The Tea Talk titled “Clarifying the Role of Internal Audit in Risk Management” explored how internal audit and risk teams can collaborate effectively to strengthen the enterprise risk management process.
Key Insights
- Internal audit provides independent assurance as the third line of defence, leaving the responsibility of identifying and mitigating risks firmly with risk management.
- Modern audit teams move beyond static reviews, using real-time data and continuous assurance to deliver insights that both protect and create organisational value.
- A resilient risk culture requires auditors to balance strict independence with collaborative influence, supported by an engaged board to ensure findings translate into tangible improvement.
What is the role of internal audit in enterprise risk management? To date, many organisations still debate this question and struggle to separate the daily duties of risk managers from those of internal auditors.
While it is easy to blur the lines between these two disciplines, the distinction is clear. The responsibility for designing and implementing processes relating to identifying, evaluating, and mitigating risks remains firmly with risk management, not audit. Instead, internal audit’s true strength lies in ensuring that these responsibilities are carried out effectively and consistently across the business.
To address one of the most critical yet frequently misunderstood aspects of corporate governance, the Institute of Enterprise Risk Practitioners (IERP®) hosted a Tea Talk titled “Clarifying the Role of Internal Audit in Risk Management.”
Drawing upon his extensive experience in governance, risk, and assurance, Chairman of the Board of Governors of the IERP® Ramesh Pillai clarified how internal audit can effectively support, challenge, and strengthen the enterprise risk management process while maintaining its independence.
Internal Audit as the Third Line of Defence
A robust governance framework relies on a clear understanding of the Three Lines of Defence model. While management, department or process owners own the risks (the first line) and risk functions monitor them (the second line), internal audit serves firmly as the third.
Because of this distinct position, internal audit does not implement, design, or manage risk or internal controls. Instead, it provides independent assurance that an organisation’s risk management and internal control processes function as intended. Confusion between the lines often leads to inefficiency, duplication of effort, and blurred accountability, which weakens the overall governance structure.
To deliver genuine impact, internal audit must offer constructive challenge and impartial oversight. Auditors cannot focus solely on financial accuracy or rely on rigid compliance checklists. They must deeply understand the broader business context, anticipate emerging threats, and evaluate whether management consistently makes informed, risk-aware decisions.
By aligning their reviews with corporate strategic objectives, auditors ensure that every internal control serves a practical purpose. In turn, they proactively drive continuous organisational improvement and build long-term resilience.
Navigating Risk Management as a Trusted Advisor
Internal audit is most effective when it operates as a trusted advisor, offering actionable insights that improve governance, risk management, and internal control processes.
While auditors continually navigate the friction between independence and collaboration, independence does not require isolation. Rather, it demands the ability to evaluate frameworks objectively while communicating openly with the other lines of defence.
To maintain this balance, auditors must avoid the common trap of absorbing operational or managerial duties. Doing so actively undermines impartiality and compromises the assurance function. Put simply: once internal audit becomes directly or indirectly involved in managing a risk, it can no longer independently assess it.
How, then, do internal audit and risk management teams work together effectively? The key is aligning in purpose rather than function. After all, both teams aim to protect and enhance organisational value.
By sharing information and aligning on key risk priorities, they eliminate duplicated efforts, expose strategic blind spots, and broaden overall assurance coverage. This collaboration must be grounded in mutual respect for their respective roles and boundaries.
Shifting Risk Governance Towards Continuous Assurance
Technological shifts, regulatory developments, and stakeholder expectations increasingly stretch the traditional boundaries of internal audit. To meet these new demands, auditors today must possess not only financial acumen but also strategic awareness and risk intelligence.
Because supporting robust enterprise risk management now requires cross-functional insight and strong data fluency, internal audit must move beyond traditional periodic audits toward a continuous assurance approach. By integrating live data and dynamic risk indicators, audit teams can deliver timely, actionable insights to both management and the board.
Executing this shift requires fresh skill sets, updated technology, and a culture of agility within audit teams. Above all, an audit plan must never remain static; it should adapt continuously to align with the company’s changing risk profile and strategic priorities.
How Audit Committees Protect An Auditor’s Independence
One of the biggest challenges internal auditors face is balancing strict independence with the influence needed to drive meaningful change. A technically flawless audit report holds little value if management never acts on the opportunities contained within it. Driving meaningful change requires auditors to translate their findings into actionable insights that trigger conversations and create tangible improvement across the company.
This delicate balance relies heavily on active engagement from the audit committee and the board. The audit committee plays a central role in reinforcing the reporting lines that preserve auditor independence. Boards must understand that internal audit exists to provide unbiased assurance, not to step in and manage risks directly. When leaders misinterpret this dynamic, they blur accountability and inadvertently weaken the governance framework.
Furthermore, robust support for internal audit teams empowers them to strengthen the broader risk culture. By highlighting recurring control failures and recommending systemic improvements, auditors can influence attitudes and behaviours toward risk. In turn, audit findings that are positioned as opportunities for learning rather than punishment foster transparency, accountability, and collaboration.
Key Lessons for Risk and Internal Audit Teams
Navigating the complexities of enterprise risk management requires internal audit and risk management teams to recognise that they are complementary yet distinct disciplines. To ensure both functions deliver maximum value without blurring accountability, they must anchor their collaboration in a few foundational principles.
Clarify The Boundaries
Management owns the risks. The risk management team supports the process. Internal audit provides independent assurance. Blurring these lines compromises organisational integrity.
Balance Independence With Influence
Auditors must remain objective to maintain credibility. Yet, independence does not require isolation. Internal audit must collaborate with risk management to eliminate strategic blind spots.
Engage The Audit Committee
Building a healthy risk culture requires active board engagement. The audit committee must protect direct reporting lines. This support empowers internal audit to drive measurable organisational change.
Shift Towards Continuous Assurance
Static audit plans cannot keep pace with modern threats. Auditors must use real-time data to deliver timely insights. This proactive approach directly strengthens enterprise risk management.
At its core, effective risk governance depends on these complementary disciplines working in harmony. The Board’s Audit Committee should continually revisit and clarify the role of internal audit as part of the evolving governance strategy. As Ramesh appropriately puts it: “When everyone understands their role, the system works. Internal audit should not only protect value; it should help create it.”
