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

What value does project management add, Q. What value does project manageme...

Q. What value does project management add? This is extremely difficult to answer in traditional accounting terms for the reason that the real value is in the quality of the end

Project organisational structures, Organisational Structures The projec...

Organisational Structures The project organisational structure facilitates coordination and implementation of project activities. It should be designed to include the essential

Cost-reimbursable contracts , Cost-reimbursable contracts  In cost-reim...

Cost-reimbursable contracts  In cost-reimbursable contracts you pay the contractor the costs necessarily incurred in the construction plus a fee. The latter portion viz. the fe

Llean management, Arvin Automotive, a company that makes muffler assemblies...

Arvin Automotive, a company that makes muffler assemblies for the Big Three, is committed to the use of Kanban to pull material through its manufacturing cells. Arvin has designed

Define the critical path analysis in risk management, Define the critical p...

Define the critical path analysis in risk management. Critical path analysis (CPA) or network analysis: Gantt charts are a poor time management tools while projects are l

Market strategy development, Q. Market Strategy Development? Market str...

Q. Market Strategy Development? Market strategy development would require the study of the markets for potential consumers. It would also involve the study of the market for e

Grand wines, Case study – Grand Wines You are an employee of Grand Wines Lt...

Case study – Grand Wines You are an employee of Grand Wines Ltd and project leader of a proposed project to equip each of the company’s 20 sales representatives with a wireless dat

Microsoft Project Management, Greeting, Do you use Microsoft Project Manage...

Greeting, Do you use Microsoft Project Management software for project management assignments if needed

Risk matrix terminology , Risk Matrix Terminology  It is a term where t...

Risk Matrix Terminology  It is a term where table used in risk analysis in which rows show the risks and columns show their likelihood (probability) of occurrence and their imp

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