The future of auditing is auditing the future. Enough with a review of historical data. The business is heading forward into the future. That is what internal auditing should focus on the value addition chain.
Internal audit departments must be transformed through re-skilling, re-tooling, and exposure.
Three challenges affecting internal auditing effectiveness in value addition
Sampling: why test some and not all? How do we provide independent assurance enterprise-wide amid resource constraints?
Cyclical: how do we avoid moving in circles again and again? How do we go beyond the mundane and basics?
Past and rear-view: how do we avoid spending a lot of the effort in reactive auditing, yet the biggest challenges for the business are in the future?
The traditional approaches to internal auditing have been overtaken by developments in innovations, processing power, and business processes integration. To win, internal auditing must be re-imagined. The efficiency and effectiveness of the internal audit of today must be like that of the Formula One (F1) drivers and crew. If you have ever watched a live F1 race in action, you notice the speed and agility of the drivers, team, and crew. Your business must operate like the way the F1 Teams and Drivers work. Your Internal Audit Team must have the agility of the F1 Pit wall Crew. And your other support processes and units like the Pitstop crew. That way, you win.
Your internal auditing approaches must move from rear-view to insight view for increased productivity and strategic input to winning.
For increased assurance, a shift must be made.
From sampling past data to automated data download and review in real-time
From manual data extraction and review to automated checks across the board enterprise-wide
From cyclical audits to on-demand auditing with continuous report generation
From unprocessed exception reporting to data analytics and visualization for additional insights.
The internal audit department must invest in predictive auditing to move from insight to foresight. You need to make product/branch/project risk profiling, trading analysis, and credit risk management models. What are the branch, project, or portfolio risk behaviors, which products need further attention? What anomalies must you model in your trading activities to predict challenges or loss positions? And how can internal audit provide early warning on the credit risks by predicting customers who are unlikely to pay?
In summary, internal audit must evolve. It starts with the training of the internal audit teams to wake up to the new realities as well as to embrace the use of the available tools and internal audit resources to win.
Are you ready for the future of the internal auditing?
The presentation by the DBS Bank, which I attended in 2017, has informed this article on the future of internal auditing. To get the full PPT, comment below, and leave your email.
As the speaker clearly said, the future of auditing is auditing the future. I agree.
Copyright Mustapha B Mugisa, 2020. All rights reserved.