Five key actions internal audit leaders need to take today

Now in its 20th edition, Internal Auditing Around the World is Protiviti’s flagship report on the key trends & developments in the internal audit landscape. Experts from the global management consulting firm outline the factors that will dominate the agenda for the coming few years – along with five key actions which need to be taken today.

Prioritise transformation

We cannot continue to think and act the same if we, and our organisations, expect and require a different result. We need to embrace change and, as we often like to say, become comfortable with being uncomfortable.

Despite advancements achieved by best-in-class internal audit functions, many organisations continue to perceive internal audit as a compliance or assurance function (often with a limited focus or scope of work), and many internal audit groups operate with a similar mindset. This needs to change.

The world is changing fast, as is the business landscape. Finance and internal audit teams need to be in tune with business trends, changes in focus, and evolving risks; nimble; technology-enabled with access to data; and positioned to be a strategically focused and relevant partner in providing value-centric perspectives to the board and C-suite.

But the board and C-suite are not just going to hand the keys for the organisation’s strategic mission control centre to the internal audit function. Internal audit leaders and teams need to earn their access – through their strategic orientation and the relevance, value, and insights they bring.

Internal audit’s transformation efforts should be aligned with both immediate needs for helping the organisation elevate business processes and the customer experience by improving quality, increasing operating efficiencies, and compressing cycle time, and managing current risks, as well as with long-term strategic planning to develop relevant skill sets for future challenges posed by technology advancements.

At the same time, internal audit must maintain its independence and objectivity.

What to watch: We expect the global regulatory landscape to continue to shift in the coming years. From expanded privacy laws and customer protections to increased and more complex sustainability reporting mandates and regulations governing the use of AI, organisations face a growing list of compliance requirements. Internal audit’s role will be critical in helping the board and C-suite prepare for coming changes and navigate the increasingly complex landscape as efficiently as possible.

With the right talent and technology, along with an innovation mindset that prioritises transformation and embraces change, internal audit functions can position themselves as integral and highly sought-after strategic partners to the business.

Lean on technology

Technology drove extensive transformation in internal audit over the past decade. Without question, this will continue into the future. CAEs and internal audit leaders should drive further investment into their functions, exploring the integration of new and emerging technologies into their auditing activities.

Invest in the acquisition and implementation of technology tools like AI for routine and advanced tasks. Available technologies, including those that have only become accessible recently, are rapidly becoming table stakes for leading internal audit functions.

Other advanced technologies, such as process mining tools, will allow for a deeper understanding of and insight into complex business processes and focus internal audit efforts on where they can have maximum impact. This will result in more time spent in areas that really matter to and will make a difference for the organisation.

AI will have a major influence on internal audit functions in the coming years. The impact will be twofold: the role of internal audit in helping to shape, govern, and control the use of AI throughout the enterprise, and the integration and use of AI throughout the internal audit life cycle to transform how work is performed and bring richer insight into assurance and advisory activities.

What you need to know: As widely discussed, AI presents immense opportunities as well as a number of risks that must be addressed. The convergence of internal audit and AI signifies a deliberate shift toward more sophisticated business practices driven by technological empowerment where both disciplines can enhance each other’s efficacy in safeguarding organisational integrity and efficiency. Yet AI must be employed in the right way, with appropriate governance and controls.

Also, even as AI delivers results at unprecedented speeds, it must be supervised with appropriate interactions and review, just as with audit staff. Accordingly, human oversight (in the loop) is needed to source information and contextualise findings within the strategic aims of the organisation and provide nuanced recommendations based on AI-generated insights.

The cost of inaction: Keeping pace with technological changes and adopting new tools and techniques poses significant challenges. However, failing to leverage technology efficiently will lead to slower audits, an increased chance of being misaligned on areas for focus, and less insightful, relevant, and valuable outputs from internal audit activities. Enabling and integrating methodologies with technology is a must.

Remember: It’s important to view technology not solely as a tool but rather as an integral part of evolving audit practices which, when utilised effectively, can enhance the relevance and value provided by internal audit.

Cultivate talent

Without high-performing professionals who can tackle complex audit matters and bring a strategic focus to the table, it will be difficult to transform internal audit’s value proposition. It’s a brave new world, and it takes evolving expertise and new ways of thinking to flourish in it.

Upskilling current staff members in emerging technologies and tomorrow’s risks – including advanced cyber threats and expanded privacy requirements – while creating a compelling work environment and career development paths will help attract a broad range of professionals to grow their careers in the internal audit function.

Processes for acquiring and developing talent should expand to embrace a new mindset of emphasising diversity rather than specific job functions. Diversity encompasses not only gender, race, and ethnicity but also experience, thought, background, education, and skills, all working toward enhancing internal audit’s capabilities of solving new and unique challenges and forming the internal audit function of the future.

Recruit and nurture a wider range of expertise.
We are past the days of staffing internal audit functions solely with accounting and finance professionals. It is paramount to set up comprehensive recruiting and training programmes to develop skills in data analytics and mining, process decomposition and analysis, AI-related competencies, critical thinking, and communicating (in all forms) for impact.

Adopt an innovation mindset

An innovation mindset is critical to helping internal audit move forward in a fast-changing world. If every aspect of the business is expected to innovate, then why not internal audit? A bold commitment to elevate internal audit’s relevance and value proposition, embrace change, and improve continuously is the hallmark of best-in-class internal audit functions.

Innovation needs to be about more than technology. Is the internal audit function viewing organisational challenges with a different perspective? How is it bringing creative solutions to the table? How are internal audit subject-matter experts and teams thinking differently as they assess the organisation’s current and future challenges? How are internal audit team members challenging themselves to drive improvement through change, execute a better process, and deliver a better product?

Embrace transformation: Internal audit has an opportunity – and in recent years has demonstrated the ability – to become an innovation leader in the organisation.

Innovation breeds resilience. In a fast-moving business environment where it is disrupt or be disrupted, internal audit has a vital role to play in innovating within its function as well as supporting transformation and enhancements to resilience throughout the enterprise.

Act as a strategic partner

Meeting and exceeding expectations is the key to success. Ensuring greater alignment between what board members and C-suite leaders seek from internal audit and what internal audit prioritises should be the focus of every professional.

Expanding advisory services without compromising independence, along with a clear risk and value focus, will further cement internal audit’s position as a relevant, strategic partner within the organisation.

Move beyond compliance and controls. Provide value-adding advisory services and guidance to teams driving innovation and transformation efforts, engage in the truly critical activities of the business, and be prepared to provide direct and real-time feedback. It should be the goal of every internal audit leader to be a voice that is sought out for input and advice, including in areas such as the organisation’s strategy and alignment with the mission and values.

Build communication skills that enable internal audit teams to convey complex insights in relatable business terms. The ability to communicate complex topics in a clear and actionable manner is vital. Stakeholders seek transparency into the organisation’s operations and risks. They may lack deep technical knowledge but need to understand audit results and their impact on the organisation’s risk profile and ability to achieve goals.