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Transforming Internal Audit into an Insightful Catalyst for Change – Giancarlo Millo

2 Aug 2019 12:00 | Anonymous
The Accountant – Sustainability. Summer 2019 
Next-generation internal audit
As we approach the end of a decade of unsettling uncertainty, organisations face evolving strategic, reputational, operational, financial, regulatory, and cyber risks. Simultaneously, there is also a need to constantly innovate in order to compete. The world is entering the fourth industrial revolution where new technologies, digitalization, and artificial intelligence are dramatically changing the business landscape.
Although internal audit’s service emphasis and delivery models must be updated, its central purpose remains much the same: to assure and advise. However, the most successful internal audit functions will also anticipate, and through proactive assurance, help organisations keep pace with and get ahead of emerging risks. These three – assure, advise, and anticipate – constitute the triad of value that internal audit stakeholders now want and need.
Until recently, assurance was more focused on past events. But the rate of change means that the past is no longer a safe predictor of the future. In today’s environment, organisations are calling on internal auditors to be more forwardlooking. Boards want the comfort that, as they take their next steps, they can see the potential stumbling blocks and understand what they need to do to get around them.
That is great news for internal auditors, but it is also a challenge! Traditional auditing is undoubtedly suitable for many projects; however, when auditors need to deal with the uncertainties inherent in planned business strategies, its approach is less relevant to the velocity of our current business environment. Internal auditors can build upon the steps they have taken to meet these new challenges by focusing more effort on innovation.


Internal audit has a vital role to play in the success of its organisation. But to be up to the task, internal auditors need to refresh their commitment to innovation in internal audit. The internal audit profession needs to push further and Transforming Internal Audit into an Insightful Catalyst for Change harder in areas such as audit automation, data analytics, and rethinking audit processes and methodologies, as well as taking the first steps toward the use of robotics in audit work.
This indeed represents a great challenge. Many internal auditors are already working their hardest to meet their stakeholders’ expectations with often constrained resource’s  – including tight budgets, limited staff, and everchanging competency demands. Even so, stakeholders seem to continually want internal audit to add more value. This is precisely why the innovation mindset is so relevant today. It means that internal audit should be a constant work in progress:
  • That processes are adaptable and open to rapid revision as circumstances change;
  • That audit finds more forward-looking ways of working to adapt to stakeholders’ changing needs;
  • That technology is a great enabler when fully embraced.


Given the current pace and magnitude of change, it is impossible to anticipate (i) every change that will materialise in the near- and long-term; and (ii) how those shifts will affect auditing operations. For this reason, it is useful to develop an adaptable internal audit function: one that is routinely experimenting with new technologies and approaches and can, relatively easily, incorporate new technologies, risk management techniques, and other business processes as they emerge and as the broader organisation evolves as part of its own transformation efforts and in response to rapidly changing external forces.
Continuous innovation should form part of the internal audit strategy to be approved by the Board through the Audit Committee. The strategy paper must be a live document which identifies the function’s most important and urgent innovation requirements on a periodic basis. Man-days should be specifically allocated in every Annual Audit Plan to cater for such innovation projects.
Each audit function should at least ensure that one of the team is assigned with a part-time responsibility to help the innovation process. They should also make sure to tap into that wealth of often unexploited talent – new professionals. Newer internal audit professionals who are not tied to tried-and-true ways of working can bring a fresh perspective and an openness to technology as an enabler of innovation.
Conclusion
Internal auditors must adapt, evolve and transform or risk becoming irrelevant. They need to ready themselves for changes and new thinking – now. Starting this journey is vital but, for many, it will not be easy because it must also be comprehensive. It requires an innovation mindset and culture within the internal audit group against the rapid pace of innovation to re-examine the foundational elements of their function’s capabilities, chart a transformational course, and then execute that plan while at the same time performing their daily jobs.
It takes courage to innovate and overcome old attitudes resistant to change, to think and act differently, and to show leadership in the organisation. But by becoming a catalyst for innovation in internal audit, auditors can become a catalyst for change in the organisation at large.

References:
  • Internal Audit: Golden Oldies or Latest Tunes? (Deloitte, 2017)
  • Internal Audit 3.0: The Future of Internal Audit is Now (Deloitte, 2018)
  • Next-Generation Internal Auditing: Addressing Risk in the Midst of Rapid Change (Protiviti, 2018)
  • The Innovative Internal Auditor (IIA, 2017)
  • The Next Generation of Internal Auditing – Are You Ready? Catch the Innovation Wave (Protiviti, 2018)
  • The Upside of Risk (IIA, 2019)
  • Unlocking the Strategic Value of Internal Audit – Three Steps to Transformation (EY, 2010)
Giancarlo Millo FIA, CPA, CIA, CISA, CRISC, MBA (Fin)
Giancarlo Millo is Group Chief Internal Auditor at Mizzi Organisation, having previously served as Deputy Group Head Internal Audit at FIMBank plc. Mr Millo has gained over 25 years’ experience in the financial services and banking industries, and has also volunteered as Secretary, Vice President and President of the ISACA Malta Chapter.
               
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