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Monday, April 7, 2014

Risk Based Audit

One of the biggest trends I am witnessing in the domain of audit is for auditors to migrate a traditional audit across to a Risk Based Audit program. This auditors' evolution or revolution if you prefer is relatively pervasive across market and industry sectors. It is actually reaching a point that in the not too distant future, a traditional audit will be seen by many as an outdated and unsatisfactory process for auditing a company.

In this blog posting we share a complete paper / presentation that leads an auditor through the various phases or steps that are required to perform a Risk Based Audit. 

Risk Based Audit
The process of auditing a business is laden with all sorts of traps, many of these constraints were discussed in a recent blog titled the "Auditor's Dilemma" [LINK]. Materiality and audit completeness may seem straightforward concepts to deal with on the surface but they present all sorts of headaches for auditors and if not defined or treated properly, the entire quality of an audit can be compromised.

A Risk Based Audit technique is supposed to be the solution for the Auditor's Dilemma but while prevailing industry trends are favoring this type of audit, there is also a lot of confusion among auditors on exactly how to go about the process of a typical Risk Based Audit.  The purpose of the publication is to address how an auditor can design and configure a Risk Based Audit exercise.

Risk Based Audit Paper [ LINK ]

The Risk Based Audit paper can be downloaded from the following [LINK] and the paper walks an auditor through the various steps of a Risk Based Audit in a methodological and easy to follow manner.

Future Development
To streamline a Risk Based Audit project further and to allow auditors to integrate these various processes into a single platform, I am planning on building an entire database reporting system that can be used by any auditor for any Risk Based Audit endeavor.

In the paper above I share a link which allows the various spreadsheet models referenced in the paper to be downloaded and explored in Microsoft Excel. This applied work will also be followed up with the development of a complete Risk Based Audit knowledge centre or software system to help auditors move through their RBA exercises quickly and without error.

All faring well, the Risk Based Audit reporting system should be made available on the Causal Capital blog in the next couple of months and we will publicize the release of this system accordingly. Additionally, it is worth noting that we are planning on releasing this software system to all risk practitioners for free and without limitation.

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