A highly centralized organization is one where decision-making authority is concentrated at the top management level, with lower levels having minimal autonomy. This change means that most critical decisions are made at the corporate level, and lower-level managers have limited decision-making power.
* (A) Incorrect - Top management does little monitoring of the decisions made at lower levels.
* In a centralized organization, top management monitors and controls most decisions.
* This statement applies more to decentralized structures where decision-making is distributed.
* (B) Incorrect - The decisions made at the lower levels of management are considered very important.
* In a centralized structure, decisions made at lower levels hold less significance since authority is concentrated at the top.
* (C) Correct - Decisions made at lower levels in the organizational structure are few.
* Centralized structures limit decision-making power at lower levels, keeping control with top executives.
* Lower-level managers mostly follow directives from upper management rather than making independent decisions.
* (D) Incorrect - Reliance is placed on top management decision-making by few of the organization' s departments.
* In a centralized system, most (not just a few) departments rely on top management for decision- making.
* IIA's Global Internal Audit Standards - Organizational Governance and Decision-Making
* Explains centralized vs. decentralized structures and their impact on risk management.
* COSO's ERM Framework - Governance and Decision Authority
* Discusses the implications of centralization on strategic decision-making.
* IIA's Guide on Corporate Governance and Internal Control Frameworks
* Highlights the effect of centralization on accountability, oversight, and risk management.
Analysis of Answer Choices:IIA References and Internal Auditing Standards: