Following a year of extraordinary challenges, «Digital Leaders» are standing out with the use of next-generation internal audit practices. (image 1)
These difficult times have created new challenges and demands for the Internal Audit functions, as well as opportunities to engage and support the business in new, innovative ways. These developments underscore the need for internal audit functions to adopt next-generation internal audit practices to be more agile and technology enabled, to have the required skillsets in alignment with these practices, and to achieve a real-time level of engagement with risk management, data and controls.
Furthermore, Businesses are changing as they embrace the innovation economy. Well-documented advances in new technologies and the drive for innovation and digital transformation are upending industries and increasingly are challenging internal audit functions to remain relevant.
Change is being driven by advances in technology and the use of data, as well as the broader economy in which knowledge, entrepreneurship, innovation, technology, and collaboration are fuelling growth. Innovation changes the business model and, as a result, the organization’s risks. Internal audit not only must respond to these changes, but also must be prepared to assess if the business is undertaking its innovation and transformation initiatives in the best possible manner. In order to accomplish this, internal audit must innovate itself.
To get started on the journey to the next-generation, internal audit functions need a clear roadmap. But the very first step, in our view, is establishing the mindset and commitment to:
- Transform the internal audit group’s governance, methodologies and enabling technology capabilities needed to address emerging business risks.
- Increase internal audit’s effectiveness and efficiency while fulfilling the function’s core mission to protect organizational value.
- Start thinking differently.
- Reassess the design and capabilities of internal audit, striving to become an agile next-generation internal audit function that embraces the benefits of technology and transformation.
Internal audit groups should approach this objective in an agile manner. Identify areas where change is needed, assign resources and make ongoing incremental improvements. Above all, be flexible and maintain a mindset of, «How can we be agile, innovative and do this better?» Look to take small steps but focus on taking those steps quickly and immediately. The «assess-design-implement-reassess» approach has become dated. Rather, adopt a more iterative approach and be flexible to make continual changes as the business evolves and new innovative approaches emerge.
The specific design of next-generation governance, methodology and enabling technology elements varies according to an organization’s unique risk environment and business objectives. On the other hand, there are common considerations and actions that have proven valuable in the growing number of internal audit transformation efforts underway.