PwC released its 13th annual State of the Internal Audit Profession study
This year’s study shows that the number of stakeholders that view internal audit as “contributing significant value” dropped from 54% in 2016 to only 44% in 2017, reaching its lowest level in five years. Despite this drop, the good news is that nearly half of all stakeholders want internal audit to take on a more integral role; this can be achieved through the function’s ability to help stakeholders better manage unplanned or unanticipated events, also known as market disruptions.
The study uncovered two key traits that enable Agile IA Functions to lead in disruptive environments –preparedness and adaptiveness.
Preparedness
Agile IA Functions are forward-looking and able to identify emerging disruptions and associated business needs. They collaborate with other lines of defense in a unified and integrated manner and make decisions mutually supported by others in the organisation. To boost preparedness, internal auditors should:
- Build the eventuality of disruption into planning and risk assessment: 84% of Agile IA Functions are mindful of disruption and include the possibility as part of the audit plan development, compared to 50% of less agile peers.
- Meaningfully collaborate with other lines of defense: 76% of Agile IA Functions cohesively work with other risk management and compliance functions to address disruption, compared to 40%of peers.
- Invest in and elevate business and technical IQ: 73% of Agile IA Functions provide Internal Audit with advanced technology and encourage the development of trending and analysis techniques, compared to 60% of peers.
Adaptiveness
Flexibility is key in Agile IA Functions—their processes must be transformative across audit plan development, audit planning, fieldwork and reporting. They should also use innovative talent models as needed and routinely reorganise or redirect resources according to disruption. To be adaptive, internal auditors should:
- Create more flexible processes and reporting mechanisms: 73% of Agile IA Functions change course and evaluate risk at the speed required by the business, compared to 37% of peers.
- Drive the use of data analytics and technology: 47% of Agile IA Functions have increased the use of data mining and data analytics for continuous auditing/monitoring of trends and potential impacts of disruption, compared to 35% of peers.
- Implement flexible talent models: 74% of Agile IA functions redirect/reorganise resources as needed to help the organisation manage or respond to disruption, compared to 40% of peers.
“To become a leading internal audit function likely means changing what internal audit is doing and where it’s focusing, such as using more frequent proactive risk evaluations in advance of disruptions,” said Mark Kristall, Partner within PwC's US Internal Audit, Compliance & Risk Management Solutions practice. “With an innovative vision of what internal audit can be, the function can deliver the greater value that stakeholders expect and need.”
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