Comprehensive and Detailed Explanation:
The greatest concern is if the vendor is excluded from the organization's third-party due diligence process.
Without proper due diligence, the organization has no assurance that the vendor meets minimum security and privacy requirements, exposing PII to significant risk.
Option A: External-facing services carry risk but can be mitigated by proper controls.
Option B: Lack of dedicated privacy staff may increase risk, but controls may still exist.
Option C: Fourth-party hosting adds risk but is acceptable if included in due diligence.
Option D: Correct - exclusion from due diligence represents a fundamental breakdown in vendor risk management.
# ISACA Reference: CISA Review Manual 27th Edition, Domain 5, section on third-party/vendor risk management and data privacy.

Developing a risk-based plan considering each entity's business processes would best help to ensure that IS audit still covers key risk areas within the IT environment as part of its annual plan. A risk-based plan is a plan that prioritizes the audit activities based on the level of risk associated with each area or process. A risk- based plan can help to allocate the audit resources more efficiently and effectively, and provide more assurance and value to the stakeholders1.
By considering each entity's business processes, the IS audit can identify and assess the specific risks and controls that affect the IT environment of each entity, and tailor the audit objectives, scope,and procedures accordingly. This can help to address the unique needs and expectations of eachentity, and ensure that the IS audit covers the key risk areas that are relevant and significant to each entity's operations, performance, and compliance2.
The other options are not as effective as developing a risk-based plan considering each entity's business processes in ensuring that IS audit still covers key risk areas within the IT environment as part of its annual plan. Option A, increasing the frequency of risk-based IS audits for each business entity, is not a feasible or efficient solution, as it may increase the audit costs and workload, and create duplication or overlap of audit efforts. Option C, conducting an audit of newly introduced IT policies and procedures, is a limited and narrow approach, as it may not cover all the aspects or dimensions of the IT environment that may have changed or been affected by the split. Option D, revising IS audit plans to focus on IT changes introduced after the split, is a reactive and short-term approach, as it may not reflect the current or future state of the IT environment or the business objectives of each entity.
References:
ISACA, CISA Review Manual, 27th Edition, 2019
ISACA, CISA Review Questions, Answers and Explanations Database - 12 Month Subscription Risk-Based Audit Planning: A Guide for Internal Audit1 Risk-Based Audit Approach: Definition and Example

The primary reason for an organization to classify the data stored on its internal networks is to implement data protection requirements1234. Data classification helps organizations understand what data they have, its characteristics, and what security and privacy requirements it needs to meet so that the necessary protections can be achieved3. While determining data retention policy56, complying with the organization's data policies27, and following industry best practices891011 are important aspects of data classification, they are secondary to the fundamental requirement of implementing data protection requirements.
References:
What Is Data Classification and Why Is It Important? - RiskOptics
Data Classification Policy: Definition, Examples, and Free Template - Hyperproof Data Classification Policy: Benefits, Examples, and Techniques - Satori What is a Data Classification Policy? - Digital Guardian Data Classification and Practices - NIST Data Classification as a Catalyst for Data Retention and Archiving ...
What is data classification? - Cloud Adoption Framework
Data Classification - Data Security Policies | ITS Policies ...
IMPLEMENTING DATA CLASSIFICATION PRACTICES - NIST
Best Practices for Data Classification | Forcepoint

The correct answer is D. Data stored on the asset.
When reviewing IT asset disposal, the auditor's most important concern is whether sensitive, confidential, regulated, or business-critical data remains on the asset. Even if the hardware has little monetary value, the data stored on it may expose the organization to privacy breaches, regulatory penalties, intellectual property loss, reputational damage, or legal liability.
ISACA discusses secure disposal as an important control area and notes that data disposal protects personal data from exposure. ISACA also identifies disposal methods such as data anonymization, data deletion, crypto-shredding, degaussing, and destruction. ISACA's CISA Exam Content Outline includes IT asset management under Domain 4 and data loss prevention, data encryption, and information asset security controls under Domain 5.
Option A is not the best answer because the monetary value of the hardware is usually less important than the sensitivity of the data. Option B is important, but a certificate of destruction is evidence of disposal; the auditor must first be concerned with whether the data was properly protected or removed. Option C may be relevant when replacing equipment, but the most significant disposal risk is residual data remaining on the retired asset.
A good CISA exam rule is: during asset disposal, focus first on data confidentiality and sanitization, not hardware value.
References: ISACA CISA Exam Content Outline, Domains 4 and 5; ISACA podcast/article page, Why (And How to) Dispose of Digital Data.