If there can be a silver lining from the recent pandemic, it may be that many Internal Audit Activities (IAAs) have considered innovative practices in human capital as a means of driving continued value to their organizations. Human capital is at the very heart of the matter; IAAs must attract and retain skillsets and resources to achieve their demanding objectives. We’ve highlighted the top four emerging human capital best practices for ensuring peak performance of the Internal Audit Activity. While the combination of these four practices, at some level, has become common practice, they continue to evolve as the Internal Audit pursues its mission to add value to the organization.
Auditing Without Boundaries – Geographical / Remote Opportunities
The recent pandemic, coupled with improvements in virtual technology, has led to the ability to, and development of, “auditing from anywhere,” whether on a beach, in a car, or an apartment. The pandemic has allowed flexible work locations, enabling a wider reach for the acquisition of talent beyond the physical location of the brick and mortar office. Expanding the team beyond the immediate vicinity increases the liklihood of finding the “right fit” or niche skillsets, subsequently meeting the ever growing and complex needs of the organization. Additionally, opportunity exists to reduce costs in some cases, when different geographies are evaluated.
Questions to consider:
- Has your organization expanded the hiring reach to areas outside of the immediate vicinities, to current regional offices, or remote working? If so, can you partner with that regional office to add new resources there?
- Does your IAA team structure allow for geographically disperse or remote internal audit resources to supplement the current team?
Alternative Resources – Offshoring and Nearshoring
The Chief Audit Executive must be fiscally responsible and that has never been more apparent than post pandemic. As one considers the needed skills, competence, and the ability to leverage lower cost resources, offshoring and/or nearshoring has become more prevalent and popular. Offshore team members are able to perform all, or a part of an internal audit engagement, depending on their level of experience. This allows leverage for both the offshore resources as well as those within the IAA. Offshoring generally provides quality skilled resources at a lower cost, and in many cases, can be performed overnight to meet testing deadlines due to time zone differences. It has been shown to improve in-house team morale by allowing them to focus on more complex activities and engagements.
Questions to consider:
- Is your workload sufficiently known so that you can triage certain parts of the activity to alternative offshore or nearshore resources?
- Are the testing instructions well-documented and do you have sufficient prior-year examples?
- Have the controls or auditable areas remained primarily unchanged so prior work can be used as a roadmap or template?
- Do you have an internal team member who can serve as a point person to assist with setup or testing inquiries with the offshore team?
Jack of All Trades, Master of None – Use of Experts
The recent pandemic required IAAs to quickly adapt to new and emerging risks, which in many cases required expertise in areas that the IAA may not have traditionally had before. To provide value to the organization and align skillsets to the work to be performed, the IAA has had to adapt to new working models that include cosourcing and outsourcing.
With the challenge of performing internal audits of new risks with reduced budgets, using a co-sourced expert in IT, cybersecurity, regulatory compliance, or privacy can provide the necessary quality, value, and competency.
Questions to consider:
- Can you keep your expert fully busy, relevant, and highly trained to justify the cost?
- Are there areas of your annual audit plan where a specialist would be necessary to provide confidence in the results with regard to credibility and competency?
- Are there areas that you need help for part of the year, or in one or two audits that it would make sense to use a third party?
Don’t Be Left Behind – Data Analytics
The recent pandemic has been a catalyst for Internal Audit to deliver increased value at the same or lesser cost. As such there has been a move to greater use of analytics across all facets of internal audit (i.e., planning, testing, and reporting). Internal auditors with data analytics skills are in high demand, and hiring or use of third-party resources is at an all-time high. Blending this highly desired skillset with the IAA’s corporate knowledge has led to the development of valued continuous control auditing programs that identify fraud, control gaps and/or streamline compliance testing.
Because of key stakeholder expectations, the current “war for talent,” and high demand for data analytics skills, the IAA has quickly evolved the baseline skills to accommodate and increase the skillset at a rapid pace. At a minimum, one team member is designated as the data analytics resource. With investment in training and hands on experience, the IIA can begin to support the organizational needs and develop simple dashboards to identify trends or outliers meriting further review. This is a stepping stone to further enhancements, but most organizations are now in the first steps of the journey.
Questions to consider:
- Do you have sufficient data analytic skills present in your team? If not what is missing?
- Where are you on the data analytics spectrum and do you have a plan to continually evolve the activities to include data analytics in every internal audit?
- What actions can you take to increase the data analytic skill set in your team?
How MorganFranklin Can Help
We work with our clients to provide:
Internal Audit Cosourcing and Outsourcing: Enabling internal audit functions to drive value by aligning organizational focus and resources on strategic objectives and risks that are most critical to stakeholders. We draw from the depth and breadth of MorganFranklin to design and implement internal audit solutions that drive value.
Quality Assessment Reviews: Independent validation of the Internal Audit Activity and identification of opportunities to increase effectiveness, improve processes, and enhance credibility. Our methodology is built around complete support and encompasses benchmarking, best practices, templates, and tools to support business goals.
To learn more about MorganFranklin’s Internal Audit Services including Cosourcing, Outsourcing, and Quality Assessment Reviews, contact our experts below.