A Research On The Integrated Internal Auditing Model Based On Enterprise-wide Risk Management

From Barings Bank to Eron, from Worldcom to China Aviation Oil (Singapore), the collapses of those glorious enterprises shock all the investors. Enterprise-wide risk management became a hot-topic and the centre of Corporate Governance. The report of Enterprise Risk Management– an integrated framework was proposed by COSO in September 2004, to be the guidance of risk management practice in corporations. As scholors and professionals predicted, risk management is the fad in this field.This paper is based on the Theory of Enterprise-wide Risk Management and Integration Theory, induces the formation mechanism of the integrated internal auditing model based on Enterprise-wide Risk Management by analyzing the influencing factors and their relationships in the internal auditing system i.e.Enterprise-wide Risk Management is a lead of the internal auditing model; the environment of internal auditing is fundamental to the survival and the development of internal auditing, and it is the premise of the formation of the internal auditing resources and capabilities; The quality and quantity of the internal auditing resources and capabilities is the determination factor of strategic capability of internal auditing system; corporate governance determines the organization and reporting relationships of internal auditing, the strategy or goal of internal auditing decides the scope and the procedures of internal auditing. According to this article, the internal auditing model means that every responsibility in corporate governance, according to its assigned accountability, implementing internal auditing and related activities to achieve some kind of corporate strategy with the assurance of a series mechanisms. This paper defines the connotation of integrated internal auditing model based on Enterprise-wide Risk Management, that is, In the background of globalization and economic knowledge, the corporation integrated Enterprise-wide Risk Management and internal auditing form both corporate governance and corporate culture with reasonable and segregated responsibilities and powers in order to adding value and making corporate strategy realized with the assurance of a series mechanisms. This paper proposed mechanisms to ensure the effective and efficient operation of the integrated internal auditing model such as management of ideal mechanism, management of contingency mechanism, incentive mechanism for employees, accountability mechanism. What's more this paper proposed tactics to ensure the effective and efficient operation of the integrated internal auditing model as follows: to follow the best practice of corporate governance, to arrange the power and responsibility precisely; to strengthen the philosophy of Enterprise-wide Risk Management; to clear the environment of internal auditing; to integrate internal auditing resources and promote internal auditing capability; to build learning internal auditing organization to ensure the effective and efficient operation of the integrated internal auditing model. Finally there is a case study of a world class Top500 multinational corporate group to testify the integrated internal auditing model based on Enterprise-wide Risk Management.