The CAE must first gather data on risk appetite and discuss the matter with senior management. If unresolved, the CAE then escalates to the board (Option C). Only if the board accepts the risk and the CAE believes the exposure remains unacceptable should the final step involve informing regulators (Option D) when required by law or regulation.
Thus, the correct answer for the last step is consulting with regulators (Option D).
Reference:
IIA Standards - Standard 2600: Communicating the Acceptance of Risks.

An ethnocentric staffing policy fills key foreign subsidiary positions primarily with parent-country nationals.
This can significantly raise costs because expatriate compensation, relocation, tax equalization, housing, education, and allowances are expensive. It may also create resentment among host-country employees who see limited promotion opportunities. In addition, it can lead to cultural myopia because parent-country managers may fail to understand local customs, employees, customers, and regulatory expectations. Statement
3 is incorrect because ethnocentric staffing generally expands, rather than limits, career mobility for parent- country nationals by giving them international assignments. Internal audit should consider these risks when reviewing global human resource strategy, compliance culture, and subsidiary control effectiveness. The disadvantages are items 1, 2, and 4 only. Therefore, Option D is correct.

Cash discounts are price reductions offered to customers who pay within a specified early payment period.
For example, terms such as "2/10, net 30" encourage payment within 10 days by offering a 2 percent discount. This improves cash flow, reduces collection risk, and shortens the accounts receivable cycle.
Quantity discounts encourage customers to buy larger volumes. Functional discounts compensate channel members for performing functions such as storage, selling, or distribution. Seasonal discounts encourage purchases during off-peak periods. Internal auditors reviewing revenue and receivable controls should evaluate whether discounts are authorized, accurately applied, properly recorded, and aligned with credit policy. Since the purpose is to encourage prompt payment, Option A is correct.

Losing the only IT auditor in the internal audit function significantly impacts the ability to perform IT audits in the approved plan. This resource limitation requires the CAE to revise the plan and seek board approval for changes.
Option A does not change the plan. Option C was foreseeable and should already have been included in prior planning. Option D has no material impact since the vacancy was quickly filled with a qualified replacement.
Reference:
IIA Standards - Standard 2020: Communication and Approval.

The Just-in-Time (JIT) method is a managerial accounting and inventory management strategy that focuses on reducing or eliminating excess inventory by receiving goods only as needed.
* (A) Theory of constraints.
* Incorrect: The theory of constraints focuses on identifying and managing bottlenecks in production, not reducing inventory levels.
* (B) Just-in-time method. (Correct Answer)
* JIT aims to reduce waste, lower storage costs, and improve efficiency by ensuring that materials and products arrive only when needed.
* IIA GTAG 3 - Continuous Auditing suggests monitoring inventory controls to align with JIT principles.
* (C) Activity-based costing.
* Incorrect: Activity-based costing allocates costs to activities based on usage, not inventory reduction.
* (D) Break-even analysis.
* Incorrect: Break-even analysis calculates the level of sales needed to cover costs but does not focus on inventory management.
* IIA Standard 2120 - Risk Management: Encourages auditors to assess cost-management strategies like JIT.
* IIA GTAG 3 - Continuous Auditing: Supports real-time monitoring of inventory to minimize excess stock.
Analysis of Each Option:IIA References Supporting the Answer:Thus, the correct answer is (B) Just-in-Time (JIT) method, as it focuses on achieving low or no inventory to optimize efficiency and reduce costs.