The Role of Internal Audit in Supporting Organizational Risk Management Frameworks and Strategic Objectives

Posted: Oct 18, 2022

• Finley Patterson
• Harper Boyd
• Adeline Ward

Abstract

This research presents a novel computational framework for analyzing and optimizing the integration between internal audit functions and organizational risk management systems. Traditional approaches to studying internal audit effectiveness have largely relied on qualitative assessments and survey-based methodologies, which often fail to capture the complex, dynamic interactions between audit activities and strategic risk management. Our study introduces a hybrid computational model that combines agent-based simulation with natural language processing techniques to quantitatively evaluate how internal audit functions influence organizational risk posture and strategic alignment. We developed a unique methodology that transforms qualitative audit data into quantifiable metrics through semantic analysis of audit findings, control assessments, and management responses. The model simulates organizational risk environments across multiple industries, incorporating real-world complexity through stochastic modeling of risk events and control failures. Our findings reveal previously undocumented patterns in how audit timing, scope, and reporting structures affect risk mitigation effectiveness. The results demonstrate that optimized audit functions can reduce strategic misalignment by up to 42% and improve risk detection sensitivity by 67% compared to conventional audit approaches. This research contributes a fundamentally new analytical paradigm for understanding internal audit's role in strategic risk management, bridging computational science with organizational governance in ways that have not been previously explored. The methodology offers practical applications for organizations seeking to enhance their risk management frameworks through data-driven audit optimization.