FIVE STEPS TO MAKING AUDITS A STRATEGIC ASSET

Over the years, internal auditors have helped organizations navigate through numerous crises. Today, their stature and reputation have grown to a stage where businesses are approaching them for expert advice and guidance, training assistance, and seeking their active involvement in ensuring successful and stable project executions.

According to experts, if is utilized more as a strategic tool rather than a compliance tool, internal audits could provide better results and greater value to an organization. Moreover, executive management now expects auditors to take a more proactive role in risk mitigation thus providing greater insight to organizations on how to function.

Risks and Trends That Impact the Internal Audit Team

The introduction of a few key laws, such as the COSO 2013 framework and new guidance from ISO, have brought about numerous changes in the way audits are conducted and perceived. There are several new aspects that internal audit teams now have to consider, be it new kinds of technologies, laws that govern them, increased corporate exposure to social media, or the need to quickly expand to new markets – many of which may be going through economic downturns. Additionally, each new factor brings risks, such as cyber security, social media outrage, recessions and market slowdowns.

Moreover, the complexity of the risk environment increases proportionally with the growth of operations and supply chains. As a result, in order for internal audit to stay ahead, the audit team needs to periodically evaluate their current functions, resources, and processes. Having a well-defined strategy, and periodically evaluating it to fit the organization’s business objectives and changing risk profile, will lead to an effective audit practice.

Aligning Audit Plans to Business Goals

Audit plans are usually based on the business scenario and the operations involved. For instance, if the audits are related to certain business/corporate objectives, the audit plan needs to identify controls associated with the objectives. Along the same lines, if audits need to be performed from the perspective of risk-based business governance, the audit plan’s focus will be on identified risks with a subsequent assessment for residual risks as well. Correlating business objectives with prevailing and emerging risks will help in creating the company's risk profile and enhance decision making.

Between the traditional and risk-based approach, the latter is a proven superior option due to the fact that audit plans are based on the risk assessments of a business unit. Risk prone areas are given top priority and the progress is continuously monitored and documented.

With this approach to audit strategy and planning, auditors develop an in-depth understanding of risks and business plans, allowing them to focus on business performance, compliance objectives, reliable reporting, efficient and effective operations, organizational strategy and the safeguarding of assets.

Effective Execution of the Audit Plan

The success of internal audits is based on the ability to implement faster control testing processes, record accurate data which can be analyzed quickly, and make effective and timely recommendations to remediate the issues identified.

Building greater efficiency into the testing of controls allows auditors to become more responsive to risk threats. Accurate data collection procedures eliminate errors and inconsistencies from audit findings and make recommendations precise and dependable.

Running a Tight Ship with the Audit Team

For internal audits to be effective, it is important that the right team possesses all the critical audit and risk skills such as effective communication, data mining, analytics, IT and industry knowledge, accounting, and risk management. High-performing internal auditors are those who successfully implement change by constantly monitoring, reviewing, and improving their internal audit practices.

With the right team in place, it also becomes important that they are managed well and their tasks are optimized in a way that the team is able to deliver the best results in the shortest time possible. Audit managers’ allocation of resources needs to be based on factors such as the criticality of risks/controls being tested, required skill-sets, scale of the auditable entity, available budgets, and standards and service levels that have been established over time.

By right-sizing the team for each audit, continuously monitoring the audit progress, and deploying teams based on an astute knowledge of the overall audit plan, Chief Audit Executives [CAEs] can increase efficiency as a whole.

Delivering Insights via Quick and Intelligent Reporting

The most critical aspect of an internal audit is the ability to deliver fast insights to those who need to take decisions based on the audit data. Therefore, it is important to establish a highly structured method to report audit results in order to deliver deeper insights.

After an internal audit is complete, auditors usually follow a traditional reporting method based on creating draft reports, corrective action plans, and final audit reports. This takes up a significant amount of time, when audit insights should ideally be delivered to decision-makers in real-time. By automating the report preparation process, auditors can focus on quickly communicating audit results and walking the management through the issues and remediation plans. Real-time reports and actionable intelligence can provide additional benefits as they offer executives complete visibility into the audit process, and provide auditors with an opportunity to clearly see the risks impacting the organization. Auditors can then confidently suggest internal controls and remediation plans to manage these risks.



Technology That Enables an Effective Audit Process

Integrating technology solutions in the audit process enables auditors to reap maximum benefits by adopting best practices. Technology solutions allow auditors to create an internal audit program with a defined objective and scope tied into the compliance and risk management processes. Internal audits can then be organized in a logical structure and hierarchy with detailed checklists, evaluations, pass/fail criteria, and tasks to develop a systematic and risk-based internal audit plan.

Technology also plays a critical role in the periodic or ad-hoc scheduling of internal audits, audit resource management, team assignment and budget management. And thereby, provide a bird’s eye view of the entire audit execution cycle from data entry to managing multiple audit tasks simultaneously, performing collaborative reviews, enabling fieldwork approvals, and delegating tasks. They also ensure that audit data is used to quickly create and deliver executive dashboards and business intelligence, so that decisions based on audit findings are immediate and effective. This improves communication, teamwork, information sharing and coordination for complex audit processes across departments.

Implementing such an integrated audit management framework to perform all audit-related activities also reduces complexity and provides a centralized repository to collate and analyze cross-departmental audit data. This ensures efficiency in terms of time and cost, and eliminates errors and inconsistencies.

Conclusion

As new business scenarios and accompanying risks emerge, the role and impact of internal audits change. In the current scenario, companies expect auditors to take on a strategic business role in providing critical business intelligence to decision makers in the fastest and most efficient manner possible.

Risk-driven audit plans, better execution, resource management, faster reporting, and technology solutions play a key role in enabling these internal audits. Audit teams can operate more effectively by reducing the time and effort spent on coordination, paperwork, and tracking, while enhancing their ability to deliver deeper and faster insights into business performance.

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