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

Functional requirements for an exhibition management system, Question: ...

Question: (a) Consider the following quality goals and provide a way to make the goal more tangible such that it can be easily verified: i. Software should be user friendl

What do you mean by variable costs, What do you mean by variable costs? ...

What do you mean by variable costs? Variable costs conversely, tend to vary directly along with the volume of output. Illustrations of variable cost are as given below: direct

Explain impact for the management of multinationals, Question : (a) Wha...

Question : (a) What are the factors that have propelled the spread of HRM discourse and practice to developing and less developed countries? (b) Discuss the Morgan's(1986)m

Organisational competences and core competences, Explain the relationship b...

Explain the relationship between organisational competences and decisions relating to the contracting out of activities. Organisational competences A competence is an mehod

Disadvantages of fms, Disadvantages of FMS Limited ability t...

Disadvantages of FMS Limited ability to adapt to changes in product Substantial preplanning and capital Tooling and fixture requirements

Explain the time-cost optimization algorithm, Question 1: What do you m...

Question 1: What do you mean by crash duration? Explain the Time-Cost Optimization algorithm crash duration/crash time - explanation including figures  Steps of Time-C

Limitations of quality cost analysis, T he dark side of quality cost analy...

T he dark side of quality cost analysis The Quality Cost Analysis will always look at the organisation's costs and not the customer's costs. The manufacturer and the seller ar

Scatter diagrams, S catter diagrams The possible relationships between...

S catter diagrams The possible relationships between two variables are identified using scatter diagrams. In order to understand data as a whole, it is very important to under

What are the advantages of division of labour, What are the Advantages of D...

What are the Advantages of Division of Labour? Advantages of Division of Labour: As very similar worker does the same work frequently:- a. It gains proficiency and ski

Project organisation structure, P roject organisation In this type of ...

P roject organisation In this type of organisation, the project management needs of all divisions of the company are served by a centralized separate division of skilled manag

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