Development of Audit Risk Model Applied in Public Investment Project Audit: The State Audit in Vietnam

Abstract

The risk-based audit approach (RBA) has proved more efficient than conventional auditing methods. This study investigates how auditors evaluate audit risk to identify significant audit areas in audits of public investment projects. This study collected data for state auditors of Vietnam's specialized and regional state audits through documentary analysis and interviews. The research data comprises 25 audit records from 2018 to 2022 and discussions with 35 state auditors. The results suggest using an audit risk model applicable to audits of finalization reports for completed projects but not compliance or performance audits. However, the audit risk model used in audits of financial statements should be appropriate for designing compliance and performance audit procedures. This finding contributes theoretically to the application of RBA in three ways: (i) the audit method is not merely technical but also dependent on the social context; (ii) the application of RBA to audits of public investment projects improves audit efficiency and quality; and (iii) the legal risk for auditors is reduced. In practice, the proposed audit risk model can assist auditors in accumulating risk assessment results from previous audits and applying them to future audits of a comparable nature by adjusting the assessed risk ratio.