Question

Enterprise Risk Management (ERM) is directly related to auditing. Describe the relationship between ERM and auditing. Why is ERM important to an organization?  

Answer 1

Both Enterprise Risk Management (ERM) and auditing focus on the organisation's risk profile. A sound system of ERM mandates with an evaluation of the nature and extent of risks at periodic intervals, and remains flexible for the adaption of changes in the risk environment. An efficient risk management program stipulates requirements of audit that need compliance while making strategic positioning or taking decisions related to organisation expansions, portfolio adjustments, and other important concerns.

ERM is important for an organization because it create awareness on the risks and the ability of the organisation to respond effectively. It improves the compliance with legal, regulatory and reporting requirements of the company; and enhances the confidence related to the achievement of strategic objectives thus an improvement in efficiency and effectiveness of operations of organisations