A common knock on internal audit is that, as a whole, it is slow to adopt new technologies to run its activities faster and more efficiently. Now a new report is putting some data behind such suppositions. According to a survey of internal audit leaders conducting by Protiviti, chief audit executives themselves admit their teams are behind on embracing emerging technologies that can advance their capabilities.
The survey revealed that only 14 percent of respondents identified their internal audit department as a “digital leader”—characterized as reaping benefits of next-gen internal audit practices given their higher reported levels of maturity in governance, methodology, and enabling technology. The survey also found 72 percent of digital leader organizations report having been well prepared for the shift to a remote working model at the onset of COVID-19, compared to only 51 percent of all other organizations.
For the report, 2021 Next-Generation Internal Audit Survey, Protiviti polled 874 executives in the first quarter of 2021, including CAEs and audit managers and directors across industries globally. Sixty percent have revenues of $1 billion or more.
“COVID-19 laid bare the urgent need for internal audit groups to adopt technologies and upskill in order to be a more strategic partner and advisor to their C-suites, boards and audit committees,” said Brian Christensen, executive vice president of global internal audit at Protiviti. “Internal audit must be able to leverage technology to deliver comprehensive analysis and insights on today’s constantly evolving risk environment—or it will become obsolete.”
The results are hardly a new finding. Many studies and reports over the years have identified a sluggishness among internal audit teams in general to adopt leading technologies. A 2018 report by PwC, for example, found that just 14 percent of internal audit shops were “advanced” in the adoption of new technology, similar to the Protiviti findings.
Areas of Lowest Maturity
The survey asked respondents to rate their level of maturity for a variety of next-gen internal audit capabilities across governance, methodology and enabling technology, and identified the following areas as those of the lowest maturity:
- Machine Learning (ML) & Artificial Intelligence (AI)
- Process Mining
- Automation
- Advanced Analytics
With the four areas of lowest maturity considered part of the “enabling technology” function, the survey reveals a disconnect in the link between effective governance and use of enabling technologies. Even among these lowest ranked areas, there was a stark disparity between digital leaders and other respondents, with digital leader organizations reporting a maturity level of 6.4 for advanced analytics compared to non-digital leaders who reported an average 3.8 maturity level on a 10.0 scale.
“After a challenging 2020 that required many internal audit functions to re-prioritize projects, it’s now time to refocus efforts on embracing the next generation of internal auditing as the new normal,” said Christensen. “As many organizations shift into a hybrid work model, it’s critical that CAEs establish a clear roadmap to access and develop the skills needed for a next-gen audit function. For internal audit groups who are lagging in next-gen technology implementation, establishing frameworks for getting where they need to be with advanced analytics and other emerging technologies is of paramount importance.”
For the majority of internal audit departments that don’t consider themselves to be “digital leaders,” there is a long way to go on several technology fronts. On the 1 to 10 maturity scale, this group scored themselves a 4.1 on advanced analytics, a 3.8 on automation, a 3.3 on process mining and just a 2.8 on machine learning and artificial intelligence. Even digital leaders aren’t far along on adopting such technologies. This advanced group, for example, only ranked themselves a 5.6 on the adoption of machine learning and AI.
“The case can be made that chief audit executives (CAEs) and their teams have more challenges and demands today than at any time in recent memory, as well as opportunities to engage and support the business in new, innovative ways,” wrote the report’s authors.
Many Just Getting Underway
The news wasn’t all bad. According to the survey, many internal audit teams are just getting started on what Protiviti calls, their “digital journey.” The survey found that a majority have transformation and innovation initiatives underway. Indeed, 61 percent of internal audit groups in North America that have completed or are undertaking one or more transformation or innovation initiatives.
“We are optimistic about the future of internal auditing. Every internal audit organization has an opportunity to become better and either begin or advance their next-generation internal audit journey,” the reports authors write. “There are small, achievable steps to take that will make notable differences, even if the organization is not a Digital Leader.”
According to the report, many internal audit teams need a change in mindset to move along the maturity curve toward better use of advanced technology. It cites four changes that need to be made to start this “digital journey”:
- Transform the internal audit group’s governance, methodologies, and enabling technology capabilities needed to address emerging business risks and heightened stakeholder expectations.
- Increase internal audit’s effectiveness and efficiency while fulfilling the function’s core mission to protect organizational value.
- Start thinking differently.
- Reassess the design and capabilities of internal audit, striving to become an agile next-generation internal audit function that embraces the benefits of the latest in thinking, methods, and technologies and is transformation-oriented.
“CAEs need to take the lead in transforming their internal audit functions to better serve the business,” the report’s authors write. “This includes defining a roadmap and getting started possibly with small projects enabling achievable wins, and establishing a culture and mindset of innovation so that it becomes a grassroots effort embedded as part of delivery.”
While it may be hard to imagine an internal audit department of auditor robots wearing VR headsets, and printing out 3D risk models that they hand to waiting drones to deliver to the CEO’s office, most internal auditors will agree that they could do a better job of getting with the technological times. Certainly, the usefulness of AI, machine learning, and blockchain is apparent and already being used in forward-thinking internal audit shops globally. 
Joseph McCafferty is editor & publisher of Internal Audit 360°.
I would suggest you provide some stepping stones to achieve your listed skills.
I would start with:
– knowing how to design, search and query a database. Start with SQL, or Microsoft Access, or Oracle. I worked at Ashton-Tate, the founder of dBase, which was all the rage for awhile. But now use the software your employer uses such as Oracle or SQL.
– Knowing how to create and manipulate Excell spreadsheet databases and pivots.
– Understanding workflow automation and what tools are used at your employer. I used Lotus Notes in the mid-1990’s which is now owned by IBM. If your employer doesn’t have a preferred workflow automation tool, that is the first finding.
– READING about tech in publications or in YouTube videos. I will say, at age 76, that I rarely encountered women in any field that did that. Thus if they are running an IA department, they won’t understand the need for such tech.
– LEARN to build a computer yourself so you will understand the components of computers, big and small. Start with YouTube videos from Carey Holzman.
– Take a course in robotics and AI to learn the basic, then experiment, even at home.
– Subscribe or use an employer provided database of video tutorials on technology, and try to learn a new tech once a quarter.
These are some of the ways people can improve their skills. I am currently the volunteer Chair of the Audit Committee for a $700-milion government agency and the last two CIA’s avoided doing any tech work, so an alternative is to know enough to hire tech audit work outside.
Vance Jochim retired CIA, CISA, CFE
Vance, I would urge you to reconsider your statement below:
“READING about tech in publications or in YouTube videos. I will say, at age 76, that I rarely encountered women in any field that did that. Thus if they are running an IA department, they won’t understand the need for such tech.”
Having worked in the field for a number of years, I have reported to and worked with many women – managing directors, VPs, CAEs, senior managers, etc. – who are at the top of their fields when it comes to understanding and implementing AI, ML, RPA, analytics/visualization software, etc. I have not observed that the female members of IA departments are any less willing to implement or knowledgeable about technology than the male members – if anything, I have seen both sexes struggle equally with other, usually male members of senior leadership and the C-suite who dismiss the need for these technologies. I believe this is where the more serious gap lies, not with female IA leadership.
I acknowledge that this may have been a relatively recent development in the field, compared to the total years you have been in it. However, I would caution you against making such generalizations in a rapidly changing landscape.
Respectfully yours.
Great points, R. Stockdale. Thanks for your comments! I will second the idea that gender has very little to do with the ability or willingness to innovate or adopt advanced technologies. Over my career, the women I’ve worked along side with have been just a tech-savvy as any of the men, or more so. -J. Mc.
Come on now. This article is about tech and surprising it is being turned into one of gender?!