Explanation

Correct Answer: A (I and II only)

Let's analyze each statement:

Statement I: "An internal audit should assess the staff involved in stress testing activities."

• ✅ CORRECT - Internal audit should evaluate the competence, qualifications, and performance of staff involved in critical risk management activities like stress testing.

Statement II: "An internal audit should review the manner in which stress testing efficiencies are identified and tracked."

• ✅ CORRECT - Internal audit should examine the processes and methodologies used in stress testing, including how efficiencies and improvements are identified and monitored.

Statement III: "The internal audit function needs to be impartial but does not need to be independent."

• ❌ INCORRECT - Internal audit must maintain both impartiality AND independence. Independence is a fundamental requirement for internal audit functions to ensure objective assessment without organizational influence or conflicts of interest.

Key Points:

• Internal audit's role includes evaluating personnel competence and process effectiveness
• Independence is essential for internal audit objectivity
• Statements I and II represent legitimate internal audit responsibilities in risk management oversight