As organizations navigate increasing complexity and rapidly changing business environments, Internal Audit has to assess its challenges for the future.
Audit Executives gathered at a recent Sydney Roundtable – “Growing Audit Capability for the Future,” facilitated by Phil Leifermann of Wolters Kluwer TeamMate, to discuss ways to address these challenges. Two vitally important challenges include Internal Audit’s ability to meet stakeholder expectations, and to become more efficient and effective.
Meeting stakeholder expectations
In this environment of new risks, changing business models, and technological disruptions, businesses are responding by commencing journeys of transformation and restructuring to ensure they are ready. As an organization trusted advisor, Internal Audit can rise to these expectations by:
- Knowing the business
A deep knowledge of the business operations and the business strategy is key, allowing Internal Audit to understand how changes in the regulatory, political, and economic environments can introduce new risks to the organization
- Focusing on service
Internal audit has to be seen as a service organization, one adept at “finding ways to serve the business.” Audit clients work at the coalface—where the work gets done day to day—and it gives them a deep understanding of the processes, risks, and problems facing the business. These clients often come up with innovative ways to solve problems. Engagement with the staff at the coalface ensures that business becomes part of the solution. Internal Audit’s role as the trusted advisor then becomes a means to serve both the organization and the audit profession.
- Focusing on value
Value is the ability to deliver assurance and advice that focus on the bigger picture—strategic risks—and the seeking out of innovative opportunities to add value. Internal Audit can focus on value by:
- Ensuring audit insights are linked to strategic priorities
- Finding new and innovative ways to focus on the future and help the business predict changes to risk profiles
Becoming more efficient and effective
Quality audit reports delivered to management and the board speak to the effectiveness of the audit department. Audit departments have to ensure audit insights go beyond the control effectiveness approach . Insights should also cover efficiency, effectiveness, and economy.
With fewer resources and increased responsibility for meeting greater expectations, audit departments have to ensure that the audit process is as efficient as possible. This will help create the capacity needed to work on high-value activities.
Additionally, Combined Assurance and Assurance Mapping allow audit teams and organizations to understand audit coverage. Partnering with other assurance providers reduces duplicated effort.
- Achieving compliance with IIA Standards
The IIA Standards as a principles-based framework promote the quality of the work done by Internal Audit. Audit teams are always looking for new and effective ways to demonstrate compliance with the Standards. Leveraging established best practices frameworks such as COBIT and ISO 27001 help audit departments work smarter, and enhance the overall quality of audit work.
In some industries, being able to demonstrate compliance with these frameworks also provides a competitive advantage.
Ways to achieve compliance with the Standards include:
- Engaging with the IIA for advice on the Standards and Quality Assurance Reviews
- Seeking out tools and technology that help comply with the Standards
- Attracting skilled talent
The Global IIA 2018 North American Pulse Survey of Internal Audit indicated that 72% of CAEs believe talent gaps hinder the ability of their departments to deliver on the audit plan and provide the required and increasing breadth of assurance.
Strategies to consider include:
- Embracing guest auditor programs
- Outsourcing specialist skills in order to deliver the audit plan objectives
- Hiring talent from diverse backgrounds
- Leveraging Technology
As data are generated at unprecedented rates, data analytics will be the compass of the modern internal audit team. Internal audit teams can use data analytics within the scope of the audit, to plan and audit, and to identify high-risk focus areas. However, there can be wider opportunities as well.
These powerful tools, which allow testing of total populations, can be built into a controls tool used by the second line of defense. Collaboration with innovation in this way can further Internal Audit’s objective of becoming the organization’s trusted advisor.
As technology grows in leaps and bounds, and the prevalence of AI and robotics comes to the fore, there are two questions to ask: How will these new technologies influence Internal Audit work? and What challenges and opportunities will Internal Audit encounter when auditing these new technologies?
In the world of disruption and technological evolution, leading Audit Executives are constantly being challenged to Grow Audit Capability for the Future. We have scanned the landscape and highlighted five key areas on which to focus.