“The role of internal audit is to provide independent assurance that an organization’s risk management, governance and internal control processes are operating effectively.”
Today, in the wake of the pandemic, organizations across the world are not just realizing the importance of internal audit, but also appreciating the merits of internal audit that go beyond the confines of ticking and tying. With automation, AI, and ML brining data-driven insights to the table, C-suites and boards are better able to realize why internal audit departments should exist. What is the primary objective of auditing? It’s about offering an independent opinion. But how many times do auditors unearth matters that are of immense importance? The crux of the issue lies in going beyond sheets and into strategy. For that, it is helpful to list out some best practices that can change how internal audit works.
Carefully define the scope of internal audit
This applies to what and how much. After all, internal audit teams help boards and the C-suite steer the ship. It is of prime importance that auditors are trained to look at the big picture and not just at minute details, which very often have no significant consequences on decision making. As the pandemic unfolded, many organizations were confronted with realities they had, hitherto, turned a blind eye to and if internal audit can unmask threats with well-timed counsel, it will well and truly have done its job.
The objectives of each audit too must be defined so that teams do not get overwhelmed with scope creep. This is when you aren’t able to audit in a modular way and land up investigating and rummaging through everything. To define the scope of the undertaking it can be helpful to learn from past audits and factor an element of structure into the internal audit process by drawing out a schedule, assigning responsibilities, setting a budget, and so on.
Prioritize insights and advice
One thing the pandemic made clear is that a spotless past is no absolute guarantee of a seamless future. Many ways of working were condemned to at least temporary obsolescence and today, many organizations question their preparedness for things to come in the future. Hence, internal audit has the chance to evolve into the role of a dependable advisor. The emphasis here lies on what lies ahead. Yes, GRC is important, but consulting must come to the fore too.
Shining a spotlight on issues that have occurred, and even diagnosing them is one thing, investigating processes for issues that may occur in the future is quite another! This is the kind of value that leadership and stakeholders seek, especially after the pandemic. Forward-looking internal audit can take many forms: providing data on how much of a cybersecurity risk work from home poses, probing into current employee morale and what a company needs to do to avoid attrition, alerting management to current ways of working that are likely to come under environmental sanctions in the future, and so on. The advantages of internal audit multiply when you add strategy to assurance.
Invest in the right skills sets
You’ll note shifting the focus from hindsight to foresight is not so much about an internal audit process, it is more about the competence of the team. As such it makes sense to recruit and retain top talent. Besides technical audit skills there are several competencies that you should look to your auditors having.
Data analysis: There is a reason that data science is in vogue and people from all professions are taking to it. With operations and processes becoming increasingly digital, there is a dire need for professionals who can work on that data, make sense of it, and churn out insights from a heap of 1s and 0s. This means that if an audit lead, for instance, were to be able to process data, he or she could instantly steer the internal audit team towards bringing data-driven insights to the executive table.
Soft skills: Irrespective of the internal audit procedure and the technical skills it mandates, what does not change is the requirement for soft skills like exemplary communication. Often, these are hard to teach and given that internal auditors communicate with persons at different levels of the organization, the audit committee, board, C-suite, employees, and stakeholders alike, soft skills can be the factor that determines the efficacy of an audit.
Cybersecurity: With online work going mainstream and unsafe cyber practices being commonplace a fragile digitally-connected world is now a reality. Along with this is the increased probability of a cyber pandemic that can cripple to industries on a global scale. Far from being conspiracy theory, this is what entities like the World Economic Forum are talking about. Having an internal audit department that understands cybersecurity is almost a necessity today (why wait for the next pandemic to strike!).
Cultivate a culture of transparency
Ancient philosophers believed that what is received is received according to the mode of the receiver. Meaning that an internal audit report may be only as good as the way it is accepted. Since it is to comprise of an independent opinion, it becomes necessary to foster transparency across the organization, and definitely between the auditors and the people they are reporting to. If internal audit reports to an audit committee, things become easier, but, for instance, in a small organization, if auditors must report to the department they are auditing it becomes tricky.
An interesting way to improve transparency across the organization is to reduce the gap between employees through collaboration. If auditors work with other employees and vice versa mutual trust will be formed and further, cross-team projects give internal audit an opportunity to glean strategic insights.
Deploy an organization-wide GRC solution
The traditional internal audit checklist is replete with items like repetitive tasks, manual data extraction, spreadsheet-intensive work, and report preparation. Not only are many of these time-consuming but in other fields tasks such as these have already been automated. It is this gap that GRC solutions like VComply seek to fill, offering internal audit capabilities such real-time metrics, easy reporting and dashboarding, advanced data analytics, compliance management, and remote auditing tools.
Deploying such a software organization-wide increases the scope of internal audit instantly and is in fact a clear sign that you want to move beyond tick marks and spreadsheets, and into the realm of data-driven insights and advice. Good luck!