Auditors - Adapt or Lose Your Place At The Top Table
As with many industries the world of auditing is being disrupted by technology and the need to see a greater return on investment.
For those hiring auditors, whether internal or external, there is an increasing demand for more strategic contribution to ensure organisations are prepared and ready for any disruption they may face. The days of completing a technical audit without providing some wider benefit to the organisations in terms of achieving their objectives is gone.
PWC’s “Staying The Course Towards True North”, their ‘Annual State of the Internal Audit Profession’ has highlighted a widening gap between stakeholder’s perceived value added by an internal audit from 54% to 44%, the lowest in 5 years. Only 9% of respondents considered their internal audit department as a Trusted Advisor.
A recent report on ‘The Future of Audit’ by Grant Thornton and ACCA highlighted where many believe the gap in skills to be. They highlighted that,
“Audit teams need to improve both the ‘harder’ technical skills and the ‘softer’ interpersonal skills”.
The technical ability of most auditors was not called into question. What was questioned was the analytical ability of those within the profession. One contributor indicated that auditors have,
“All the technical experience but not the necessary understanding to make big picture decisions later on”
It is clear there is an issue to be addressed by the audit profession but the positive news is that there is a desire from those at a senior level (48%) to capitalise on the information auditors have to give them, but they need it in useful, manageable, relevant fashion.
So how can the modern auditor bridge the value canyon?
With the increasing wealth of data available and the need for businesses to stay ahead of the curve in terms of their competition it is vital there is someone who can not only ensure compliance, as auditors have always done but to add real business value. Company leaders are looking for auditors to predict market trends and advise on potential changes with the insight they garner.
There is an obvious benefit in terms of competitive advantage but there is also an advantage in predicting changes that could have a negative effect. Changes such as the general data protection regulation (GDPR) which will come into force on 25th May 2018 needs to be prepared for and managed. Maximum fines will go from £500k to £17m. Providing insight on the solution to this and being part of the management for the process is something that senior official will be looking for from Auditors over the coming year.
Agile IA is the adaptation of the Agile project management process for auditing and is built on two principles,
“Prepare and Adapt”
There is definitely a feeling amongst the industry that adapting this style of working will improve the chances for auditors to take their seat at the top table. But what does it entail?
Disruption to an industry or organisation can come at any time so there needs to be a more regular review of risk and this should be aligned to business objectives.
It is vital auditors are consulting industry and professional thought leaders to provide a current assessment of the situation and giving company leaders the insight that will allow them to make a more informed decision.
Auditors will also need to make a more concerted effort to collaborate with other departments to make sure the information they provide enables the organisation to react in a timely fashion to the changes in the market place.
The other aspect to Agile IA is being adaptable. The core elements of an audit won’t change but building in a more flexible scrutiny of the data to provide a more timely response is critical. Using that data to not only predict risk but identify root causes and predict changes is certainly the level of information company leaders are looking for.
Testing hypotheses and procedures and adapting them to suit demands of the business that might not even have been thought of yet will be essential.
Being adaptable also means creating an ongoing process of education that will ensure a level of learning is happening and is being implemented in the day to day operations of an auditor.
So it is clear that the auditing profession is keen to make their mark in the boardroom and those within the boardroom need the information that auditors can provide. However the profession need to adapt to an agile style of working where their annual audit becomes an ongoing process of evaluation that will provide the company with meaningful and valuable insight to give them a competitive advantage.