How agile internal audit can benefit your business
More and more businesses are realizing the benefits of adopting an agile internal audit methodology. But for those new to the ideas of agile auditing, what is it? Why is agility such a prized trait in internal audit? What makes an internal audit agile — and how can this agility help your organization?
The Move to Agile Internal Audit
Internal audit is the process of checks and balances by which companies evaluate their internal controls. In recent years, the need to comply with SOX requirements has brought internal audit into the spotlight, as obligations around watertight financial controls have grown.
And it’s not just in financial reporting that internal audit has grown in importance. With concepts like ESG in stark focus, auditing your processes and controls across all areas of governance and compliance is taking on new significance.
As a result, today’s internal auditors are not simply a checkbox function; they’re under pressure to deliver as business partners and consultants. Internal audit has the potential to act as an adviser to the board and leadership, moving beyond reporting to advising on best practices around processes, controls, governance and risk.
Business risks are ever-changing. Organizations need to be nimble in response and alive to the threats they face. If internal audit teams are to act as strategic advisers, they need a step-change in approach. Adopting an agile internal audit methodology can deliver this.
What is Agile Auditing?
What is agile internal audit? The terms “agile internal audit” and “agile audit methodology” may be increasingly common, but this doesn’t necessarily mean they are well understood. What is audit agility?
The “agile” concept was born in the world of software development. It’s characterized by work that takes place in short periods, often called “sprints,” with quick iterations designed to enable “test and learn” and refinement of processes and approaches in conjunction with internal stakeholders.
Agile auditing follows this concept of working in short bursts. It sometimes follows one of two widely accepted agile working philosophies: Scrum or Kanban. Organizations may also adopt their own, or a consultant’s, proprietary agile internal audit methodology.
What is “Scrum” in Agile?
Scrum, taking its name from the signature rugby move, is a way of working as a team; a framework that helps teams work together better by learning from experience and continuously improving by identifying which moves and tactics performed well, which didn’t and what can be improved.
Agile working manifests itself in frequent meetings and regroupings, setting roles and adopting tools that help teams to collaborate successfully and continuously revisiting their approach to reassess and refine processes.
What is “Kanban” in Agile?
Kanban is an agile working philosophy that relies on transparency, listing work items on a physical or digital project board.
Is Your Internal Audit Agile?
So once you’ve identified the characteristics of agile internal audit and the need for audit agility —it’s time to evaluate your own internal audit process.
Answering these questions might help to determine how agile your internal audit currently is:
- Does your internal audit team help your organization identify risks quickly? Do you adapt constantly to audit against today’s and tomorrow’s risks instead of yesterday’s?
- Does your internal audit function evolve at the speed of the business — and at the speed of changing risk?
- Are you able to deliver strategic insights to the business, not just data?
- Does your audit process result in user-friendly dashboards and visual data presentations that the business can easily use to drive decisions?
- How often do you revisit your audits and plans? Agility means accelerated, adaptable audit cycles, not rigidly adhering a set cadence. Risk-based audit planning allows you to respond to risks as they happen, rather than adhering to an inflexible timetable.
- Can you consistently access the skillsets you need for the audit projects you’re working on? Do you have the skillsets within your audit team to tackle evolving risks like cyber and ESG?
If your internal audit approach is set to rigid timeframes, is backward-looking rather than forward-facing and fixated on internal concerns rather than externally focused, it’s time to prioritize implementing agile internal audit.
How Do I Do an Agile Audit?
A traditional audit process is linear and done to set timeframes. An agile internal audit methodology is circular and nimble, responsive to external influences and determining audit frequency based on identified risks.
To make your internal audit agile, follow these steps:
1. Take a short-term approach. Don’t schedule audits at the start of the year with no revisions to the plan; instead, act in short bursts or sprints, reviewing and improving at every iteration. This allows you to quickly see if you’re on the right track and switch tack if you’re not.
2. Communicate regularly and openly. Regular communication is vital, whether you’re taking the entire Kanban approach to transparency, or you’re just moving towards more frequent, short meetings to discuss current work and challenges.
Frequently meeting enables the short-term approach detailed above, and allows you to take sharp turns if the your route isn’t delivering results. Assess past activity, review current workload and set goals for the next stage. Constant communication keeps your agile internal audit process alive and evolving.
3. Stay close to stakeholders. Communication isn’t just within the internal audit team; you also need to convey your agile internal audit aims and gains to your stakeholders. Your board and leadership will have invaluable insights into organizations’ priorities, risks and opportunities, all of which should be taken into account in your agile internal audit planning.
4. Harness technology. Tools and technology have the power to accelerate your agile internal audit process. Bringing a degree of automation to the internal audit makes your approach more robust, more efficient and quicker to pivot when it needs to.
Automated workflows drive clear reporting on which to build effective, agile internal audit. Audit management software increases visibility of risk and powers internal audit agility via clear reporting and user-friendly insights.
How Does an Agile Approach to Internal Audit Benefit Businesses?
Internal audit management has traditionally been a rigid process with set deadlines and parameters. However, introducing an element of agility is shown to get stakeholders on board in a way that an annual audit cadence cannot.
Agile internal audit connects internal audit management to business strategy, helping business teams continuously improve their risk management processes.
It helps to improve teamwork within the internal audit department, boosting collaboration and effectiveness and enabling newer team members to learn from their more experienced colleagues.
Agile internal audit gives your board and senior leaders the assurance they need about the risks your organization faces and confidence that risk is being identified and mitigated via a rigorous integrated risk management approach that looks forward, not backward.
It allows you to deliver regular updates via responsive reports and dashboards due to of short bursts of audit activity, rather than having to wait for a formulaic report at a defined timeframe.
As a result, internal audit teams can position themselves as business partners who act in a consulting capacity, helping their directors respond to evolving threats and advising on mitigation and prevention strategies. It also helps auditors to gain the respect and support of the team they’re auditing, and convey that everyone is working toward the same end.
Implement Agile Internal Audit for More Efficient, Results Driven Audits
Modernizing your approach to audit will enable you to stay ahead of emerging risks. Consequently, you not only support your business but transform the internal audit function into a valued business partner. Find out more about how internal audit software from Diligent delivers the essential foundation for your path to agile internal audit.
