There is currently a misalignment in the world of Internal Audit. As Richard Chambers and AuditBoard’s 2023 Focus on the Future Report reveals, there are key areas where significant gaps exist between risk levels and planned efforts. The ability to attract and retain top talent, macroeconomic factors and geopolitical uncertainty, and business model disruptions due to the evolving risk landscape were all listed as top concerns for major organizations, yet only 13-20% of businesses have meaningful plans to devote substantial resources to these issues. Internal audit teams need to be ready to identify and address this kind of disconnect to ensure that their organizations are positioned for success in 2023. In this article, Audit International will identify three top internal audit trends, the challenges they present, and how internal audit teams can leverage software solutions to deploy team resources strategically against the most pressing concerns — setting themselves, and their business, up for success.

Trend 1: Velocity of Risk and Technology Change
Teams must continually provide assurance while adapting to evolving risks, digital disruption, and regulatory changes. Today we’re seeing significant contributions from the digital revolution, climate change, and stakeholder expectations, as the speed of decisions, the amount of connectivity, and the availability of data have all increased. Companies are learning that they have to balance pressures regarding what’s coming from governments, investors, and society as a whole. Stakeholders expect companies to act legally and with a conscience, and regulators are focusing on things like climate change, data privacy, and security.

Challenges in this area hit in numerous ways. First, there is an expanded purview required from emerging technologies and related risks. Second, there are repeated shifts to audit scope that put new burdens on teams. Third, there is an increased depth and breadth of data that brings along associated issues — including data reliability, related required team efforts, and resource constraints.

Technology can help audit teams develop solutions for these issues. Audit planning software accelerates risk and change responses from teams. With this preparation, teams can create risk-based audit plans with risk metadata to allow for efficient execution and continuous assurance.

Trend 2: Growing Internal Audit Talent Gap
Staff shortages, changing attitudes towards work, and a pre-existing skills gap are increasing talent risk and influencing how internal audit teams approach their work. Many teams are reporting that they are losing talent and struggling to replace them. Meanwhile, for the remaining team members, expectations are growing. They want to do more, and we need to keep them engaged. We have to support the folks that we have and give them opportunities to work in cybersecurity, sustainability, and other areas of interest.

The challenges created by the talent gap are as expected. Due to greater cost-cutting and efficiency demands often put in place by organizational leadership, teams are being asked to do more with less as headcount may be frozen or cut. There are the aforementioned difficulties retaining people and improving their skills, plus there are increasing specialization and training needs for team members.

A technology solution in this area is software with resource planning capabilities. This can help teams manage, optimize and retain talent by deploying resources more strategically, and it allows teams to improve individual and overall skills, efficiency, and experiences.

Trend 3: Align With the Business Objectives
The highly competitive corporate landscape and economic disruptions are driving the internal audit profession to refocus efforts on improved strategic alignment. Richard Chambers speaks often about auditors needing to become agents of change. When contemplating initiatives like cybersecurity, diversity, equity, inclusion, and third-party risk management, executive teams and audit committees all want better strategic alignment from internal audit teams. Internal audit must understand and embrace stakeholder needs and challenges so that we can better support their strategic initiatives.

The challenge for internal audit teams in this area is aligning audit with business priorities, which isn’t always as simple as that might seem. Plus, there is an increased requirement to validate internal audit resources. We have to start thinking in new ways, provide more value propositions, and be able to deliver more in less time.

Audit International are specialists in the recruitment of Auditors and various Corporate Governance Professionals including Internal Audit, Cyber Security, Compliance, IT Audit, Data Analytics etc across Europe and the US.

If you would like to reach out to discuss your current requirements, please feel free to reach us via any of the following:
Calling
– Switzerland 0041 4350 830 59 or
– US 001 917 508 5615
E-mail:
– info@audit-international.com”

At Audit International, we know when people hear buzzwords like ‘data analytics’, ‘artificial intelligence’ and ‘machine learning’, it can be intimidating. Many people don’t fully understand such concepts, but in truth, you don’t need to. You just need to get comfortable with them. And you probably already are: familiar services like Netflix or Spotify use artificial intelligence to understand your preferences and make subsequent suggestions based on that knowledge. The level of consumers’ expectations is continually increasing, and the successful companies are those that are advancing with technology. The same is true for businesses and their expectations. In audit, the revolution is underway and the sections that follow highlight the key drivers for this change.

Improve the audit experience –

The volume of data available to auditors is astounding, but in most cases, this data is simply not being used. If this were happening in any other industry, there would be questions to answer. Data analytics can improve the audit experience in several ways, for both the audit team and for the client.

Improve audit quality-

During the planning phase of the audit, audit teams must shift their focus away from the old mindset of “what could go wrong?” Through analytics, we can turn our attention from what could go wrong to what has gone wrong. Auditors have access to the client’s complete financial data for the period under audit – if they focus on analysing and understanding the data, they could identify an unexpected transaction or trend in the process. During the execution phase, auditors should also build on the knowledge gained in planning to truly understand the business in question and focus their attention on higher risk transactions. Finally, auditors should move away from a ‘random sample’ approach and, instead, focus on the transactions that appear unusual based on their knowledge of the client, business or industry. These are just a few areas where improvements in audit quality can be achieved using data analytics.

Improve efficiency-

In the examples above, the use of data analytics in planning will identify what has gone wrong and any associated unusual transactions. In execution, these transactions will be tested as part of the audit sample. It could also cover some requirements under auditing standards concerning journal entry testing, as the journal entries will likely be the data that highlighted what went wrong in the first place. Again, this is just one example of efficiencies gained without even considering the hours saved by automating processes like creation of lead schedules and population of work papers.

Post-pandemic world-

The world will be a very different place in years to come. Firms with the ability to perform in-depth analysis using data analytics undoubtedly have a significant advantage over those that do not, given the efficiencies they can gain and the potential reduction of physical evidence required from clients, among other things. Due to the changes we have all had to endure, auditors may also have additional procedures to perform (e.g. roll-back procedures where they were unable to attend stock counts at year-end due to the COVID-19 closures of businesses). Such procedures have the potential to be automated, saving even more time and effort for audit teams.

Improve engagement-

Rather than spend time performing mundane tasks such as testing large randomised samples, data analytics allows audit teams to jump into the unusual transactions. This will make the job more interesting to auditors and cultivate a curious and questioning mindset, which will, in turn, lead to improved scepticism and audit quality.

Improve client experience-

This might happen in two ways. First, the time saved by the client’s staff (who, in theory, will have fewer samples for which to provide support) and second, through the value the audit adds to the business. As an example, consider an audit team performing data analysis on the payroll for their client. As payroll is a standardised process, the audit team has an expectation around the number of debits and credits they would see posted to the respective payroll accounts each month. As part of their analysis, however, they find an inconsistent pattern. This can be queried as part of the audit and the client will be better able to understand a payroll problem, which they were previously oblivious to.

Client expectations-

Given the level of data analysis that occurs daily in the life of anyone using a smartphone, a consistent, high quality is understandably expected in people’s professional lives, too. Audit clients, like all consumers, want more. They want a better and faster audit. They want an audit that requires minimal interference with the day-to-day running of their business, without compromising the quality of the auditor’s work. With troves of data now available to auditors, such expectations are not entirely unreasonable. Audit firms have access to vast amounts of financial and related data – in some instances, millions of lines of information – that, if analysed robustly and adequately, would improve their processes, their clients’ experience, and the quality of their audit files.

Aspirations of professionals-

Audit professionals can often struggle with work-life balance, as we here at Audit International know. Though most firms are getting on top of remote working, the hours in busy season are long. In a time of continuous connectivity, the time frame around ‘busy season’ is also becoming blurred. Through the use of technology, we will one day make auditing a ‘nine to five’ job. Many will scoff at that idea and, although we do not expect this to happen in the next five years, or even ten years, it is possible. By automating mundane tasks and continuously upskilling our graduates, we can transform how an audit team completes work. There will be more scope to complete work before clients’ financial year-ends, thus moving much of the audit out of the traditional ‘busy season’. Machines can complete specific tasks overnight so that auditors could arrive at their desk, ready to work on a pre-populated work paper that needs to be analysed by a person with the right knowledge. With appropriate engagement by all parties (i.e. audit teams, senior management, and audit clients), we could significantly reduce the hours spent on audit engagements and give this time back to auditors. Along with attracting high-calibre graduates, we will retain high-quality auditors in the industry while also avoiding mental fatigue and burnout, which will again lead to better quality audits.

Graduate recruitment-

Graduates joining firms in recent years have particular expectations of the working world. They want job satisfaction, flexible hours, remote working, and an engaging role that will challenge them. Professional services firms have to compete for the very best graduates, and no longer just against each other – a host of technology-enabled businesses are attracting talent on an unprecedented scale by meeting the needs listed above. Technology, and data analytics, in particular, can offer the solution to the graduate recruitment challenge – by making the work more efficient and automating mundane and repetitive tasks, graduates can instead focus on analysis. Time and time again, when we talk to candidates, we always hear that if they find their work challenging and interesting, they will feel more engaged.

Challenges-

This move towards technology is not without its risks to the profession. Automating basic tasks removes the opportunity for graduates to form a deep understanding of these sections of the audit file. The onus is therefore on the current cohort of Chartered Accountants to take the reins, both to drive technology advancement forward and also provide practical, on-the-job coaching to ensure that this knowledge is not lost for the generations that follow.

“Audit International are specialists in the recruitment of Auditors and various Corporate Governance Professionals including Internal Audit, Cyber Security, Compliance, IT Audit, Data Analytics etc across Europe and the US.

If you would like to reach out to discuss your current requirements, please feel free to reach us via any of the following:
Calling
– Switzerland 0041 4350 830 59 or
– US 001 917 508 5615
E-mail:
– info@audit-international.com”

Have you ever had one of those days where you were determined to write that audit report? So you block off the time on your calendar, go into your office, shut the door, remove any and all distractions and breathe. Because now is the time to take all of those thoughts and perfect phrases running wild in your head and put them on paper. You sit down at your desk ready to make it happen. And you come up with nothing.

You decide to invite a colleague in to assist. Because after all, two heads are better than one. The two of you discuss the issues thoroughly, but nothing seems to sound right.

Writing objective observations takes time, skill, and tact. And if you’re like any other auditor, the audit issues sound wonderful in your head. But by the time you formulate the right words, reach for your pencil and place it on paper, that wonderful wording has become a distant memory. It’s worse if you’re in a group setting because you now become frustrated as the group begins asking you to repeat what you said. Unable to remember words uttered only seconds prior, it is only then that you realize how old you truly are.

If you’ve ever faced this situation, do not fear. There are several tools and techniques you can use to speed up and improve your report writing. But first, we must address the five big problems with writing reports:

1. We think faster than we write
2. Our million dollar thoughts come at the wrong time
3. We believe in writer’s block
4. We look for perfection in the first paragraph
5. We don’t understand and/or appreciate the writing process

5 Problems with audit report writing
We think faster than we write
We’ve all been there. Browsing through our cabinets trying to make a mental grocery list. Then you reach the point where there are too many items to remember. You decide to write a list. You reach for your paper and before the pen touches the pad, you’ve already forgotten the five items you wanted to write.

Our brains are fascinating. I can remember where I was in the summer of 1989, but I cannot remember what I ate for breakfast this morning. It is that forgetfulness that can derail your report writing.

Our million dollar thoughts come at the wrong time
Worse yet is when you have this wonderful idea, but then realize that it is 5:00 o’clock and you are stuck in traffic. There is no way you can capture that great thought without causing a pile up. So you try other techniques. You turn off the radio and repeat whatever it is over and over. You hope to continue this until you get home, or at least until you get to a stopping point. Of course something interrupts your thought and you forget what you were trying to remember.

We believe in writer’s block
Some people believe that writer’s block is a thing. I’m here to tell you, it is not. At least in the context of business writing or internal audit reports. Wikipedia define writer’s block as follows:

“Writer’s block is a condition, primarily associated with writing, in which an author loses the ability to produce new work or experiences a creative slowdown. This loss of ability to write and produce new work is not a result of commitment problems or lack of writing skills. The condition ranges from difficulty in coming up with original ideas to being unable to produce a work for years. Writer’s block is not solely measured by time passing without writing. It is measured by time passing without productivity in the task at hand.”

As you can see, writer’s block is a primary concern for creative writers. Our audit reports are, or should be, factually based non fiction. We are taking a series of facts, placing some logic and order to those facts, and providing management with a conclusion. What we are not doing, is creating new characters or developing plots and story lines. We know the beginning, middle and end of the story. Therefore, we know what to say. The problem is how do we say it so that it has the best impact given within the culture of the organization.

We look for perfection in the first paragraph
Because audit report writing is simpler than creative writing, we believe that we should be able to sit down and create the perfect prose in minutes. After all, we know the beginning, middle and end of the story. When we finally put pen to paper, our initial draft is usually not good. We then become frustrated. But I believe that frustration is because we don’t understand the writing process.

We don’t understand and/or appreciate the writing process
All the magic happens in the editing. Any writer will tell you this. Ernest Hemingway famously once said that “The first draft of anything is ****” (insert a very bad word here). As someone who has had articles published, I can tell you this is true. I can recall the first time I sent something to an editor. I thought it was an okay piece. But what came back was a magnificent manuscript. I fined tuned it a little and the result was something we were all pleased with. The writing process does not require perfection at the start. Your initial goal is to get something on the page. After that, trust the process and let the magic happen in editing.

3 tools you can use
Google voice typing
Because our brains seem to signal our mouths to speak faster than our hands can write, voice typing is the perfect shortcut to getting those wonderful words out of your head and on paper. For those unfamiliar with voice typing, you talk, it types. It’s as simple as that. Well, sort of.

The best free voice typing tool I’ve found is through Google. Log in to your account. Then, access Google Docs and open a document. Go to Tools, then Voice Typing (or you can press Ctlr+Shift+S).

You will see a microphone that may say Click to Speak. Click it, talk to it, and watch the magic happen. You will need to learn certain commands like period, comma and new paragraph. But other than that, if you speak clearly, it will recognize most speaking voices and words.

Your Cell Phone voice recorder
If barking out commands to your computer isn’t your thing, you’re in luck. There’s another option. If you’re like me, your cell phone is probably within arms reach. Grab your phone and go to your favorite app store. Search for a voice recorder. You should see several. Download one that piques your interest.

You can now record yourself talking about the audit issues. Now you will never miss that wonderfully worded paragraph that would sound great in an audit report. Once recorded, you can listen to the recording and pull out the impactful paragraphs.

Transcription
If you truly believe the recording represents your best work ever, you can have it transcribed. Yes, you heard me, transcribed. It’s not as bad or as expensive as you think. Before I get into that, I must say that I am not being paid by nor am I endorsing these specific products. there are several transcription services that I have used. Some use live transcribers while others use automated engines.

Summary

Writing audit reports can be a daunting task. But it has to be done. Nowadays we have a lot of tools that can help streamline the process. Many of the biggest issues start with us. Writer’s block is only as real as we allow it to be. Sit down and put something on paper. Use some electronic tools to get your words on paper. Almost any words will do. Afterall, the magic happens in the editing.

“Audit International are specialists in the recruitment of Auditors and various Corporate Governance Professionals including Internal Audit, Cyber Security, Compliance, IT Audit, Data Analytics etc across Europe and the US.

If you would like to reach out to discuss your current requirements, please feel free to reach us via any of the following:
Calling
– Switzerland 0041 4350 830 59 or
– US 001 917 508 5615
E-mail:
– info@audit-international.com”

Audit International are aware that public sector organizations face a variety of risks, ranging from cyber threats to budget constraints to compliance concerns. While internal audit teams in the government sector might not be responsible for solving all those risks, they need to make sure that they are following through with relevant risk management protocols.

Therefore, it is essential that internal audit teams are conducting internal audit risk assessments to figure out what these risks look like.

“Risk-based auditing ensures that the internal audit activity is focusing its efforts on providing assurance and advisory services related to the organization’s top risks… This requires internal auditors to have a working knowledge of basic concepts, frameworks, tools, and techniques related to risk and risk management,” explains the Institute of Internal Auditors (IIA).

In this article, we’ll examine five tips to help public sector internal auditors build better risk-based audit plans. These include:

1) Define your goals
Before you get too bogged down in the specifics of running an internal audit risk assessment, take a step back and consider what you’re trying to accomplish. Doing so includes finding internal alignment within your audit team and with other stakeholders.

As Baker Tilly advises, internal audit teams “should meet with the various stakeholder groups – management, the audit committee, and the governing body – to explain the process, set expectations for the results and listen to any desired outcomes, as a means of adapting the approach or identifying other activities where internal audit can add value.”

2) Organize your data
Conducting an internal audit risk assessment also requires strong data practices. But before you can get to a place where you are using data analytics to identify key risks, public sector organizations often need to organize their data first.

Information might be held in a variety of systems that makes analysis inefficient, if not ineffective. Tools like TeamMate+ use a data exchange API framework to pull together data from different sources, such as governance, risk, and compliance (GRC) systems and enterprise resource planning (ERP) tools, giving you a complete picture of what’s happening within your organization.

3) Get agile
If you go through an entire risk-based audit without getting any feedback along the way, then it’s easy to get off track. For one, risks might have changed from the time the audit started to when it eventually wraps up. And when you present to stakeholder leaders at the end of the risk assessment, it can be tough to then incorporate their feedback into your internal controls and assurance processes.

Engaging in agile auditing can help. By breaking an internal audit risk assessment down into more manageable chunks — where different risk areas go from the planning to presentation stages in short sprints — public sector internal auditors may have an easier time adapting to change and incorporating feedback.

4) Go dynamic
Agile auditing creates a dynamic internal audit risk assessment. Instead of approaching these assessments as an annual occurrence, you can review public sector risks on more of an ongoing basis.

That means collaborating with other departments throughout the year to keep up with emerging risks, which is where good data-sharing practices also come in handy. Dynamic or continuous risk assessments can also result in more frequent reporting so that you can keep everyone in the loop and get their timely feedback. Having a strong internal audit risk assessment tool like TeamMate that can help you simplify risk scoring and create efficient audit reports makes a big difference.

5) Keep up with public sector requirements
Lastly, working in internal audit in the government sector means staying on top of general risks like cybersecurity and financial concerns, along with meeting specific public policy guidelines and regulations. Public sector internal auditors often turn to sources like Wolters Kluwer, which provides resources like webinars and other Expert Insights so you can learn what you need to do to strengthen internal audit as a government organization.

Following these five tips can go a long way toward creating a strong internal audit risk assessment and a better audit process overall. Even if it seems like your organization doesn’t face many risks, conducting a risk-based audit can help you stay on top of any changes to your risk level. Rather than being caught off guard, building a reliable internal audit risk assessment plan can help your organization control risk, however that takes shape.

“Audit International are specialists in the recruitment of Auditors and various Corporate Governance Professionals including Internal Audit, Cyber Security, Compliance, IT Audit, Data Analytics etc across Europe and the US.

If you would like to reach out to discuss your current requirements, please feel free to reach us via any of the following:
Calling
– Switzerland 0041 4350 830 59 or
– US 001 917 508 5615
E-mail:
– info@audit-international.com”

Audit International recently came across a very interesting article, on improving Internal control systems, in the Wall Street Journal, and thought we’d share it with you.

Increasing business complexity and regulatory requirements are driving continual change to the risk environments for many organizations, and historical approaches to risk and controls may not be suited for the current atmosphere of digital transformation, persistent change, and uncertainty. As the business landscape continues to evolve, the risk of accounting and reporting misstatements rises, often due to the inability to respond to internal and external circumstances and adapt quickly to business changes.

Developing an internal controls framework with upgraded operating models, advanced technology integration, and new processes to monitor, implement, maintain, and optimize a risk and reporting structure can position an internal control program to stay ahead of risk and increase value. First, we will explore some of the internal and external factors driving challenges beyond traditional remediation and restatements in accounting and reporting, including considerations receiving attention from the SEC and AICPA. These critical change drivers, along with internal controls and automation opportunities, inform a new risk and controls framework empowered by more proactive and data-driven solutions.

External Factors Driving Remediation and Restatements

Remediation and restatement drivers include external challenges such as new accounting rules; the SEC and regulatory guidance; and environmental, social, and governance (ESG) reporting. Some of these external drivers were highlighted at the recent AICPA conference and featured prominently in recent SEC comments—including SEC reporting and rulemaking, ESG matters, auditor independence, and digital assets.1 2

Data quality and the importance of modernized reporting supported by new technology were prominent features at the AICPA conference, with an emphasis that organizations evaluate their standards, processes, and technologies to create accurate and easily accessible reports. In addition, responding to market demand for ESG information was a key theme throughout the conference and SEC comments. ESG is the universe of topics that reflect areas of performance management around the impacts and dependencies of the business on society and the environment. It is a dynamic and interactive process that will likely have far-reaching implications for an organization, and the overlap between sustainability and financial reporting is inherent. Still, given the scope and possible market share of ESG activities and resulting data volume, multiple possibilities of future regulatory requirements may cause uncertainty around developing a new reporting framework that can mitigate remediation and restatements and optimize the controls environment.

Internal Controls and Automation Opportunities

Understanding both the external and internal drivers to risk and reporting structures helps inform the structure of a new internal control program to be more resilient, efficient, and agile through a changing risk profile. In addition, developing the new program using a change framework that identifies what to monitor, implement, maintain, and optimize in the controls program implementation may further enable a more resilient and efficient framework.

In addition to the external challenges to remediation, addressing internal challenges and opportunities is also necessary when developing the new control program. Disruptions from new technology and digital transformation are potential examples of prevailing internal challenges that may lead to restatements and remediation. However, the digital transformation also enables opportunities with automation, enhanced analytics, artificial intelligence, and data-driven solutions for the evolving risk and controls landscape and reporting lifecycle.

Automation Opportunities Across the Reporting Lifecycle

Process automation—includes manual, repetitive, rules-based processes and enables transaction automation, dynamic data manipulation, and streamlined communication. Examples include report generation, data reconciliation, and trend tracking.
Shared services process automation—includes processes with multiple interactions across different systems that enable process synergies. Examples include payroll, onboarding, education and training, and IT functions such as infrastructure, directories, and file management.
Outsourcing process automation—can be built for outsourcing contracts using robotic process automation (RPA) solutions. Examples include reconciliations, claims processing, inventory processing, production support, and network monitoring.
Developing a New Internal Controls Program

This five-step guide to developing a new internal controls framework can be considered to help address the external and internal challenges and utilize automation and data-driven solutions to move a control program forward and reduce the chances of accounting and reporting remediation throughout the transformation.

Conduct dynamic risk assessment and scoping updates that are periodically refreshed to remain agile, identify fraud risk considerations, and create a communication plan.
Develop internal control program methodologies, update operating models, and ascertain control owners and operators, including areas to automate.
Introduce technology to help automate and monitor the control environment and obtain electronic evidence with data and analytics.
Establish automated control methodology, develop a digital testing approach to control automation, and evaluate and update protocols for data security and cybersecurity.
Lead with the process, data, and user experience, all enabled by advanced analytics, data visuals, automation, and intelligent technology integrated within the framework.
Potential Benefits of an Updated Control Framework

Using remediation and restatement drivers to create a modernized controls framework may offer benefits beyond mitigation of risks in controls reporting. Developing a framework for a changing risk profile built on a foundation of new technology elevates the quality of reporting by increasing transparency and visibility into business processes with meaningful insights into managing risks. These deeper insights allow the function to refocus efforts and move away from point-in-time solutions to address issues continuously with more transparent monitoring and visualization capabilities.

“Audit International are specialists in the recruitment of Auditors and various Corporate Governance Professionals including Internal Audit, Cyber Security, Compliance, IT Audit, Data Analytics etc across Europe and the US.

If you would like to reach out to discuss your current requirements, please feel free to reach us via any of the following:
Calling
– Switzerland 0041 4350 830 59 or
– US 001 917 508 5615
E-mail:
– info@audit-international.com”