Internal audit said to be using data in new ways that could guide directors
Corporate boards have the opportunity to take advantage of a more evolved internal audit function, but few are yet to do so, according to a principal in Deloitte & Touche’s advisory practice.
Internal audit teams have traditionally been used to give assurance to the board that the company is in compliance with regulations – notably the Sarbanes-Oxley Act, which requires all public companies to submit an annual assessment of the effectiveness of their internal financial auditing controls.
But these teams can also offer their boards strategic insight and foresight by using new data-processing techniques, Deloitte global internal audit analytics leader Neil White tells Corporate Secretary. The question is whether, given the cost of providing compliance assurance, internal audit can do that part of its work more efficiently – leaving it time to offer more value-added advice, White says.
At issue is internal audit analytics, which can be thought of in essence as using data, statistics, models and similar tools to drive better corporate decision-making. One example would be internal audit at financial services firms analyzing social media data then taking its findings to discuss how the business is operating so as to be better able to advise the board, according to White.
A lot of board members struggle with the idea of such an approach by internal auditors and don’t see the bigger role they can play, he says, but others take a more positive and practical view and there is a changing mind-set.
Opinion also seems to be mixed among internal audit leaders. A Deloitte survey released early last year finds that although just 7 percent of chief audit executives (CAEs) report using internal audit analytics at an advanced level, 34 percent believe this changing role is the near-term future.
White says audit committees can play a critical role in moving toward this new role for internal audit because they have oversight of the function. Some internal auditors also need to change their mind-set, he adds.
According to a Deloitte notice, the board – particularly the audit committee – should be asking CAEs questions to help ensure their company gets the greatest insight out of the internal audit team, including:
- Has your team begun assessing how analytics could enable internal audit professionals to shift away from a retrospective view and into an insights-driven proactive view of our organization?
- How could internal audit analytics affect the internal audit process and communication of results?
- How can internal audit most effectively collaborate with IT and other groups?
- What data do we need to answer the important questions?
- How can we measure our progress and capture lessons learned?