Internal audit

An independent function that tests whether risk management and controls work and reports to the board. It is the third line of defence.

Where you will meet it

Internal audit comes up in 17 learning outcome notes across the FRM syllabus. A few of them:

• The Governance of Risk Management
  FRM Part I · Foundations of risk management

  “Internal audit gives independent assurance.”

• Stress Testing
  FRM Part I · Valuation and risk models

  “Internal audit is the third line.”

• Governance
  FRM Part II · Credit risk measurement and management

  “The third line is internal audit, which gives the board independent assurance that the first two lines work.”

• Intraday Liquidity Risk Management
  FRM Part II · Liquidity and treasury risk measurement and management

  “An independent risk function measures, stress tests and reports, and internal audit reviews the whole framework.”

All terms beginning with I · FRM glossary

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