As companies grow, the need to track and monitor a broad set of internal behaviors and processes becomes more critical and more complex. A solid internal audit team must be thorough, unbiased, and professional. As such, most large organizations have entire departments dedicated to this topic.
Companies assign different goals and roles to internal audits. A KPMG survey revealed the differing perceptions of the role of internal audits within organizations; answers included providing insights regarding productivity and compliance, identifying new revenue sources, improving communication, and more.
Based on this very broad spectrum of goals, the critical role of internal audit teams in organizations is reflected, and the sky’s truly the limit. New audit technologies and methods tackle specific challenges that CFOs and auditors encounter, and keeping an eye on trends in this arena makes auditors more prepared for upcoming needs and obstacles. To help your audit team stay updated, here’s a list of internal audit trends that are growing in popularity and importance to become a must-do for organizations in 2021.
Trend #1: Digitization and automation
Digital transformation is an ongoing trend and a process that many companies have started a few years back, and we can expect to see it grow and expand to new areas in 2021. Companies choose to automate audit procedures in order to minimize human error and bias while saving time and money. Instead of sampling information more or less randomly, they can now examine massive amounts of data covering entire processes end-to-end. The digital and automated internal audit process can take place on an ongoing basis and offer frequent insights to keep the company more informed. Automated data gathering and analysis ensure that audit teams receive relevant data and insights on time, including specific alerts when a compliance issue must be addressed immediately.
There are different levels of digitization and automation. The most basic one includes data integration and collection, and the more advanced use cases involve advanced technologies such as Process Mining, AI and Natural Language Processing (NLP). As the use of advanced analytics becomes more common, we can expect to see sophisticated use cases take over this year. Companies not only use more automation across the board – they also embrace the more advanced functionalities it has to offer.
Trend #2: Remote audit
Due to the COVID-19 pandemic, the current trend is remote everything. In-person human interactions are limited, and all teams, including those focused on internal audits, have to develop creative and resourceful solutions. While this task may be challenging, it is made possible thanks to the right work methodologies and technology tools.
The obvious focal point is communication. Organizations need tools that overcome availability issues and allow teams to remain on the same page. This includes video conferencing tools, documentation technologies, and security solutions to keep the entire process private and safe for the company and audit participants. Companies should also measure the efficiency and productivity of the process to learn if it lags behind face-to-face audits or perhaps exceeds them.
There’s a good chance that at least some parts of the internal audit process will continue to be performed remotely even after the pandemic is history. Companies are likely to see this trend growing and sticking around for the long-run.
Trend #3: The need to deal with the growing risk of internal fraud
With everyone working from home and transitioning audit processes to remote work environments, new internal fraud risks emerge. Internal fraud attempts may include false medical reports that are harder to investigate, false time reports, fraudulent financial reporting, and unauthorized access to sensitive company information. Companies might not want to think of this option, but employees themselves pose a significant risk when critical information isn’t adequately protected. With many jobs at risk during the pandemic, some employees may seek “insurance” and decide to use company data maliciously.
Audit technology can monitor access to information and alert when employees who shouldn’t be exposed to data reach it. Advanced, AI-based technology can put the pieces together to spot suspicious behavior and report it.
Trend #4: Going into new digital frontiers
As mentioned above, digital transformations are not a new trend, but their effect on internal auditing is. As companies become more tech-oriented, entire sections must change and adapt. This includes not only the digitization of the internal audit process itself, which we’ve discussed earlier but also the need to monitor more digital procedures across the company. Companies need to ensure that digital activities don’t go under the compliance radar or create false alerts. In other words, it’s crucial for the internal audit team and the technologies it uses to fully understand how each company process works. If it transitions to digital, the policies, technologies, and third parties related to this process must change accordingly.
The digital transformation trend will not only influence the way audit teams approach particular tasks but also the structure and capabilities of audit-focused technologies. We are likely to see internal audit technologies that know how to work with digitized company processes, integrate with new tools, and draw the right conclusions based on the digital environment involved.
Internal audits shift according to relevant regulations, business conduct, and technologies. When we take on the task of mapping trends in this field, we must ask ourselves where businesses are headed and plan the internal audit strategy based on that. By considering these factors, we can guarantee that any business activity will be monitored and continue to go hand in hand with compliance.