Using technology to support internal audit's strategic mission - The Global Risk Insight Series - Brief Article

Internal Auditor, Dec, 2001 by Andrew J. Dahle, Mike Gowell

Today, as organizations struggle to enhance profitability in a difficult business environment, internal audit functions are under increasing pressure to meet strategic business goals and support internal value drivers. Many auditors are looking to technology and new tools to assist in that effort. They are learning that automation can play a significant role in supporting their efforts to deliver stakeholder value. However, it is also clear that employing technology effectively requires a clear understanding of its role and appropriate use to ensure that any technology investment achieves that goal.

A Strategic Enabler

Internal audit technology is not an end in itself, yet internal audit functions often view technology as a "silver bullet" capable of producing substantial benefits simply by being implemented. However, even the best internal audit technologies are essentially enablers, tools that help internal audit functions achieve their larger strategic goals, not goals by themselves. There is abundant evidence that the "right" automation can be a real asset as organizations transform their internal audit functions to maximize stakeholder value. Accordingly, any internal audit technology initiative must start with a clear understanding of the stakeholder values that internal audit is striving to deliver. The internal audit technology strategy can then be aligned with other internal audit strategies to focus clearly on those values.

Selecting the Right Technology

When the actual selection process begins, internal audit functions should carefully scrutinize any technology to ensure that its capabilities and projected benefits align closely with their technology strategy. In addition, they must make sure that a prospective technology is flexible enough to support their organization's unique processes, systems and objectives. If using a particular technology forces an internal audit organization to adopt a methodology that isn't aligned with its strategy and related value drivers, it's unlikely to deliver the desired strategic benefits.

Internal audit functions should consider the following issues when assessing their internal audit technology platform needs:

Assess your user requirements. Assess your needs, specify your requirements and look for technology flexible enough to accommodate your specific needs. Know what capabilities you require and look for them. Also ensure that the technology fits your organization's overall technology platform.

There are many advanced features and benefits associated with internal audit technology platforms, including knowledge capturing, intranet-based issue tracking, built-in scanning, online and in-person user forums and risk assessment modules. Again, find the features that match your needs.

* Seek wider, integrated applications. Look for technology platforms that allow integrated internal audit applications rather than those that just house stand alone tools. For example, does the risk assessment tool directly interface with the internal audit plan and the resulting internal audit projects?

* Assess the full cost of the automation. It is important to consider technology costs and projected payback beyond the first year. Software vendors may incorrectly minimize initial costs, so it is important to consider the full costs of any automation solution.

* Assess the reliability of the supplier. Many software start-ups have appeared in recent years, and experience demonstrates the risks associated with relying on unproven organizations.

* Assess the track record of the product. How many internal auditors use the platform? Does the technology have a proven history of successful implementations?

Contributing Real Value

Internal audit functions that are careful in their technology assessments will find that automation can support strategic initiatives in a variety of ways.

For example, internal audit organizations are aware that the new Institute of Internal Auditors Standards - effective January 1, 2002 - will require a quality assurance and improvement system within each internal audit function. Many functions have found that the right internal audit technology platform can contribute significantly to enhanced audit quality through enhanced consistency across the audit process, and ease of review.

In addition, high-performing internal audit functions are increasingly recognized as important knowledge-sharing units within many organizations. Internal audit technology frequently improves knowledge management and, in the process, contributes to stakeholder value.

Studies also have shown that, on average, auditors spend in excess of 40% of their time documenting and reviewing audit work, so the opportunity for automation to significantly improve efficiency in this area is considerable. For example, users of PricewaterhouseCoopers' TeamMate internal audit automation platform report on average achieving efficiency savings of 20% on average in the first year alone. Technology that increases the percentage of time internal audit is focused on achieving stakeholder value drivers is clearly valuable.