Audits, whether performed internally or externally, have typically been primarily about confirming the status quo. Do records match reality? Are processes working as intended? Are controls well-defined and operationally effective? And when there inevitably are variations, are they within an acceptable tolerance? Auditing is critical in lending credibility to information and confidence to decision-making. However, as markets change, risks evolve, and as a consequence the role of internal audit and its impact on the organization.
The traditional role of internal audit teams to verify the accuracy and efficacy of controls, mark deviations, and bolster compliance, runs the risk of becoming too narrow within the frame of modern risk management and compliance and can fall prey to its own set of vulnerabilities and redundancies. Though its mission to enable effective decision-making does not change, the value an internal audit team can provide is greatly expanded beyond verification when modern risk management, communication, and agile principles are applied. This approach enables and provides assurance that the organization can reliably achieve objectives, address uncertainty, and act with integrity.
Internal audit teams face a particular risk that adherence is not always indicative of quality performance. The risk is that efforts to moderate an organization’s performance can have a diminishing return over time, rewarding only that which is measured. The question is: how to enable internal audit teams to add greater value to the business and contribute to deeper strategies than simply containment? A well-designed assurance function should be able to quantify the value of audit through the detection and mitigation of risk exposure.
Knowing your Risks:
A new approach begins with an understanding of risk management, compliance controls, and effective governance in a new paradigm. These are areas where internal audit teams have the potential to make significant contributions. Understanding this widens the scope of what an internal audit team can offer to the organization and further define its role as an enabler of decision-making. This clarity allows chief audit executives to develop higher-value strategies aimed at value to the business. These executives should cast a wider net for their long-term goals and contributions with better performance indicators on assurance in the business context.
Communicating the Risks
Next is communication. Communication is highly important for internal audit teams, as they serve as a bridge between many different parts of the organization with different priorities. Audit teams must understand, compile, communicate, and draw conclusions on information from across a variety of places, systems, processes, and perspectives within an organization. Auditors need effective communication tools and practices to facilitate producing high-quality information. Low-level operational audits might have employees wondering what is important, what resources must be prepared, or what information to take away from their efforts. Effective communication here can reduce friction. When communicating findings with leadership and boards. Effective use of technology and practices deliver insightful and actionable data in this context.
Providing Strategic Insights
Lastly, a wider scope requires intelligent and strategic use of resources. Audit teams face the daunting task of gathering, analyzing, and communicating the condition of many aspects of organizational information and operations. Establishing methodologies and integrating technology to allow teams to organize, visualize, identify, and diagnose potential threats to the organization’s health greatly empowers internal auditors to leverage their unique vantage point.
Reducing friction and enabling the previously discussed principle of communication is key, as these will contribute to an agile and effective audit team. One that can pivot to new operations, adapt to emerging responsibilities, and communicate across a range of organizational concerns.
Organizations need agility, and internal auditors themselves need to be agile. Shifting paradigms of internal audit to risk management with greater communication and with that accountability delivered through information and analytics is achieved with technology. Audit functions need highly agile technology to see across systems and processes that deliver 360° insight and control to the business as it shifts and requires agility as well as greater accountability in assurance.