Internal audit leaders need to look to the future and improve adopting next-generation auditing techniques, a new Protiviti survey found.
Protiviti’s 2020 internal audit capabilities and needs survey “Exploring the Next Generation of Internal Auditing,” examines the competencies of nearly 780 chief audit executives and internal audit leaders in the industry to find priorities for internal auditors to focus on to create a next-generation audit function. The survey was conducted in late 2019 and early 2020, but its release was delayed by the unexpected event of COVID-19, which has changed the audit landscape.
“The foundation of next-generation internal auditing lies in principles such as agility, real-time risk and controls monitoring, dynamic risk assessment, and the effective leveraging of data and advanced technologies,” Brian Christenson, executive vice president of global internal audit at Protiviti, said in the report. “The advantages a next-generation internal audit mindset and approach deliver have become further magnified during this global crisis.”
The survey found that internal auditors provided the lowest scores of competency in self-assessments in respects to enabling technology, but governance and methodology did not rank high either. The industry needs to adopt new techniques such as agile auditing, machine learning, and strategic vision to adequately prepare for new challenges in the changing landscape.
Governance
Internal audit leaders had most progress in governance out of the next-generation governance. Auditors reported the highest level of competency in strategic vision, with an overall competency level of 3.3 on a five-point scale. This shows that internal audit leaders are prioritizing innovation-focused thinking and establishing a clear strategic mission.
The overall mediocrity of self-assessment ratings in the section, however, indicate that governance still needs work from internal auditors. Aligned assurance is especially important for auditors to focus on, as achieving aligned assurance can empower auditors to develop other aspect of next-generation governance techniques. Properly implementing next-level governance measures will help internal audit build a strong foundational structure for their internal audit functions.
Methodology
Compared to 2019, more auditors are undertaking methodology initiatives. Continuous monitoring is being used and improved by the largest percentage of respondents, with 29 percent currently undertaking and 32 percent planning to undertake within the next year. In addition, the self-assessed competency of continuously monitoring in the methodology section was the highest, as 3.1 on the five-point scale.
Agile auditing has the lowest self-assessment rating and highest “need to improve” rank among all the skills. Agile auditing can add value to internal audit through flexible auditing and continuous feedback, an indispensable next-generation audit technique that auditors need to prioritize implementing.
Dynamic risk assessments and high-impact reporting are also areas that need improvement. Dynamic risk assessments can help an organization precisely identify emerging risks, allowing the organization to also achieve high impact reporting, which involves optimized risk assessments.
Enabling Technology
Internal auditors trailed the most in technology adaptations, a skill that they will need to master to effectively audit in the next generation. Unfortunately, audit leaders have taken a step back in technology implementation, falling in percentages of implementation in machine learning, process mining, and robotic process automation compared to the percentages of implementation from 2019. Moreover, more internal auditors have indicated no plans to adopting such technologies than in 2019, showing a worrying regression from technology.
Technology are key tools for internal auditors to fully become next-generation leaders in their organizations. Machine learning, process mining, and robotic process automation all offer invaluable data sorting and analytics that can help auditors predict risks and analyze large amounts of data that would be time-consuming and tedious for human-handling. Automation can prove to be time and cost-saving for internal audit functions who want to add value to their organizations.
Over half of respondents either have adopted advanced analytics or are planning on adopting the technology. As data-focused insights become ever more important, machine learning, process mining, and robotic process automation can offer many of the same benefits and plus some as advanced analytics. Though implementation of these technologies are currently low, respondents are increasingly giving reasons of increasing audit coverage, enabling continuous auditing, and driving efficiency, which shows that auditors are becoming more aware to the benefits of the processes and may implement in the future.
Internal auditors are working toward becoming next-generation leaders, but are not there yet. Mediocre to concerning competencies and implementation in governance, methodology, and enabling technology is keeping auditors back from efficiency and effectiveness as they brace new challenges. Especially with COVID-19 creating new risks and unknowns, auditors should prioritize pivoting to next-generation tools to optimize their function and responses to risks. 
Stephanie Liu is assistant editor at Internal Audit 360°
There is so much truth in this article, it is an eye opener and a must follow.