The Application of Analytic Hierarchy Process (AHP) For Risk- Based Allocation of Internal Audit Resource

Esmail Hamid


This study presents a case study on Toseye Sanaye Behshahr and group of related companies in 2011 to provide a link between the internal audit planning model and its actual application. The theoretical risk-based planning model developed by Patton et al. (1983) addresses the important question of allocating available internal auditing time on the most cost- benefit basis. This case study provides a practical approach to developing a risk index for each organizational unit that might be audited. Using these risk indices, the study develops a functional technique to assign a level of audit intensity to each unit in order to achieve the cost benefit criterion. The Risk index requires determination of three variables. First, a set of risk factors judged common to all units is needed. Second, the relative importance of each factor to the others is required. The Ten auditors individually performed a pair wise comparison of each factor (Saaty 1977). To quantity the last component needed for computation of the risk index, the internal audit director rated the six risk factors for each unit on a five- point scale. The three elements were then combined to arrive at a risk index for each unit.


Keywords: AHP, Risk Auditing.

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