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 Standard on Internal Audit (SIA) 18, Related Parties
 Standard on Internal Audit (SIA) 17, Consideration of Laws and Regulations in an Internal Audit
 Standard on Internal Audit (SIA) 16, Using the Work of an Expert
 Standard on Internal Audit (SIA) 14, Internal Audit in an Information Technology Environment
 Standard on Internal Audit (SIA) 13, Enterprise Risk Management
 Standard on Internal Audit (SIA) 12, Internal Control Evaluation
 Standard on Internal Audit (SIA) 11, Consideration of Fraud in an Internal Audit
  Standard on Internal Audit (SIA) 9, Communication with Management
  Standard on Internal Audit (SIA) 8, Terms of Internal Audit Engagement
 Standard on Internal Audit (SIA) 7, Quality Assurance in Internal Audit
 Standard on Internal Audit (SIA) 6, Analytical Procedures
 Standard on Internal Audit (SIA) 5, Sampling
 Standard on Internal Audit (SIA) 4, Reporting
 Standard on Internal Audit (SIA) 330, Internal Audit Documentation
 Standard on Internal Audit (SIA) 320, Internal Audit Evidence

Standard on Internal Audit (SIA) 13, Enterprise Risk Management
November, 28th 2018
            STANDARD ON INTERNAL AUDIT (SIA) 13
               ENTERPRISE RISK MANAGEMENT*

Contents
                                                                         Paragraph(s)

Introduction .........................................................................1-2

Risk and Enterprise Risk Management ................................ 3-4

Process of Enterprise Risk Management and
Internal audit .......................................................................5-6

Role of the Internal Auditor in Relation to
Enterprise Risk Management ............................................. 7-11

Internal Audit Plan and Risk Assessment ......................... 12-15

Effective Date....................................................................... 16


    The following is the text of the Standard on Internal Audit
    (SIA) 13, Enterprise Risk Management , issued by the Council
    of the Institute of Chartered Accountants of India. These
    Standards should be read in conjunction with the Preface to
    the Standards on Internal Audit, issued by the Institute.

    In terms of the decision of the Council of the Institute of
    Chartered Accountants of India taken at its 260 th meeting held
    in June 2006, the following Standard on Internal Audit shall be
    recommendatory in nature in the initial period. The Standards
    shall become mandatory from such date as notified by the
    Council.


    Published in the February, 2009 issue of The Chartered Accountant.
*
Standard on Internal Audit (SIA) 13

Introduction

1.   The purpose of this Standard on Internal Audit is to establish standards
     and provide guidance on review of an entity's risk management system
     during an internal audit or such other review exercise with the objective
     of providing an assurance thereon. This Standard applies where the
     internal auditor has been requested by the management to provide such
     an assurance on the effectiveness of its enterprise risk management
     system.

2.   Enterprise risk management enables management to effectively deal
     with risk, associated uncertainty and enhancing the capacity to build
     value to the entity or enterprise and its stakeholders. Internal auditor
     may review each of these activities and focus on the processes used by
     management to report and monitor the risks identified.

Risk and Enterprise Risk Management

3.   Risk is an event which can prevent, hinder, fail to further or otherwise
     obstruct the enterprise in achieving its objectives. A business risk is the
     threat that an event or action will adversely affect an enterprise's ability
     to maximize stakeholder value and to achieve its business objectives.
     Risk can cause financial disadvantage, for example, additional costs or
     loss of funds or assets. It can result in damage, loss of value and /or
     loss of an opportunity to enhance the enterprise operations or activities.
     Risk is the product of probability of occurrence of an event and the
     financial impact of such occurrence to an enterprise.

4.   Risk may be broadly classified into Strategic, Operational, Financial and
     Knowledge. Strategic Risks are associated with the primary long-term
     purpose, objectives and direction of the business . Operational Risks are
     associated with the on-going, day-to-day operations of the enterprise.
     Financial Risks are related specifically to the processes, techniques and
     instruments utilised to manage the finances of the enterprise, as well as







                                       2
                                            Enterprise Risk Management

     those processes involved in sustaining effective financial relationships
     with customers and third parties. Knowledge Risks are associated with
     the management and protection of knowledge and information within the
     enterprise.

Process of Enterprise Risk Management and Internal audit

5.   Enterprise Risk Management is a structured, consistent and continuous
     process of measuring or assessing risk and developing strategies to
     manage risk within the risk appetite. It involves identification,
     assessment, mitigation, planning and implementation of risk and
     developing an appropriate risk response policy. Management is
     responsible for establishing and operating the risk management
     framework.

6.   The Enterprise Risk Management process consists of Risk
     identification, prioritization and reporting, Risk mitigation, Risk
     monitoring and assurance. Internal audit is a key part of the lifecycle of
     risk management. The corporate risk function establishes the policies
     and procedures, and the assurance phase is accomplished by internal
     audit.

Role of the Internal Auditor in Relation to Enterprise Risk
Management

7.   The role of the internal auditor in relation to Enterprise Risk
     Management is to provide assurance to management on the
     effectiveness of risk management. Due consideration should be given
     to ensure that the internal auditor protects his independence and
     objectivity of the assurance provided. The role of the internal auditor is
     to ascertain that risks are appropriately defined and managed.
8.   The scope of the internal auditor's work in assessing the effectiveness
     of the enterprise risk management would, normally, include:
     (a)   assessing the risk maturity level both at the entity level as well as the

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Standard on Internal Audit (SIA) 13

           auditable unit level;
     (b)   assessing the adequacy of and compliance with the risk management
           policy and framework; and
     (c)   for the risks covered by the internal audit plan:
           (i)    Assessing the efficiency and effectiveness of the risk response;
                  and
           (ii)   Assessing whether the score of the residual risk is within the risk
                  appetite.
9.   The extent of internal auditor's role in enterprise risk management will
     depend on other resources, internal and external, available to the board
     and on the risk maturity of the organisation. The nature of internal
     auditor's responsibilities should be adequately documented and
     approved by those charged with governance. The internal auditor
     should not manage any of the risks on behalf of the management
     or take risk management decisions. The internal auditor should not
     assume any accountability for risk management decisions taken by
     the management. Internal auditor has a role only in commenting and
     advising on risk management and assisting in the effective mitigation of
     risk.

10. The internal auditor has to review the structure, effectiveness and
    maturity of an enterprise risk management system. In doing so, he
    should consider whether the enterprise has developed a risk
    management policy setting out roles and responsibilities and framing a
    risk management activity calendar. The internal auditor should review
    the maturity of an enterprise risk management structure by
    considering whether the framework so developed, inter alia:

     a)    protects the enterprise against surprises;
     b)    stabilizes overall performance with less volatile earnings;
     c)    operates within established risk appetite;



                                          4
                                         Enterprise Risk Management

     d)   protects ability of the enterprise to attend to its core business;
          and
     e)   creates a system to proactively manage risks.

11. The internal auditor should review whether the enterprise risk
    management coordinators in the entity report on the results of the
    assessment of key risks at the appropriate levels, which are, inter
    alia:

          Risk Management Committee.
          Enterprise Business and Unit Heads.
          Audit Committee.

Internal Audit Plan and Risk Assessment






12. The internal auditor will normally perform an annual risk assessment of
    the enterprise, to develop a plan of audit engagements for the
    subsequent period. This plan will be reviewed at various frequencies in
    practice. This typically involves review of the various risk assessments
    performed by the enterprise (e.g., strategic plans, competitive
    benchmarking, etc.), consideration of prior audits, and interviews with a
    variety of senior management. It is designed for identifying internal
    audit key areas and, not for identifing, prioritizing, and managing risks
    directly for the enterprise. The internal audit plan, which should be
    approved by the audit committee, should be based on risk
    assessment as well as on issues highlighted by the audit
    committee and senior management. The risk assessment process
    should be of a continuous nature so as to identify not only residual
    or existing risks, but also emerging risks. The risk assessment
    should be conducted formally at least annually, but more often in
    complex enterprises. To serve this objective, the internal auditor
    should design the audit work plan by aligning it with the objectives



                                     5
Standard on Internal Audit (SIA) 13

     and risks of the enterprise and concentrate on those issues where
     assurance is sought by those charged with governance.

13. The risk review process to be carried out by the internal auditor
    provides the assurance that there are appropriate controls in place for
    the risk management activities and that the procedures are understood
    and followed. Effective enterprise risk management requires a
    monitoring structure to ensure that the risks are effectively identified
    and assessed and that the appropriate mitigation plans are in place.

14. The review process conducted by internal auditors will help to
    determine, inter alia:

     a)   whether the adopted measures result in what was intended;
     b)   whether the procedures adopted and information gathered for
          undertaking the assessment were appropriate; and
     c)   further, improved knowledge would help in reaching better decisions
          and identifying the lessons to improve future assessment and
          management of risks.
15. The internal auditor should submit his report to the Board or its
    relevant Committee, delineating the following information:

          Assurance rating (segregated into High, Medium or Low) as a result
          of the review;
          Tests conducted;
          Samples covered; and
          Observations and recommendations.

Effective Date

16. This Standard on Internal Audit is applicable to all internal audits
    commencing on or after ______. Earlier application of the SIA is
    encouraged.

                                     6

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