| Lehman Brothers Holdings Inc., the top investment bank in the U.S. with 158 years of history, which survived the American civil war, two world wars, the Great Depression,"9·11"attack and one acquisition, and the one who was described as the cat with 19 lives by Roy Smith, a financial professor at New York University, finally went down like ninepins during this worldwide subprime mortgage crisis. With 11% market share, it used to be the largest acquiring company of subprime mortgage security products in 2006, but it suffered a loss of nearly 7 billion U.S. dollars from February to August in 2008, and another loss of 3.9 billion U.S. dollars within the latest three months by the end of this August with a slump of its stock price.What's more, on the day that Korea Development Bank ceased purchasing Lehman Brothers'6 billion dollars stock assets, its stock price again nosedived by 43% and its assets shrank to 2.9 billion dollars, even less than those of several small-sized local banks in America. After Paulson, the U.S. Treasury Minister, had announced that the government would not aid it, the helpless Lehman Brothers had no other choice but to fall into bankruptcy.Lehman Brothers Holding Inc. had been proud of its perfect risk management system. However, looking back on its bankruptcy, people may wonder how much on earth its risk management works for the high-risky business and who should supervise and evaluate enterprises'risk management activities. Almost at the same time when Lehman Brothers announced its bankruptcy, China's Sanlu milk scandal was disclosed, which stunned the whole nation and brought great strike to the entire Chinese dairy industry. The 52-year-old Sanlu Group, one of the leading enterprises in Chinese dairy industry, whose milk powder sales has been listed No.1 for consecutive 11 years and liquid milk ranks No. 4 in china, was facing with the bankruptcy too. The manufacturers and the sellers involved in the scandal are criticized, and extensive discuss and research are made on enterprises'management on strategic risk, value risk, quality risk and legal risk.Risk management is crucial not only to the high-risky finance industry, but also to the traditional industries and enterprises. In the process of building market system and opening to the international market, Chinese enterprises are confronting with an increasingly fierce market competition and have to operate in a more and more complex and risky environment. When a majority of the companies don't have a sound risk management system, the management of those companies is facing how to establish and improve the risk management system and how to effectively manage risk and keep it under an acceptable level.Based on the current demand for risk management, this study aims to find out how to sufficiently exert the functions of value add audit and how to fully and effectively ensure the goal of risk management. Based on an overall review of the research results both domestic and abroad, the writer studies the development of audit models and the root cause of risk based internal audit, and raises its theory foundation, and also constructs its theory framework. The efficiency and effect of audit could be improved through combining it with the process of enterprise risk management, to evaluate enterprises'business strategy and analyze risk so as to ensure the reasonable allocation of audit resources. Meanwhile, in order to enhance the guidance to practice, the article also studied the technique and basic process of risk based internal audit and its applications in China.The study consists of six chapters.Chapter one is the introduction which includes the document review, research background, research questions and methodologies.Chapter two discusses the theory foundation of risk based internal audit. In this chapter, the writer firstly reviews development of accountability theory and the audit goals.The author then studies the development of audit models and methods, elaborates the inevitable trend of audit development towards risk based internal audit. At last, the author introduces other basic theories of risk based internal audit, such as the comprehensive risk management theory, strategy theory, system theory and accountability theory. This chapter acts as the theory foundation for the next chapter which talks about the theory framework of conducting risk based audit. Chapter three talks about the theory framework of risk based internal audit. The framework is developed from the nature and characteristics of risk based internal audit. Based on the development of accountability, the author points out the framework should include the following parts: nature, hypothesis, goal, function, object, constraint conditions and basic methods. With nature as its logical starting point, the theory framework of risk based internal audit determines the goal of audit and its extending functions, and further determines its object to be audited. The goal and the functions of the audit object can only be achieved when the constraint conditions requirements are met. The end of this chapter sees the discussion about the fundamental methods of how to implement risk based internal audit.Chapter four talks about the starting point of risk based internal audit, i.e., strategy evaluation and risk analyses. Starting from business strategy evaluation and risk analysis, the risk based internal audit identifies the audit focus and cycle based on, and works out the audit programming. The article mainly studies risk analysis and the importance of strategy in enterprise risk management, discusses strategy goals breakdown and overall risk construction with XXX Cor. as an example, and explores the basic techniques in risk analysis and the method to work out an audit programming.Chapter five discusses the identification and evaluation of comprehensive business operation risk. The processes and methods of implementing risk based internal audit will be studied from this chapter. In this chapter, the writer analyses the levels of operation risk and risk kinds, studies the basic process of operation risk evaluation, constructs risk models, confirms the characteristics, motives and relations of risks, and settles the specific audit program at last.Chapter six studies the implementation of risk based internal audit. After evaluating the business strategy and comprehensive operation risk and settling the audit program, this chapter studies the implementation measures of the audit program. Prior to the implementation, the key goal and key performance indicators have to be confirmed with a review of the motive for the program. After that, a detailed audit plan will be worked out, audit tests will be conducted and enterprises'capability of risk managing will be evaluated. Finally based on the test and evaluation results, audit report will be produced and audit advice will be put forward.The main innovations of the article are as following:First, the topic corresponds to the current social demand and can guide enterprise management. The core of modern enterprise management lies on scientific decision making and the goal is to realize a maximum value of the enterprises. An effective enterprise risk management is essential to scientific decision making and could guarantee enterprises'strategic goals. A business failure might not be due to the absence of a sound risk management system, but because of the ineffective activities designed to avoid risk. Therefore, the aim of risk based internal audit is to evaluate the validity of enterprise risk management so as to provide reasonable assurance for the realization of ERM. The study of the article exactly meets the urgent needs of current business operation management and is of help to solve problems troubling the businesses.Second, the article constructs a theory framework for the risk based internal audit, contributing to the theory study in this field. The theory study of risk based internal audit is currently in its primary stage, supplying no systemic and comprehensive guide to research. A reasonable theory framework has to be built. The theory framework constructed by the author after careful study could act as the theory foundation for the risk based internal audit application.Third, the dissertation studies in a detailed way the practice and implementation methods of risk based internal audit. By combining the basic technique and method of risk management and modern audit, identifying audit focus and reasonably allocating audit resources based on strategy evaluation and risk analyses, the author explores a new audit model...
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