Risk-based internal audit: factors related to its implementation

What is it about?

This study empirically investigates the factors associated with the implementation of risk-based internal audit (RBIA). First, a literature review of the relevant literature is performed, and five potential factors related to the implementation of risk-based internal audit are identified. Based on that, we construct a questionnaire survey sent out to 185 internal auditors, executives, and accountants in Greece to receive 90 responses during November 2019-January 2020. Multiple regression analysis is conducted to identify the factors related to the implementation of RBIA. We show that there is a statistically significant positive relationship between the implementation of RBIA and 1) the provision of risk management training, 2) an active audit committee role, and 3) the establishment of a formalized risk management system. Empirical studies on the factors related to the implementation of risk-based internal audit are rare. This is the first study to create empirical variables based on a thorough review of the relevant literature to empirically investigate the factors that are related to the implementation of RBIA in an emerging economy. By focusing on the Greek context, this study also sheds light to other countries with similar CG systems, thus providing insights to settings where the Type II agency problem exists (La Porta et. al., 1999). The identification of factors related to RBIA enhances internal audit effectiveness through proper risk assessment, and effectively enhances the accuracy and quality of financial information.

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