Identify And Evaluate Business Risks
Help Questions
CPA Business Analysis and Reporting (BAR) › Identify And Evaluate Business Risks
A not-for-profit social services agency is deploying an artificial intelligence chatbot to triage client requests. The agency expects to reduce administrative costs by $500,000 on a $12 million budget, but the chatbot will be trained on prior case notes that may contain sensitive personal information. Which internal factor should management prioritize?
Increasing investment income by shifting reserves into higher-volatility securities
Changing the method used to allocate overhead to programs
Reducing program spending to improve the current-year operating surplus
Establishing controls over data quality, privacy, and human review to prevent inappropriate disclosures and service errors
Explanation
The concept of business risk analysis being tested is prioritizing internal controls for AI deployment in not-for-profit services. Key facts include an AI chatbot for triage using sensitive case notes, with expected cost reductions but data privacy concerns. The correct answer aligns with business analysis principles by emphasizing controls to prevent disclosures and errors, per data governance frameworks. Choice B is incorrect as it addresses investment volatility not related to AI, while C focuses on spending reductions overlooking privacy risks in COSO principles. Choice D is an allocation method not mitigating the core internal data risks in assessments. A framework for evaluating such risks includes data privacy impact assessments and control designs. Management should prioritize by testing controls and ensuring compliance with ethical standards.