Next Gen of Internal Audit – Internal Audit Industry

Next Gen of Internal Audit Industry
Next Gen of Internal Audit – Internal Audit Industry

Protiviti Switzerland shared its view on transformational musts and enabling technologies for Internal Audit functions based on Protiviti 2021 Next-Generation Internal Audit Survey. Basing our consideration on this Global survey conducted early this year, CAEs and their teams have more challenges and demands today than at any time in recent memory, underscoring the need to adopt next-generation internal audit practices to be more agile and technology enabled, to have the required skillsets, and to achieve a real-time level of engagement with risk management, data, and controls. The survey, 2021 Next-Generation Internal Audit Survey, is available here.

Following a year of extraordinary challenges, “Digital Leaders” are standing out with the use of next-generation internal audit practices. Here are a few insights and observations regarding the Next-Generation Survey

The journey starts with Commitment, Culture and Agile Mindset

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.

Transformational components

In our view, there are three essential objectives of next-generation internal audit groups:

  • Improve assurance by increasing the focus on key risks.
  • Make internal audit more efficient.
  • Provide deeper and more valuable insights from internal audit’s activities and processes.

The specific governance structures, methodologies and enabling technologies that next-generation internal audit groups introduce vary.

Use of Enabling technologies in the Audit Process

Extensive reliance on automation, data analysis and a variety of advanced technology applications is a defining feature of next-generation internal audit functions. Common technology activities and tools implemented in next-generation transformations include:

  • Advanced data analytics – Leveraging data within the organization to assess risk enables the internal audit group to execute work more effectively (full samples, data-driven flowcharting, risk thresholds, etc.).
  • Robotic processes automation – Reducing highly manual tasks within the internal audit function (e.g., generating audit announcements and document request lists, compiling finding summaries) allows the team to focus on risk within the business and areas that require significant levels of judgment.
  • Process mining – Challenge traditional approaches to internal auditing by leveraging data to understand processes at a deeper level and earlier in the audit cycle, using data to tell the story of how processes are being transacted rather than through traditional, unreliable, and manual intensive walkthroughs.
  • Machine learning (ML) and Artificial intelligence (AI) – Leveraging artificial intelligence and machine learning enables internal audit groups to increase the effectiveness and efficiency of complex testing, as well as help move complex analysis to more real-time.

2021 Next Gen Internal Audit Survey

The journey needs to begin now – Next Gen IA survey

The results from the Survey reveal relatively low maturity levels in governance, methodology and enabling technology. But what is most telling is the skill and capability levels of organizations that we classify as “Digital Leaders.” They are reaping the significant benefits of next- generation internal audit practices given their higher levels of maturity in these areas. They are reaping the significant benefits of next- generation internal audit practices given their higher levels of maturity in these areas. (image 4)

2021 Next-Generation Internal Audit Survey

* For each next-generation internal audit capability, the score represents the average response based on a 10-point scale, where “1” indicates a low level of maturity and “10” indicates a high level of maturity.
** For the purpose of our analysis, we have categorized our group of “Digital Leaders” to include those organizations and internal audit departments that rank themselves at “7” or higher on our 10-point digital maturity scale, where “1” is a Digital Skeptic and “10” is a Digital Top Performer.

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Matt Liang
Associate Director