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Practically, how this risk based audit technique works?
Risk based internal audit technique is actually quantifying risk level of each activity/process in numerical terms. It measures risk probability and severity in any given activity so as to help management and others to prioritize activities to be audited or considered for value addition and improvement. This prioritization also considers risk appetite of management.
Risk based Internal Audit is a methodology which is mainly focused on the inherent risk involved in the activities or systems and provide assurance that risk is being managed by the management of an organization within the defined risk appetite level. It is basically the risk management framework of the management and seeks at every stage to reinforce the responsibility of management and the Board of directors for managing risk.
Risk based internal audit helps the risk management of an entity by providing assurance about the risk mitigation. It allows internal audit to provide assurance to the Board of directors that risk management processes are managing risk in an effective manner, in relation to the risk appetite.However it is important to note that if the risk framework is not very strong or does not exist, the organization is not for RBIA.
