The Malaysian listed companies are still struggling to maintain their enterprise risk management (ERM) system efficiently due to improper implementation problems of risk management practices. Therefore, the prime objective of this study is to reveal the audit effectiveness in mitigation of risk management implementation (RMI) problem and to examine the effect on financial performance. To achieve this objective, three hundred (300) questionnaires were distributed among the managerial employees of Malaysia listed firms by using simple random sampling. Data were analyzed by using SmartPLS 3. It is found that external audit effectiveness (EAE) and internal audit effectiveness (IAE) has a significant positive relationship with an ERM system. However, top management stress has a significant negative relationship with RMI. Additionally, ERM system has positive effect on financial performance of companies.It is also found that level of RMI playing a mediating role. Thus, this study is contributed in the body of knowledge by highlighting the vital factors to mitigate the crucial problem of RMI, particularly in Malaysian firms. Hence, the current study is quite beneficial for practitioners to implement ERM system effectively.
Keywords: Enterprise risk management, internal audit, external audit, top management stress, implementation.