Internal Audit

The future of Internal Audit: Analysis, insights and prospectus

Emerging times are bringing innovative changes in how internal audits can contribute to organizations. The digital world is moving at a fast pace. It will change how internal is provided to clients and has given a new challenge to the audit firms to change the traditional auditing practice and transform and adapt new technologies and a new set of rules and practices.

Internal auditing has successfully pivoted to meet its stakeholders’ growing and changing needs. After its transition in 1990 to its response, the regulatory body in companies changed fraud and corruption laws, financial reporting, embezzlement of the fund,  and data privacy. The profession has adapted to address the dynamic expectations of its key stakeholders.

Only recently, the Auditor has faced a significant transition over the few years and has reinvented itself. However, organizations face strategic, reputational, operational, financial, regulatory, and cyber risks. And there is a need to innovate changes to survive constantly.

The world has entered the fourth industrial revolution, where new technological advancement, digitalisation, and artificial intelligence^[1], data privacy have changed significantly. The year 2020 has already brought significant changes in the audit industry. In contrast, the year 2021, after the biggest outbreak of the pandemic worldwide, affects the world economy and provides even more opportunities.

Since numerous changes are happening around the globe and as data and technology are the core of every aspect of the modern organization, IA departments need help to work and must adapt to forthcoming changes. The following aspects bring a change in IA function as a whole.

Privacy compliance will be a critical aspect of the Audit.

In 2020, the privacy regulation made some significant decisions and built a better understanding of potential privacy risks, so it can be more effectively involved in identifying compliance risks and building the appropriate controls to mitigate them. It incorporates privacy considerations into its enterprise risk assessments and determines how equipped the organization is to respond to new regulations and sustain the new compliance risk.

The board of an organization participate more in the cyber security programme.

The board members will get a comprehensive view of the internal and external risks in the organization. Boards depend more on Chief Audit Executives (CAEs) and their Audit team to communicate the risks and effective methods to mitigate them. The Audit will need to educate the board members on the steps to test the organization’s cybersecurity program to validate its effectiveness. With the comprehensive knowledge of boards in risk management, industry trends, best practices of regulation, and business strategies, the Audit team  provide  solutions to handle any identified risks before they become too large to address

Internal audits play a significant role in digital business transformation.

To keep up with the needs of a changing digital workplace, many organizations have adopted digital transformation and implemented new technological advancements and processes to make the business more efficient.

For instance, intelligent automation, such as robotic process automation (RPA), will continue to expand rapidly in many businesses in 2021.

However, while making a significant change in digital transformation,  all areas of the organization encounter many challenges. In business processes, it can be redesigned and automated. The CAEs and their audit teams will be a part of a board-level discussion and executive management team.

The RPA (robotic process automation) Audit can bring help  to guide the company while  considering the following aspects:

• What kind of controls will be put in place to monitor the performance of these tools;
• Who will design, redesign and monitor the controls
• What processes will be implemented to prevent unauthorised access to new systems and protect their sensitive data?
•  Audits provide data analytics to manage the availability of data.

Data analytics has transformed the area of internal auditing, providing valuable insights to management, transforming manual processes into automated ones, improving the accuracy of audit results, and increasing the ability to identify and address future risks across the enterprise.

Over the few years, more audit departments will integrate data analytics as a core capability across all business areas, bringing various benefits.

Internal audit skills and expertise will expand.

The drive for innovation within many organizations forces auditors to adapt and evolve rapidly, and many auditors need help to keep up with these changes.

The auditors must expand their abilities beyond traditional areas like accounting, compliance, fraud, and finance in today’s business environment. To support the change in an organization, many companies are looking for auditors with professional experience in technical areas like data science, analytics, IT, cybersecurity, and privacy.

Upgrading audit infrastructure and technological advancement:

Large companies are upgrading the technology infrastructure, especially with complex auditing requirements that span financial audits,  assessments, audits and inspections related to operations, quality, safety, suppliers and IT. Companies are migrating from traditional systems like point applications and paper-based procedures to a web-based integrated audit management system.

The technological advancement allows the CAE to strengthen the audit function, and after enabling it, it delivers more strategic value while lowering its operating costs.

Conclusion

The digital world is changing, compelling the future of internal audits to adopt new tools and techniques to respond effectively to future risks. The year 2021 was challenging for Audit as it faced an uncertain economy, more significant compliance challenges, board-level demands, technological change, and increased cyber threats. Internal Audit trends for 2023 demanding talents, escalating risk velocity and more.

However, as long as the internal Audit has the tools and resources to keep up with the current developments and advancements, this evolution will bring significant value to businesses everywhere.

Also Read:
Decoding the Viability of Internal Audit Using AI
Effective Steps of Performing an Internal Audit Successfully
Internal Control System- Analysis of Benefits & Limitations