3 main categories of risk faced by internal auditors.

These are types of risks usually considered by internal auditors

  • Operational risks: These are the risks that the operating activities of an entity maybe disrupted, either deliberately or unintentionally. Employees may make mistakes, and do something wrong or forget to do something necessary. Machines may break down, there may be poor security arrangements, poor supervision, weak management or an ineffective organizational structure. operational risk refer to anything that might go wrong with operational activities.
  • Financial risks: These are risks of what might happen if there are changes in the financial environment, such as interest rates, taxation laws or exchange rates. Financial risk also include credit risk which is the risk of non-payment or late payments by customers.
  • Compliance risks: These a re risks that the entity may fail to comply with relevant rules and regulations, resulting in penalties being imposed by regulatory authorities or fines being paid to injured parties. Examples of compliance risks include risk of non- compliance with health and safety laws , anti_pollution laws, pension laws, employment lows and establishment laws.

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