Audit risk is the risk that the financial statements are materially incorrect, even though the audit opinion states that the financial reports are free of any material misstatements. The two components of audit risk are the risk of material misstatement and detection risk.
Risk based Auditing is an internal methodology which is primarily focused on the inherent risk involved in the activities or system and provide assurance that risk is being managed by the management within the defined risk appetite level.
Every organization is different, with a different attitude to risk, different structure, different processes and different language. Experienced internal auditors need to adapt these ideas to the structures, processes and language of their organization in order to implement Risk Based Auditing.
Risk Based Auditing seeks at every stage to reinforce the responsibilities of management and the board for managing risk.
If the risk management framework is not very strong or does not exist, the organization is not ready for Risk Based Auditing. More importantly, it means that the organization’s system of internal control is poor. Internal auditors in such an organization should promote good risk management practice to improve the system of internal control.
Where Risk Based Auditing is new to an organization, the head of internal audit will need to market the concept to management and win their support, particularly since it may mean a change for them in the way that they think about risk.
Come for training at the Institute of Forensics &ICT Security and acquire skills on how to come up with professional Risk Based Auditing policies and procedures so that your company/Organization can be able to achieve its intended objectives.