What are the benefits of using a risk-based approach to audit scheduling?

Risk based thinking helps on the following points: - To Prioritize resources based on the significance of identified risks - To identify the right auditors - Aligns audit efforts with org. objectives and strategic goals. - Enhances focus on high-risk areas, increasing the effectiveness of audits. - Enables timely identification & mitigation of emerging risks. - Facilitates better decision-making by providing insights into risk exposure. - Optimizes resources by allocating more resources to high-risk areas. - Enhances stakeholder confidence by demonstrating proactive risk management. - Helps in meeting regulatory requirements by addressing key risk areas. - Promotes a culture of continuous improvement by addressing risks systematically.

It is much more efficient to focus and align the Audit Plan with strategic objectives of the organization. There is a risk of wasting auditors time and resources if the Audit Plan is totally independent of the goals of the company. This alignment involves having a very good communication and understanding between auditors and stakeholders of the organization.

Benefits: 1.Early detection and mitigation of risks. 2.Optimization of audit resources for cost efficiencies. 3.Efficient resource allocation by targeting high-risk areas. 4.confidence in audit process through proactive risk management. 5.Tailored audit process aligned with identified risks.

As well as strategic objectives, the audit plan should also consider the external environment that could have an impact on the organisation's effectiveness. A good framework is PESTLE - Political, Economic, Social, Technological, Legal, Environmental. The organisation's ability to identify external as well as internal risks, and the assessment of the effectiveness of the strategies to manage those risks, should be part of the corporate audit plan.

With over 8 years of rich experience as an auditor in banking and financial institutions, I have found that employing a risk-based approach to audit scheduling offers numerous significant and impactful benefits. This approach is not only efficient but also strategically advantageous in ensuring that audit resources are allocated where they are most needed.

Increased Efficiency and Effectiveness: Focus on high-risk areas:?Resources are allocated based on the level of risk, allowing auditors to prioritize high-impact areas and avoid wasting time on low-risk activities. This leads to more efficient use of resources and generates more valuable insights. Improved audit quality:?By focusing on critical areas, auditors can delve deeper into specific processes and controls, leading to more comprehensive and effective audits. Dynamic adaptation:?The audit schedule can be adjusted based on changing risk levels and emerging issues, ensuring audits remain relevant and timely.

In my extensive experience, I have encountered situations where specific departments, such as international transactions, carry inherently higher risks. We prioritizing this area in the audit schedule, we proactively identify and mitigate potential threats before they escalate. This targeted focus enhances the overall security and integrity of the institution's operations.

we use audit risk-based approach so that we can direct the audit to examine the operations that have been observed indicating signs that they may fail, or the operations whose failure may cause significant damage to the company if it occurs.

Based on the risk score of audit sessions, you can define the scope, duration, priority execution, expert support needed. This will allow you to tailor audits for Stakeholders 1 - Auditees individually and acknowledge their performance in previous cycles, which is always appreciated. It helps to plan the time wisely - instead of conducting 1-2h-long sessions with every Team, you can have full-scope for risky Teams, and 30 mins interviews with well-performing Teams. Do not forget Stakeholders 2 - Auditors. Risk score can help to assign more experienced auditors to challenging audits, pair co-auditors for learning experience and rotate auditors from one team to another in cycles, so they all get more exposure within the company's context.

Through my diligent application of this approach, I have seen how regularly auditing high-risk areas, such as Treasury, HR, Compliance and Trade Services e.t.c, helps in identifying vulnerabilities early. This early detection enables the institution to implement corrective measures swiftly, thereby significantly reducing the likelihood of severe financial or reputational damage.

In my role, I have witnessed how presenting a risk-based audit plan to the board and external regulators reassures them of the institution’s commitment to transparency and due diligence. This enhanced confidence led to more favourable regulatory reviews and stronger investor relations, contributing to the institution’s overall stability and reputation.

The audit universe should consider both inherent and operational risks. High inherent risks would include: * Complex manufacturing profiles * Products that require particular precautions by the customer / user * Manufacturing processes with high environmental or employee safety risks * New product development, launch and supply * Supply to highly regulated markets or those with specific local or regional requirements High operational risks would include: * High levels of defects, rejects, complaints, returns, audit or regulatory findings * High levels of change * High turnover of staff * Changes in key personnel A risk matrix can be constructed and audit frequency determined according to High, Medium or Low Risk, e.g. 1, 2 or 3 years.

Implementing a risk-based approach requires a good understanding of the organization's risk landscape. This may involve conducting risk assessments and workshops with key stakeholders. It is important to communicate the rationale for the chosen audit schedule to stakeholders and ensure they understand the risks involved. The risk-based approach should be flexible and adaptable to changing circumstances and emerging risks. Overall, a risk-based approach to audit scheduling allows you to make better use of your resources, provide more valuable insights, and ultimately contribute to a more effective and efficient organization.

The development of the internal audit process is its orientation towards risks, and it currently takes an important place in the risk management processes in organizations. but the relationship between audit and risk management extends beyond simply constructing an audit plan. In fact, many additional responsibilities have become part of the organizational scope of internal audit. These additional tasks are aimed towards enhancing active risk management within the organization. It includes aspects such as integrating risks into the audit objective, formulating audit questions, determining sample sizes, and take Audit process risks in consideration

The purpose of Quality System is to find systemic flaws, not isolated slips. Rather, the things to CONTRIBUTE to the isolated slips. So, processes that have MORE factors that contribute to slips, should get MORE audit attention. Things that you KNOW they like to do "right", you can audit less frequently. Use audits cost effectively, and NOT as a whip for your human resources. Invest in giving the humans consistent materials, reliable tools, and confident training.

Using a risk-based approach to audit scheduling brings several benefits. Firstly, it helps focus resources on areas of greatest concern, ensuring that audits address the most significant risks to the organization. This targeted approach improves efficiency by allocating time and effort where they are most needed. Secondly, it promotes better decision-making by providing management with insights into potential threats and vulnerabilities. By identifying and assessing risks proactively, organizations can implement appropriate controls and mitigation strategies, reducing the likelihood of adverse events.

Early identification of potential problems:?Focusing on high-risk areas allows for timely intervention and mitigation of potential losses. Improved decision-making:?Risk-based audit findings provide data-driven insights to support informed decision-making at all levels. Increased flexibility:?The approach allows for adjustments to the audit schedule based on emerging risks or changes in the business environment. Overall, a risk-based approach to audit scheduling offers a more strategic and effective way to identify and address crucial issues within an organization. It leads to better resource allocation, improved risk management, and ultimately, greater organizational success.