Risk-Based Auditing and Detection of Irregularities in Nigerian Public Institutions

This study investigates the effectiveness of risk-based auditing in detecting financial irregularities in Nigerian public institutions. Traditional audit approaches have been criticized for their resource inefficiency and inability to focus investigative effort on areas of highest risk. Risk-based auditing, which directs audit resources toward activities and transactions presenting the greatest risk of material misstatement or fraud, has been increasingly adopted by audit institutions globally. This study adopts a survey design and collects data from 88 internal auditors, external auditors, and audit supervisors working in federal agencies, parastatals, and state audit departments. The study assesses risk assessment methodology quality, audit plan alignment with risk profiles, and detection outcomes under risk-based versus traditional approaches. Regression and descriptive analysis are applied. Findings indicate that institutions using structured risk-based audit methodologies demonstrate significantly higher rates of irregularity detection compared to those relying on compliance-focused traditional audits. Risk prioritization and continuous monitoring were identified as the most effective elements of risk-based practice. However, adoption remains incomplete, with many audit units lacking the skills or tools needed for structured risk assessment. The study concludes that risk-based auditing holds significant promise for improving public sector audit effectiveness in Nigeria. It recommends that the Office of the Auditor General develop mandatory risk-based audit standards for all federal audit engagements and invest in training programs to build risk assessment competency across the public audit workforce.

Keywords: risk-based auditing, public institutions, irregularity detection, audit quality, internal controls.