Keeping up with internal audit technology: what auditors need to do in 2021
How internal audit technology is used in the audit process has been a pertinent question in the industry for years.
Back in 2015, we explored how, despite more internal audit departments adopting automation tools to improve their work processes, many did not appreciate the benefits of technology and failed to keep up with developments.
In 2016, CBOK reported that organisations should use a robust performance management system to maximise their internal audit functions for the 21st century. The IIA also recognised the value of technology, including data mining, analysis tools and continuous auditing, to help organisations work better.
Fast-forward to 2021. We’re in this midst of a pandemic, and technology continues to develop at a rapid pace. Considering these changes, we’re taking a look at how technology is transforming the audit process and what internal audit functions must do now to keep up with a constantly evolving environment.
How technology is transforming the audit process
The advantages of using internal audit technology have long been recognised by industry leaders and professional bodies. According to ACCA, technology now ‘has the potential to revolutionise audit’. The Internal Audit Foundation and Deloitte also state that ‘internal audit has a growing number of modern automation tools at its disposal.’
So, what technology is currently available and what are the benefits?
The most common technologies that internal audit can embed into their processes include Robotic process automation (RPA), machine learning (ML), artificial intelligence (AI) and data analytics tools. Using these kinds of technology can:
- Help internal audit work more quickly, accurately, and efficiently
- Automate mundane, manual processes, allowing auditors to focus on other important areas of work
- Improve audit quality
- Provide better insight into potential opportunities and threats
- Modernise organisations
- Cut costs in the long-term
How are internal audit functions currently using technology?
Six years ago, the IIA wished that audit departments would develop a vision for the use of technology tools over the coming years. A recent three-part report by the Internal Audit Foundation and Deloitte provides insight into how far organisations have come with the use of internal audit technology.
The first report in this series reveals that an increased number of internal audit departments are using Robotic process automation (RPA) to expand their audit coverage, work faster, and automate monotonous and repetitive tasks. However, many internal auditors are still debating how these functions can be implemented and are consequently missing out on the time-saving technology.
Furthermore, according to their survey of IIA members, the majority of internal audit companies are either using some automation, are in the process of adopting it, or have only just begun to use it. Those who are working with a significant amount of automation are in the minority at only 8%.
A report by ACCA into audit and technology corroborates these findings. For example, they discovered that many audit firms are now using data analytics tools, but the majority are only just beginning to work with AI. They conclude that audit functions could do more to adapt and entrench technology into their work processes.
Compared to when we examined internal audit technology in 2015 and 2016, there are many technology tools available, and several are being used in some capacity by auditors. Nonetheless, these reports indicate that little has changed in terms of how quickly technological changes are being embraced. There is still some way to go before modern technology is firmly embedded into the industry overall.
The impact of technology on auditing going forward
It is safe to say that technology isn’t going anywhere and will only continue to expand and develop in the future. Challenges introduced by the pandemic, such as remote auditing and cybersecurity issues, are also likely to continue in 2021. So, what does internal audit need to do to keep pace with an increasingly digital and uncertain world?
As lockdowns forced organisations to work digitally, those who were behind with technology were at a huge disadvantage. The IIA warns that companies who fail to innovate now will fall further behind.
Become technologically competent
Both Deloitte, the Internal Audit Foundation and ACCA see technology as the way forward for the audit industry. They argue that future auditors must therefore be confident working with digital solutions to perform quality audits, as well as to understand and audit the risks technology can bring to organisations.
Don’t forget the human element of audit
While automation can take over the more routine aspects of auditing, digital solutions cannot completely replace human activity, such as the relationship auditors have with their clients. Firms will need to work out how the two can work together for maximum benefit.
Consider audit software
As new risks are expected to emerge in 2021, organisations will likely look to their internal audit departments to help them manage. Internal auditors therefore need to be well-prepared to meet these challenges. Audit software like Pentana Audit can help you to work faster and more productively, as well as improve the quality of audits.
To find out more about how auditing software can benefit you and your business, take a look at our back to basics guide on internal audit technology.