The focus of Internal Audits (IA) is to diagnose the needs for compliance, risk management, and governance as it pertains to a companies purpose. IA has shifted from a team designed to provide assurance to a strategy group meant to meet the ever-changing landscape of business and technology. IA more than ever before, needs to both evaluate the current structures and procedures but also see into the future of potential roadblocks or problems so they can be planned for an addressed as competition changes and growth is experienced. To achieve these goals, IA can focus on four audit areas that give a broad perspective that can then be narrowed as pain points or troubles are identified. These areas are Risk Focus, Flexibility, Effectiveness, and Efficiency.
Identifying and mitigating risk is a key element of the internal audit process. This is an ongoing and constant process as regulations and laws are constantly shifting. Perhaps at the forefront of risk that most companies face presenting is in the area of cyber security and data privacy. The constant threat of breaches and the upheaval that can result from a leak means continual monitoring is key; an audit should identify the current structures and procedures and make sure they are sufficient and meet current recommended standards. Ensuring that companies are compliant with all current regulations and are on track or have a plan for updated or changing laws is vital. Additionally, a focus on ethics and the potential fallout from an individual indiscretion or a company-wide mistake is increasingly important in a culture that pays far greater attention to these things. Having clear policy and procedures makes dealing with these things more straightforward.
Determining the rigidity of individual policies and procedures in the face of changing climates is required for determining strategy. Regulations and compliance procedures are continually evolving. Are the systems in place able to accommodate these changes, or will they need to be restructured and shifted? Knowing this beforehand can save time and money in an ever-changing environment. Our digital world full of startups and investors competitors can develop overnight. Is your business prepared for these types of disruption? If the market shifts as a new competitor offers something new, are you flexible enough to adjust and meet the new demands of the market?
There are several tools available to measure effectiveness and productivity, but using them to maximize efforts rather than adding additional busywork is a crucial piece of an Internal Audit. Using data analytics is a tremendous advantage when deployed effectively. This means measuring the correct forces and outputs and then understanding what those numbers mean can be the difference between growth and stagnant quarters. Examining the entire process of a company to identify pain points and bottlenecks can lead to restructuring or reassigning that moves things forward in new ways as alignment is created through greater focus.
Similar to effectiveness focus, efficiency means examining the structure and systems to identify redundancies that are intended. Pouring over the relationships with third parties is another place where efficiency can be lost. Ensuring these relationships move things forward and don’t slow things down can be a win for internal auditors. The greatest asset of any business is its people, and identifying failures in talent management, and identification can mean huge losses is productivity with poor fits or misplaced potential.
By focusing internal audits on a strategy rather than assurance of compliance, IA can move the company forward with confidence that it will meet the rising challenges and coming changes.