An organization facing financial hardships is planning to reduce its internal audit function size without...

Comprehensive and Detailed Explanation:

The most significant concern is the replacement of auditor judgment with AI outputs (C). Per the Global Internal Audit Standards, auditors must exercise professional judgment in planning, evaluating evidence, and forming conclusions. While AI can enhance efficiency and flag anomalies, final risk assessments must remain the responsibility of auditors. Option A (variations in answers) and Option D (acceptance issues) are secondary operational risks. Option B is incorrect — generative AI can interpret free-text responses, though with limitations. The core issue is ensuring that AI supports, but does not replace, human professional judgment. Therefore, the correct answer is Option C.