The client's internal audit process was historically checklist-driven and reactive, lacking a formal, risk-based methodology to prioritize areas of greatest exposure.
This approach created uncertainty in audit coverage, inefficient resource use, and limited strategic value provided to the Board of Directors. Recognizing the need for a proactive and intelligence-driven function, the client sought to implement a structured framework to systematically identify, assess, and audit its key risks, ensuring audit efforts were focused where they mattered most.
Our methodology began with a comprehensive Enterprise Risk Assessment, conducting interviews with key managers and reviewing strategic documents, prior audits, and financial data. This process identified inherent risks across all critical business units, including Lending, BSA/AML, IT, and Operations.
We then analyzed the likelihood and impact of each identified risk, evaluating existing controls to calculate a residual risk score (High, Medium, Low). These scores directly informed the creation of a prioritized three-year Internal Audit Plan and corresponding budget. This draft plan was socialized with senior management for alignment before receiving formal approval from the institution's Audit Committee, embedding it into the governance structure. Finally, we executed the audits using tailored testing procedures for each risk category, consolidating findings, management's responses, and strategic recommendations into a comprehensive final report for both management and the Board.
This was achieved by implementing a formal risk assessment that focused audit resources on high-risk areas like cybersecurity and BSA/AML. The new process provided the Board of Directors with superior oversight tools, shifting their engagement from reviewing compliance checklists to understanding strategic risk exposure. Ultimately, this established internal audit as a strategic advisor and fortified the institution's overall control environment and regulatory posture.