Concept of project risk audit , Project Management

Assignment Help:

Define the Concept of Project Risk Audit 

Audit can be defined as an evaluation of a person, organisation, system, process, enterprise, project or product. Quality risk audit is a systematic, independent and documented process of examining an activity of an organisation and this is based on objective evidence. Internal risk auditing helps an organisation achieve its targets by developing an orderly, closely  controlled approach to calculate and improve the effectiveness of risk management, administration, and authorised processes Now let us analyse why we need to perform a Project Risk audit. 

Project risk Audits are performed to monitor if the project is on track and is defect free. It ensures the correct functioning of the processes. These audits should be objective because the project?s wellbeing is at stake. It examines and documents the effectiveness of risk responses in dealing with identified risks and their root causes, as well as the effectiveness of the risk management process. The task of the Project Manager is to certify that the risk audits are performed at a correct frequency, as defined in the risk management plan. The layout for the audit and its objectives should be clearly defined before the audit is conducted. To conduct a Project risk Audit, risk auditors are required. Let us study the role of risk auditors. 

Deciding the risk auditor 

The initial step in project risk audits is to allocate someone to take on the role of project auditor. Ideally, the project manager would be in charge of this. If this person is not objective, or if the stakeholders are relying on this project, an external auditor is hired or approaches an audit organisation. 

Components of audit risk Audit Risk: It refers to the auditor?s readiness to accept that the financial statements which may be materially misstated after the audit is completed and a clear opinion is given. If the auditor decides to lower audit risk, he has to ensure that the financial statements are not materially misstated. 

AR = IR x CR x DR 

Where, IR is inherent risk, CR is control risk and DR, detection risk is the conditional possibility that the auditor does not detect a material misstatement in the project. 

Inherent risk:  It refers to the auditor?s assessment that there may be a material misstatement related to the assertion in the financial statements under audit. The evaluation of inherent risk (and also control risk) is an exercise that requires professional judgement on the part of the auditor. Hence, two auditors evaluating the same organisation may assess the inherent and control risks differently, but it is to be expected that their assessments should be in the same area. 

Control risk: It refers to the risk that the client?s internal control policies and actions fail to distinguish or prevent a material misstatement from occurring, control risk is out of the hands of the auditor; however, its extent can be assessed. 

Detection risk: In this if the detection risk is high then the auditor is willing to accept a high risk detection risk and will do less substantive testing as compared to a situation where the detection risk is lower. It is important that while detection risk can be modified at the auditor's discretion, inherent risk and control risk exist independently in the audit.   


Related Discussions:- Concept of project risk audit

Explain the development process, Question 1: "Total Quality Management ...

Question 1: "Total Quality Management is regarded as a quick fix solution by many organizations.This has led many companies to start on the road to total quality improvement in

Risk management , Introduction to Risk Management Let us begin with def...

Introduction to Risk Management Let us begin with defining Risk. Risk, is an integral part of the business scenario, and can be termed as a potential event that can have opport

System layout planning activity relationship chart , System Layout Planning...

System Layout Planning Activity Relationship Chart Systematic layout planning (SLP) method is used in some production systems such as service systems, where the amount of mate

Importance of materials management, Importance of Materials Management ...

Importance of Materials Management The  primary  and secondary  objectives  listed  above  should  themselves give us clear idea about  the  importance of materials management

Agile software development, Agile software development is a group of softw...

Agile software development is a group of software development procedures based on iterative and incremental development, where requirements and solutions develop through collabora

Improving Business Performance, Hi, I am looking for help in an assignment ...

Hi, I am looking for help in an assignment to analyse Tesco as case study and suggest an improvement strategy, and plan the implementation of the improvement. Would require MS Proj

Code of professional conduct, A 28 year old quadriplegic man is admitted to...

A 28 year old quadriplegic man is admitted to the hospital with pneumonia and severe pressure ulcers.  You are the enrolled nurse caring for him and hear him asker the doctor that

Traditional definitions of quality, T raditional definitions of Quality ...

T raditional definitions of Quality There are various definitions of quality. According to quality pioneer Joseph M. Juran quality has two meanings that are very important for

Define how you would estimate the quality control, Define how you would est...

Define how you would estimate the quality control and familiarisation activity. Quality control can be added like a percentage on top of all 'doing' activity like creating prog

Describe the roles of the sponsor, Describe the roles of the sponsor. T...

Describe the roles of the sponsor. The sponsor’s role is to signify the organisation commissioning the project and to create the main business decisions relating this. The spon

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd