Inherent risk and auditor’s decisions: Government internal auditing

by Open Science Repository Business Administration
(June 2014)

Abstract

Government internal auditing in recent times has increased greatly in terms of importance and responsibility; it has become an official observer in the eyes of both managers and the public. Most decision-makers in government organizations make their decisions based on the internal audit function (IAF) which is supported by internal auditor’s reports. It is necessary to find a clear mechanism to ensure that the internal auditor’s decisions are highly credible and reliable. Hence, the issue of the three inherent risks (IR) appears, which can affect the internal auditor’s decisions. This paper investigates the government internal auditing process and the inherent risk which affects the internal auditor’s decisions in the public sector; it focuses on the main three factors of competence, objectivity and performance.

The high quality of the internal auditor’s decisions can improve opportunities and explore threats to the achievement of organizational goals, identify operation management improvements, and reduce the impact of risk.

However the management of government organizations should accept a level of what is called “residual risk’’ (RR). RR is the risk that remains after organizational management takes action to decrease the possibility of undesirable events, in conjunction with internal control activities, as a way of dealing with risk.

Keywords: government audit, public sector, internal audit, inherent risk, internal auditor.

Full text

Inherent risk and auditor’s decisions: Government internal auditing