What are the key priorities for internal audit?

The financial services landscape is changing fast, driven by emerging technology, new ways of working, and evolving societal norms. These developments bring a wealth of new opportunities for firms with an ambitious vision and the right knowledge. Traditionally, innovation has been led by the business, while internal audit has given assurance over the associated risks. But internal auditing is growing beyond its original assurance remit and becoming a force of innovation.

Our new financial services internal audit report 2022/23, driven by an industry-led survey, explores the issues, challenges, and opportunities in internal audit. The analysis explains the opportunities, ambitions, obstacles, and concerns across the industry: value proposition, future-proofing, and improving diversity, equity, and inclusion (DE&I).

Strategy

33% of respondents believe they don't have adequate resources to deliver the audit plan.

Resourcing is a common problem, particularly for small to medium-sized firms, but not delivering the internal audit plan can put firms outside the Institute of Internal Audit’s code of practice. This can reduce trust in internal audits and prevent the team from delivering value-adding activities that can drive innovation across the business. Innovative internal audit teams need to find ways of doing more with less.

Value proposition

81% say that internal audit has appropriate standing, credibility, and impact at key governance committees; 57% of functions fail to meet certain objectives, and 60% believe the function isn't future-fit.

To drive innovation internal audit needs a seat at the table and something to say. While most functions have influence, not delivering objectives for future fitness can undermine the strength of audit messaging. To maintain influence, internal audit needs to generate value-adding insights and keep moving their business forward.

Measuring success

20% of respondents feel that risk and control culture is a barrier to meeting all internal audit objectives.

Less than half of our survey respondents (40%) believed they had fully realised audit objectives over the last year. Barriers include budget constraints, risk, and control culture. This highlights ongoing resource pressures, and the need for further work on culture to embed good risk management across the firm.

Fit for the future

60% of respondents don't think their function is future fit.

It’s difficult to pin down exactly what makes internal audit future fit, but most of our respondents leaned towards good use of data analytics and technology. These tools will help you keep pace with evolving business needs, improve responsiveness, and maintain a competitive edge. As more firms embrace automation, internal audit needs the right blend of skills to embrace and action change.

Skills gap

Over 70% of respondents say they're focusing on data analytics and ESG.

Resourcing is a key concern, and many internal audit leaders identified skills gaps across key areas: from ESG to cyber security and data analytics. While these gaps can be bridged through co-source providers or guest auditors from the first or second line, upskilling existing staff will help long-term development. However, they need adequate time to learn so you may need to rethink your training-day allocations.

Data analytics

Over 60% of respondents use data analytics in less than 25% of audit engagement.

Financial services firms increasingly rely on data-driven processes and procedures, but this depends on collecting good quality data and analysing it effectively. This includes the use of automation to help firms move away from manual processes and give specialist resources time to focus on value-adding tasks. Easing the pressure on resources, effective use of data analytics can boost confidence in internal audit findings and help identify new opportunities for growth.

Inclusion and diversity

67% of respondents feel their function is delivering their organisation’s DE&I targets.

Inclusion and diversity is key to building a more resilient and better-performing culture across an organisation. A team that brings in different perspectives will build diversity of thought and drive innovation. Giving every team member a voice and opportunities for growth will help retain talent in the long term, ensuring diversity, equity, and inclusion from entry level up to the boardroom.

How can you ensure your function helps the business achieve its goals?

Download the 2022/23 internal audit report

For more insight and guidance, get in touch with our financial services internal audit team, Rob Benson, Vivian Lagan and Ravi Joshi.