Internal Audits and Risk Management Measuring the Impact

¶ … Audit in Risk Management

Agelova, B., Koleva, B. (2015). The role of internal audit in risk management system of the companies. Economic Development, 3: 1-10.

This study shows that the purpose of the internal audit is increasingly oriented towards mitigating risk so that the firm in question can reduce uncertainty and exercise adequate, effective and appropriate decision making processes. The focus of the study is, therefore, on the internal audit aspect of a company's risk management. The purpose of the study is situated in evaluation research -- here, that which is evaluated is the "contribution of the internal audit in the management of risks in the Macedonian enterprises" (Angelova, Koleva, 2015, p. 1).

The sample used for this included the managers of 30 Macedonian enterprises along with 48 internal auditors in the Republic of Macedonia. The survey method was used for gathering data and the finding of the study was that internal audits do have a "significant impact on improving the quality in the process of risk management" (Angelova, Koleva, 2015, p. 1).

The study is helpful in that it identifies the diverse approaches that an internal audit will utilize in assessing business operations: these approaches will range from overcorrections to verification to systems approach, cyclic approach, risk management approach, and the matrix approach. The study notes that different approaches will be used for different sections/departments of a business due to the complex arrangement of the enterprises and the way in which they conduct themselves.

Conducting the audit depends upon identifying the goals of the management of the enterprise and then assessing the risks that pose a threat to the attainment of those goals. Risk is measured by level, from tolerable to serious.

The survey revealed that nearly 90% of the persons involved in either management or auditing processes of these enterprises in Macedonia viewed the audit's essential task as providing "assessment of the enterprise operation" (Angelova, Koleva, 2015, p. 6). This means that the firm's compliance, risk, errors and effectiveness are all part of the analysis -- but that the total assessment is really what is most important. In other words, if a company is performing poorly in one area but makes up for it with stellar performance in another department, the overall picture is more positive because of it.

Using the Likert scale and evaluating the equal variance of the survey results, the researchers show that the average assessment of those surveyed held zero "statistically significant difference," indicating that virtually all of those surveyed viewed internal audits as very important to the quality of the risk management involved in conducting business in Macedonia (Angelova, Koleva, 2015, p. 8).

More than half of the respondents replied that, in qualitative terms, the internal audit made a "significant" contribution to risk management, while around 30% of respondents viewed that the contribution made a "high level" of quality contribution to the process of risk management. 15% viewed the level of contribution as "medium" and only 2.5% viewed the audit process as "insignificant" to a company's overall control and management of operations and its ability to exercise sound risk management (Angelova, Koleva, 2015, p. 8-9). Thus, the researchers conclude that out of 78 respondents, virtually all viewed the internal audit as contributing some degree of positive contribution to the strategy of managing risk.