In this current era of digital transformation, the role of internal auditors has transformed in tandem. What was once a focus on traditional financial and compliance auditing has broadened to encompass a broad operational and strategic remit — much of which hinges on advanced technology and complex risk landscapes.
This article explores why technology and risk management have become essential skills for internal auditors and how mastering these areas can help auditors to add value and effectively position themselves as strategic advisers.
Technology is Reshaping the Audit Landscape
Modern organisations rely heavily on technology in virtually every facet of their operations, from cloud computing and artificial intelligence to data analytics and cybersecurity. This shift has far-reaching implications for internal audit teams.
- Increasing Complexity of Digital Environments: With the proliferation of digital systems, internal auditors must understand a range of technologies, from enterprise resource planning (ERP) software to cloud-based platforms and emerging tech such as artificial intelligence. Familiarity with these systems enables auditors to examine their configurations, data flows and security protocols, ensuring compliance and identifying risks.
- Data Analytics in Auditing: Data analytics is now a core part of the internal audit process. By adopting tools that analyse data across vast and complex data sets, auditors can identify patterns, anomalies and trends, gaining insights that are nearly impossible to detect manually. This capability not only enhances audit accuracy but also enables continuous auditing, giving management timely insights.
- Cybersecurity Threats: Internal auditors with a strong understanding of cybersecurity principles can provide valuable insights into how well the organisation is prepared to prevent, detect and respond to cyber threats. This knowledge is crucial for evaluating the effectiveness of security policies and controls, especially in highly regulated industries.
Risk Management is the Backbone of Effective Internal Auditing
Risk management is a fundamental component of the internal audit process, enabling auditors to assess the organisation's risk exposure, identify vulnerabilities and provide recommendations to mitigate these risks. In today’s uncertain environment - where risks are multifaceted - it’s crucial that internal auditors can demonstrate strong risk management capability, when seeking a new role.
- Holistic Risk Assessment: Effective internal auditors don’t just focus on financial risks but also operational and reputational risks. By understanding the various types of risks that can impact an organisation, auditors are better positioned to provide comprehensive evaluations that align with the company's risk tolerance and objectives.
- Supporting Business Continuity and Resilience: Auditors equipped with risk management skills play a key role in helping organisations develop resilience. Whether it's through assessing the effectiveness of business continuity plans, evaluating supply chain risks, or testing disaster recovery processes, internal auditors can help the organisation prepare for, withstand, and recover from disruptions.
- Proactive Identification of Emerging Risks: As the business environment changes, so do the risks that organisations face. Internal auditors who are adept at risk management can proactively identify emerging risks, such as regulatory changes, geopolitical uncertainties, or ESG risks. This forward-looking approach allows businesses to adapt and respond before these risks become critical issues.
The Synergy of Technology and Risk Management in Internal Audit
While technology and risk management are powerful skills on their own, in auditing, the two disciplines are inextricably linked, in the following ways:
- Automating Risk Assessment and Controls Testing: For example, through data analytics, auditors can perform real-time analysis of transaction data to flag any anomalies or potential compliance issues. This approach is far more efficient than traditional, manual methods and enables auditors to focus their efforts on high-risk areas.
- Enhanced Reporting and Insights: Advanced visualisation tools and dashboarding software enable auditors to present data and insights in a clear, impactful way, making it easier for leaders to understand the organisation’s risk profile and make informed decisions.
- Fostering a Culture of Risk Awareness: By demonstrating how different risks are interconnected and how technology can address these risks, auditors can encourage business units to adopt a proactive, risk-conscious mindset.
Building Skills for the Future of Internal Auditing
For today’s internal auditors, developing and demonstrating expertise in both technology and risk management is essential. Here are some practical steps for auditors to build these skills:
- Continuous Learning: Pursuing certifications in areas like data analytics, cybersecurity or enterprise risk management can elevate CVs and provide auditors with the skills they need to stay current and effective.
- Hands-On Practice with Audit Technology: Familiarity with tools such as audit management software, data analytics platforms, and visualisation tools can help auditors incorporate technology more effectively into their workflows.
- Collaborating with IT and Risk Management Teams: By working closely with IT and risk management departments, auditors can gain deeper insights into their organisation’s digital landscape and risk appetite.
Conclusion
As the internal audit profession continues to become ever-more strategic, those who embrace technology and risk management skills will not only enhance their career prospects but also become integral to their organisation’s success, serving as trusted advisors.
The future of internal auditing will belong to those who are not only proficient in the art of auditing but are also masters of technology and guardians of risk.