Risk Management in Lithuanian Organizations – Relation with Internal Audit and Financial Statements Quality
Risk Management in Lithuanian Organizations – Relation with Internal Audit and Financial Statements Quality

Summary/Abstract: Over the last few years the importance to the strong corporate governance of managing risk has been increasingly acknowledged. There is more opportunity and risk in today’s complex, dynamic and fast changing environment The new reality is that risks are swift, sudden and relentless; the sources of risks being less predictable, which not only adds to the challenge of managing, but forces businesses to review their approach to risk management and control. Organizations are under pressure to identify all the business risks they face: social, ethical and environmental as well as financial and operational, and to explain how they manage them to an acceptable level. Organizations operate in the environments where factors such as globalization, technology, regulation, restructurings, changing markets, and competition create uncertainty. Uncertainty is caused by an inability to precisely determine the likelihood that potential events will occur and their associated outcomes. Risk usually can be understood as an uncertainty about the events and their outcomes that could have material effect on the goals and objectives of the organization. Risk is the threat that the organization will not reach its objectives both facing the negative circumstances and also failing to utilize the opportunities, i.e. risk is a set of circumstances that hinder the achievement of the determined objectives. Therefore in order to reach its objectives each organization has to develop and implement an approach to assessing and managing the uncertainties and opportunities it faces in the pursuit of its business strategy, with the intention of maximizing shareholder value and performance, i.e. meeting the determined objectives. The purpose of this article is to research efficiency of the risk management systems in Lithuanian companies from the perspective of the quality of the financial statements and also to research whether the existence of the internal audit function impacts the risk management system efficiency through the quality of the financial statements, i.e. researching whether internal audit is effective in Lithuanian companies.

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