Risk-based Strategic System Audit Model In The Use Of Internal Audit

Risk-oriented internal audit has been dominating the global audit industry and now it has transferred to the risk-based strategic-system audit approach instead of the traditional risk-oriented audit approach. As the most updated model of risk-oriented audit, the risk-based strategic-system audit approach contributes new development to the risk-oriented audit and is better in accordance with the needs of all kinds of economic entities by merging the theories of system and strategic management and optimizing the traditional audit models. The risk-based strategic-system audit approach helps auditors allocate audit resources to those areas with significant risks, make the audit work more target-oriented and lower the entity-level audit risks, which all contribute to help the entities prevent and control risks as well as improve operational efficiency.The paper illustrates on the theoretical development history of the audit approach and pointed out the inheritance and development between the risk-based strategic-system audit approach and the traditional approach. Then the paper analyzes the necessity of introducing the risk-based strategic-system audit approach into internal audit and carefully examines on the ways to realize this. Internal auditors shall work under the guidance of the theories of system and strategic management and with the entity strategic objectives in mind. They evaluate and examine the internal and external risks and then based on these risks prepare audit plan and the detailed action plan, identify the key audit areas and allocate resources.Domestically, the risk-based strategic-system audit approach is still investigated more in theories and few entities have put it into practice. The paper introduces China Shenhua’s process of applying the risk-based strategic-system audit approach in internal audit, that is beginning from risk examination systematically analyzing the internal and external risks and then identifying the key areas, based on which internal auditors prepare action plan and finally presented ways for doing better. The paper analyzes the advantages of the risk-based strategic-system audit approach as well as the disadvantages in practical application and presents the improvement suggestions from audit implications, data mining and risk quantification. The paper aims to provide experience reference for those entities planning to implement the risk-based strategic-system audit approach which is also the paper’s practical implications.