Enterprise Risk-Oriented Internal Audit:Theoretical Analysis And Its Application

With the acceleration of economic globalization, international competition, and information revolution, the world has been undergoing enormous changes. Strategic business alliances, virtual organizations of economic cooperation and development are emerging in great numbers, while operation diversification, mergers and acquisitions are all over the world. As the internal and external environment gets more complicated, higher risks are imposed to enterprises, which have turned into a key factor for business goals. Changes in business environment and the trend of internal audit outsourcing have contributed to the development of internal audit and brought in a new model in the late1990s, risk-oriented internal audit. The new model introduces the theory of comprehensive risk management into internal audit, brings together the goals of both internal audit and business, and promotes the integration of internal control and corporate governance, so as to provided value-added services for enterprises. Since2002, with the formulation and implication of a series of regulations, such as Standards for Internal Audit Practices and Internal Audit Guidelines, The application of risk-oriented internal audit has become an irresistible trend here in China. However, domestic research in this field has been limited, due to a late start. To be specific, a systematic and unified framework of risk-oriented internal audit is missing. What’s more, many enterprises are still following the same routine as external audit in practice. The understanding and application of risk-oriented internal audit has become a pressing issue.This paper has conducted a thorough research on the theory and practice of risk-oriented internal audit with traditional research methods. After a review of related literature on risk-oriented internal audit domestic and abroad, the paper first traces the revolution of internal audit in enterprises, and discusses the background of risk-oriented internal audit based on the development of management theories. On this basis, the paper studies fundamental theories of risk-oriented internal audit to classify the definition, objects, objectives, functions and processes of internal audit. Next, the paper discusses the necessity and feasibility of the implementation of risk-oriented internal audit in details, and analyzes the key points of risk-oriented internal audit. Finally, the paper analyzes the current obstacles to the full implementation of risk-oriented internal audit from five aspects, including institution, personnel, function, procedures and technology, and proposed corresponding strategies.