Risk Based Auditing

Topics: Risk management, Internal control, Internal audit Pages: 32 (9945 words) Published: May 4, 2013
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Internal Auditor’s Perception about their Role in Risk Management Comparison between Belgian and US Companies Gerrit Sarens1 Ignace De Beelde

April 2005 2005/304

Department of Accounting and Corporate Finance, Kuiperskaai 55/E, 9000 Ghent, Belgium. Email: Gerrit.Sarens@UGent.be, Phone: +32 9 264 35 66, Fax: +32 9 264 35 88. Acknowledgment: We appreciate the comments and suggestions on earlier drafts of this paper received from Andrew Chambers (London South Bank University), Rogier Deumes (University of Maastricht), Abigail Levrau (Vlerick Leuven Gent Management School), Tom Baelden (Vlerick Leuven Gent Management School), Ann Vanstraelen (University of Antwerp and University of Maastricht) and Patricia Everaert (Ghent University). A first draft of this paper was presented at the 3rd European Academic Conference on Internal Audit and Corporate Governance, 7-8 April 2005 (Cass Business School, London). We would like to thanks all participants for their constructive feedback.



In addition to a number of quantitative studies in this area, this study wants firstly to elaborate in a complementary qualitative way how internal auditors perceive their current role in risk management within the Belgian context where internal auditing is a relatively young profession. Secondly, we want to investigate whether, under the influence of recent changes in corporate governance regulations, a greater financial emphasis in internal auditors’ work can be noticed. Thirdly, we are interested in differences between Belgian companies and Belgian subsidiaries of US companies with relation to internal auditors’ role in risk management. In order to get adequate data, we interviewed 10 Chief Audit Executives and collected relevant documents. The data reveal that the specific content of internal auditors’ role in risk management is very time and country specific. For the Belgian

companies, internal auditors’ focus on acute shortcomings in the risk management system creates opportunities to demonstrate their value in the short run. Internal auditors are playing a pioneering role in the creation of a higher level of risk and control awareness and a more formalised, standardised, transparent and documented risk management system. In the Belgian subsidiaries of US companies, internal auditors’ objective evaluations and opinions are a valuable input for the new internal control review and disclosure requirements mentioned in the Sarbanes Oxley Act. Moreover, an enhanced attention for financial controls and the quality of financial reporting was noticed within these companies.

Keywords: internal auditors, risk assessment, risk management, risk and internal control communication, Sarbanes Oxley Act, interviews Category: research paper


By stating that the internal audit activity should evaluate and contribute to the improvement of risk management, control and governance, the Institute of Internal Auditors (2004) recognises the assurance and consulting role of internal auditors in corporate governance. Until now, no empirical research on the role of internal auditors in risk management (including internal control) has been conducted within a Belgian context. In this study we want to elaborate in more detail how internal auditors perceive their current role in risk management within the specific Belgian context where internal auditing is still a relatively young profession and where a lot of (large) companies recently started up an internal audit function. Moreover, it is important to notice that the Belgian environment is different from the Anglo American environment where the internal auditing profession is more developed and where listed companies are subject to more stringent corporate governance regulations. By incorporating four Belgian...
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