Project Management Accounting: Budgeting, Tracking, and Reporting Costs and Profitability, Second Edition

Chapter 8

Risk Assessment

Risk assessment has long been a tool in the project manager's arsenal, and there are many books, articles, and Internet commentaries on the topic. Since this book is taking a different angle in its view of project management, we will look at risk assessment from a different point of view—accounting and auditing practices. The primary focus of this chapter is in identifying those risks that would concern an auditor or accounting professional. We believe that this additional knowledge, as well as traditional risk assessment as practiced by project management professionals, will improve your overall skills. In addition, the tools and techniques provided in this chapter will help you assess the risk in being employed by a company and be useful during an employment search as well as leading up to a contract project management engagement.

The New Oxford American Dictionary defines risk as “the possibility that something unpleasant or unwelcome will happen.” Risk assessment has become more popular in current times because of the meltdown of the financial credit markets in 2008. In fact, the insurance and auditing professions have been aware of the concept since the beginning of their respective industries. In the insurance industry, risk assessment is used in the formulation of customer acceptance and premium calculation. The audit profession relies heavily on the use of risk assessment when an auditor is designing procedures and audit programs. The audit profession ...