Following an IS audit, which of the following types of risk would be MOST critical to communicate to key stakeholders?
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A. B. C. D.C.
After an IS audit, the most critical type of risk to communicate to key stakeholders depends on the purpose of the audit, the risk management framework used, and the organization's risk appetite.
In general, an IS audit aims to evaluate the effectiveness and efficiency of information systems and related controls, identify vulnerabilities and threats, and recommend improvements to mitigate risks to an acceptable level. As such, the audit report should provide a comprehensive overview of the audit findings, including the types of risks identified, their likelihood and impact, and the adequacy of existing controls to address them.
The four types of risk that the question refers to are:
A. Control risk - the risk that a material misstatement could occur in a financial statement due to a failure or weakness in internal controls B. Residual risk - the risk that remains after implementing controls or other risk mitigation measures C. Audit risk - the risk that the auditor may fail to detect a material misstatement in a financial statement D. Inherent risk - the risk that exists in a process or transaction regardless of any controls or risk mitigation measures in place.
Based on the above definitions, the most critical type of risk to communicate to key stakeholders after an IS audit would be the residual risk. This is because residual risk represents the actual level of risk that the organization is exposed to, after taking into account the effectiveness of existing controls and other risk mitigation measures. Residual risk is a critical measure of the organization's risk profile and should be communicated to key stakeholders to inform their risk management decisions.
Control risk is important for financial reporting purposes, but it may not be the most relevant type of risk for all stakeholders. Audit risk is important for the auditor to consider when planning and conducting the audit, but it may not be as relevant to key stakeholders who are more concerned with the actual level of risk that the organization faces. Inherent risk is important to consider when designing controls and risk mitigation measures, but it may not be as relevant to key stakeholders who are more concerned with the actual level of risk that the organization faces after controls are implemented.
In summary, the most critical type of risk to communicate to key stakeholders after an IS audit is the residual risk, which represents the actual level of risk that the organization is exposed to after taking into account the effectiveness of existing controls and other risk mitigation measures.