Relation Between Internal Auditing And Risk Management Essays

717 Words Mar 23rd, 2016 3 Pages
As we already learned in chapter 4 concerning in risk management, the key component of internal auditing is evaluating and improving the effectiveness of governance, risk management and control process. The connection between internal auditing and risk management are fairly straight-forward. Internal auditor would not achieve their objectives without risk assessment and management.

In order to achieve the objectives, one must to analyze the risk via enterprise-wide risk management. According to the Institute of Internal Auditor or the IIA, enterprise-wide risk management refers to the process conducted by management to understand and deal with risks and opportunities (uncertainties) that could affect the organization’s ability to achieve its objectives (IIA Chapter 4).

Due to complexity of business nature, risk also evolves into five types, which are strategic, compliance, operational, financial, and reputational risk. (Blackman 1). Strategic risk refers to external risk that could impact business due to technological changes, macroeconomic background, competitors, substitute product or services, customers (buyers), suppliers and other interest groups such as Union, Communities, and Environmentalist. Second, compliance risk refers to all the requirement that relate to law and regulation. Third, operational risk refers to internal factor in the business that could impact day-to-day operational business such as technical failure, worker injuries, human error, etc.…

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