Internal Audit's Best Course of Action

C.

When management decides to accept the residual risk of an audit finding and not take the recommended actions, internal auditors may still believe that acceptance is inappropriate. If, after discussing the situation with executive management, there is still disagreement regarding the decision, the internal audit team should take the following course of action:

Option A: Reporting this matter to the audit committee without notifying executive management is not the best course of action because it may create a lack of trust and openness between the internal audit team and executive management. The internal audit team should always work towards building a collaborative relationship with executive management.

Option B: Documenting in the audit report that management has accepted the residual risk and taking no further actions is not the best course of action because internal auditors have a responsibility to provide recommendations to management and the audit committee. If internal auditors believe that acceptance of residual risk is inappropriate, they should communicate this to executive management and the audit committee.

Option C: Reporting the issue to the audit committee in a joint meeting with executive management for resolution is the best course of action. This approach encourages a collaborative and transparent approach to resolving the issue, and allows all parties to work together to reach an appropriate decision.

Option D: Scheduling another meeting with executive management to convince them of taking action as recommended is not the best course of action because it may lead to a confrontational approach, and could create a negative relationship between the internal audit team and executive management. If executive management has already made a decision to accept the residual risk, it is unlikely that they will change their mind. It is better to work with the audit committee to resolve the issue.

In summary, option C is the best course of action as it encourages collaboration and transparency between internal auditors, executive management, and the audit committee.