Adding value to internal audits by innovating how they are planned, delivered and communicated is more important than ever, explains Eddie Best.
We need new approaches to meet the cadence of business activity, rapidly changing situations and the need to work remotely. While internal audit's response will depend on the context of your business environment, use Agile methodologies to add benefit now, seizing this opportunity to innovate audit planning, delivery and reporting for the 'new normal'.
Applying Agile methodology to internal audit
There are many variations to the Agile approach, meaning you can pick and choose which parts you apply. There are, however, a few key areas that can add the most value to internal audit in the current environment:
Agile teams will come together to discuss what key assurance questions they are seeking to answer. This is more than jointly-agreeing terms of reference with the business. There is a focus on collaborative IA and business sessions for planning, including spending time defining priorities and creating a backlog of future assurance questions. There is also a common agreement on what 'done' looks like for fieldwork to meet its goal, for example:
Project reviews – only looking at three key elements needed for set up
Corroboration – speaking to stakeholders in the initial sprint, without sample testing to inform the future direction
Data analytics – using data to identify potential themes and issues, with management investigating outliers from the output of the first sprint
This moves beyond the risk-based approach to fieldwork planning. Divide the work into sprints to add focus, real-time challenge and value. Match the pace and cadence of the business, with focused activity and quick reporting that focuses only on key issues. Identify areas where data and technology can support fieldwork and determine how much work you can accomplish within a set time. Acknowledge that the work may not be comprehensive, but it will be sufficiently complete to be useful and provide a level of assurance to inform the scope of future sprints.
Agile stand-ups and fast feedback
Another key element of Agile is short, regular joint meetings with your team and the auditees. This is more than just keeping auditees informed of progress and involves more collaboration on defining the way forward.
The same applies to reporting and presentations. Get all key stakeholders together on short calls for real-time collaboration through the process. Focus on quick overviews to enable people to make decisions for the next steps in fieldwork.
When setting up your backlog, focus on determining your priorities for a risk-based approach. Make sure to target future sprints and high-risk areas using insight gained from the initial sprints.
If there is no value in doing more work and your question has been answered, stop and move on. This is the nature of Agile and getting to grips with this will make your audit process more effective.
Evolving your internal audit plan
One key aspect of Agile is to be 'Agile about Agile'. If part of the Agile methodology isn't working for your internal audit team, don't use it. The key is to be flexible in your processes and practices to optimise efficiency.
As such, you can consider a hybrid approach, focusing part of your project in an Agile way and using traditional methods for others. Perhaps you can defer on-site aspects until the lockdown has eased sufficiently. You can see if any existing audits or emerging risks can be focused on a few short sprints to get an opinion on current risks.
Critical success factors to employing an Agile approach
Agile is flexible, meaning it can be implemented in some form for every industry. The biggest hurdle is normally convincing your stakeholders that it is the right way to conduct internal audit.
Business buy-in to for Agile internal audits
As new ways of working are emerging, internal audit teams need to find a quick way to get buy-in. Try using Agile for one project or audit as a pilot to prove how effective it can be. Use the results to champion the approach and be sure to highlight your success.
Stakeholder hierarchy is not always maintained
Rather than the normal approach of agreeing with many stakeholders before senior teams see the output, Agile feedback is often to a number of stakeholders at once, so standard hierarchies are not always maintained. This needs to be carefully communicated and managed to fit your context.
Initial findings may need additional context
Normally, teams would have completed all fieldwork before any feedback. In Agile cases, it is quicker and more efficient to flag gaps in stand-ups. This allows for faster direction on next steps and sources of evidence. This approach will need to be clearly communicated.
Availability of key stakeholders for short updates and discussions
While everyone is busy in the current environment, spending 15 minutes on a well-structured feedback call can save time for everyone going forward.
When Agile is used properly, there will be no reduction in the quality of your internal audit. But there will be a huge increase in efficiency, speed and the perceived value from stakeholders.