Compensation programs, if improperly designed, are most likely to trigger undesired adverse behavior. They can incentivize the wrong actions or behaviors if they are overly aggressive or misaligned with the organization's ethical standards or long-term goals. For instance, excessively performance-based incentives might encourage short-term gains at the expense of long-term stability, leading to risky or unethical behavior. References: Institute of Internal Auditors (IIA) - Practice Guide: Assessing Organizational Governance in the Private SectorQUESTION NO: 512
Which of the following would an internal auditor expect to find within an organization’s internal control framework?
A. A compliance risk mitigation strategy to be implemented by the compliance function.
B. A statement of the organization s values, reflecting its attitude toward risk
C. Details of how each group from the Three Lines Model fits into the risk management strategy.
D. The risk appetite related to establishing and approving process
Answer: B
An internal auditor would expect to find a statement of the organization's values, reflecting its attitude toward risk, within an organization’s internal control framework. This statement helps set the tone at the top regarding the importance of control and the approach to risk management, which is fundamental for guiding the behavior and decision-making within the organization. References: Committee of Sponsoring Organizations of the Treadway Commission (COSO) - Internal Control Framework`1
