Appropriate disclosure of nonconformance with the Standards involves reporting and discussing the issue with the appropriate level of authority, in this case, the board. Disclosing to the board that the internal audit activity lacks the necessary skills and knowledge to perform an IT engagement addresses a significant issue of competency and nonconformance with the Standards, which require auditors to possess the knowledge, skills, and other competencies needed to perform their responsibilities. The other options either involve internal discussions or do not address the broader impact on the organization.