According to findings from the 2019 Internal Audit Capabilities and Needs Surveyconducted by global consulting firm Protiviti, three in four (76 percent) internal audit groups are undertaking some form of innovation or transformation effort, a positive indicator that organizations are positioning themselves to thrive in the future. However, more progress is needed for next-generation internal audit models to mature and fulfill their full potential – fewer than one in three (31 percent) internal audit functions have an innovation roadmap in place to guide their innovation and transformation journeys.
The Protiviti survey, titled “Embracing the Next Generation of Internal Auditing,” surveyed 1,113 Chief Audit Executives (CAEs) and internal audit leaders and professionals in North America, Europe, Asia-Pacific, Latin America, Africa, India and the Middle East.
“Once internal audit departments realize that we’re already in the race to adopt next-gen internal audit capabilities, they’ll need to accept that the journey to the finish line looks more like a marathon than a sprint,” said Brian Christensen, executive vice president, global internal audit, Protiviti. “It’s important to remember that transformation to a next-generation internal audit function is not about one or a series of projects, but rather a culture and mindset focused on continuing innovation and seeking ways to do things better by leveraging new processes and the latest technologies.”
Forty-one percent of Protiviti’s survey respondents are concerned that they are moderately or far behind their competitors’ internal audit transformation activities. With most firms already taking on transformation initiatives in some capacity, and 48 percent saying that they’ve increased focus on it in the last year, the remaining 24 percent of internal audit teams who have not definitively started their digital transformation journey need to begin as soon as possible to maintain relevance within their firms and the wider industry.
Optimistically, most survey respondents believe that their teams already have the right skills in place, or they have plans to upskill their teams. Despite this sentiment, access to enabling technology skills and expertise remains a pervasive challenge, and one that internal audit groups appear likely to address via outsourcing and co-sourcing models.
Enabling Technologies to Transform Internal Audit
The survey report includes analysis of the adoption of next-generation internal audit technologies. Among the technologies assessed in the study, internal audit groups have deployed advanced analytics most frequently (23 percent), followed by process mining (20 percent), robotic process automation (RPA) (19 percent) and artificial intelligence/machine learning (17 percent).
Despite the growing necessity for technology transformation, Protiviti found that only 16 percent of audit committees are highly interested in the internal audit group’s innovation and transformation activities. This suggests that CAEs should not wait for audit committees to start the discussion but must be bold and communicate effectively about the need to transform.
Top Ten Audit Plan Priorities
The Protiviti study also delved into specific audit plans for 2019. According to respondents, the top ten audit plan priorities for this year are:
- Enterprise risk management
- Cybersecurity risk/threat
- Vendor/third-party risk management
- Fraud risk management
- COSO Internal Control – Integrated Framework
- Agile risk and compliance
- Lease Accounting Standard
- AICPA’s Criteria for Management’s Description of an Entity’s Cybersecurity Risk Management Program
- Cloud computing
- Revenue Recognition Standard
Other sections of the study cover recommendations for CAEs’ transformation action steps and an assessment of internal audit capabilities.