Carrying out internal audit - part 1

In this lesson

1. 0:00 Internal audit department: when it's needed
2. 0:41 Assessing changing circumstances for audit requirements
3. 2:15 Risk-based auditing: the core approach
4. 4:11 Understanding inherent and control risk
5. 5:29 Detection risk and overall audit risk
6. 6:28 Calculating audit risk formula

About this lesson

We'll explore when an internal audit function is needed, how to assess whether circumstances warrant establishing one, and the framework for deciding where to focus your audit effort. You'll understand inherent risk, control risk, and detection risk, and how these combine to determine your overall audit risk and resource allocation. This video covers the essential groundwork for internal audit planning, which is critical for AA and AAA papers. You'll see how auditors decide what to audit across the year and within each assignment, using a practical risk-based approach. The session includes worked examples showing how factors like company size, transaction complexity, and organisational change influence the decision to establish an internal audit department, and how to apply risk assessment to guide your audit priorities. By mastering this content, you'll be able to justify audit decisions and demonstrate systematic thinking about control environments—skills that directly support exam success and real-world audit practice. Understanding risk-based auditing is fundamental to delivering effective internal audit work and communicating its value to management and the board.

Duration: 7m