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Risk-based Auditing
PHIL GRIFFITHS

CHAPTER

1 What is Risk-based Audit?

The Internal Audit identity crisis
Let’s face it, if you are reading this book, you are probably either already an auditor, preparing to become one or responsible for managing or overseeing the function. The other possibility is that you are considering a role in Internal Audit – if this is the case I hope to be able to whet your appetite and show you what a wonderful opportunity it brings. Whichever category of reader you are the first major bridge to be crossed is the identity of the function. I was to learn that we tend to meet any new situations by reorganising – a wonderful method for creating the illusion of progress This quote by the Roman Caius Petronius in AD 66 illustrates the dilemma for Internal Audit. Internal Audit has seemingly attempted a number of changes in approach over the years, but have any made a real difference? Is Internal Audit seen as the ‘White Knight’ charging in full armour, past cheering throngs of well-wishers to rescue the damsel in distress or the ‘Lady with the Lamp’, splendid and serene, tending to the ranks of wounded in the Crimean War without a thought for her personal well-being. Probably not. It is more likely that an auditor may be seen, to use the old joke, as the team that comes in after the battle and bayonets the wounded. The role still has somewhat of an identity crisis. Risk-based audit offers some, if not all, of the solutions. In the following chart I would like to pose a question to you to illustrate the point. Please pick the one creature which you believe best describes the role of Internal Audit in the eyes of the Chief Executive or Directors of your organisation. Try and put yourself in their shoes. If you asked them the same question, what do you believe their answer would be? Let’s analyse the most likely responses: • Dinosaur If

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