Assessment of the contribution of inherent risk and residual (Control) risk assessments to the audit process considering banking and real sector

Companies and banks which are important elements of economic life, face many risks during their daily activities and effective management of these risks in the developing economic environment becomes more and more important every day. Inherent and residual risk assessments which is an important part of the risk management process allow company managements to identify risks in advance and to take actions to prevent these risks and the company from incurring material and moral losses. The main purpose of this study is to defend the thesis that inherent risk and residual risk assessments are increased the effectiveness of the audit. Inherent risk and residual risk assessments performed before the audit are considered to be extremely important in terms of determining the audit universe and prioritizing high-risk areas. The effectiveness of the audit is increased by focusing on the predefined risk areas of the company and resource efficiency can be ensured in terms of time and personnel. Within the scope of the study, the concept of sustainability, which is one of the most important concepts of today, is emphasized. Both the contributions of risk control assessments to the sustainability studies of the companies and contributions of the risk management and auditing activities supported by the risk control assessments to the corporate sustainability of the companies are addressed. The contributions of inherent risk and control risk assessments to the audit process are evaluated within the context of the real sector and banking sector. It is emphasized that effective risk assessments are mostly carried out in the banking sector due to legal requirements and the approaches of companies in the real sector to this issue are evaluated comparatively. The study also includes the perspectives of local companies and foreign-origin enterprises in terms of risk control assessment and the differences between these enterprises are emphasized. Since banks and firms do not want to share their practices, risk control assessment practices couldn't be included within the scope of the study, but the perspective of risk control assessments in terms of banking sector and real sector is tried to be interpreted through the activity reports and sustainability reports of banks and companies by using content analysis methods. In the course of this study, literature review was performed by using domestic and foreign sources for the risk control assessment process and audit relationship, and no search was found that included the comparison of the real sector and the banking sector. In the literature, researches in this area are mostly academic studies on risk management, corporate risk management, operational risk management or auditing. As a result of content analysis that is performed through the companies which were included in Borsa İstanbul Sustainability Index (BIST) between November 2017 and October 2018, it was observed that the structural risk and control risk assessments were made most effectively in the banking sector both in internal and external audits. Enterprises that are considered to have an effective risk control assessment, although not as much as the banking sector, are publicly held enterprises subject to the Capital Market Legislation. The companies subject to BIST Sustainability Index are considered to perform structural risk and control risk assessments more effectively than other enterprises. It is seen that, one of the most important reasons why banks use the risk control assessment method more effectively than the companies is that the legislation they are subject to requires them to make a risk control assessment.