An internal auditor discovered that the organization was not in full compliance with a regulatory...

The CAE must communicate significant risk exposures and control issues to the board. A regulatory noncompliance issue that could result in significant fines qualifies as a high residual risk. Internal audit should not implement corrective actions (management’s responsibility) or recommend disciplinary action. While discussions with management (Option A) are appropriate, the ultimate duty is to escalate the matter to the board (Option C).