Internal Audit 4.0 | Are Internal Auditors Ready for The New Auditing Frontier?

The question of who will audit the auditor has always been in the mind of hybrid accountants who toll the path of internal auditing.

A lot of questions have been asked of late about the usefulness of internal audit department in an organization. The above two questions and many more is gradually paving way for the next wave of changes that is coming to the internal auditing space.

Internal audit 4.0 is coming with a kind of wave that will unravel things in the process of weeding out the unprepared and unqualified currently occupying internal audit positions in varying capacities in different businesses.

What is internal auditing 4.0?

Internal audit 4.0 is a peerless revolution that is powered by the liberating impact of technology on participants of assurance trade. Internal auditors being the major actors in the assurance providers professionals would be the first set of professionals to be moved by this revolution.

Both the auditees and those charged with governance now have plethora of information at their disposal to guide them on what to expect from their internal auditor in an ideal world. Yes, it is a fact many of these players in this internal audit space are wrong expecting internal auditors to perform magic. But this does not remove the unfortunate truth that the internal audit goal post has long moved.

Features of internal audit 4.0

• Presence of heavy automation: I was once in a meeting when a very high placed member of the board of a reputable organization made a comment that fully captured what she expected from the internal audit of the organization she represents. In her comment, she said ‘…as an internal auditor your expected to automatically get notified when things like this happen.’ She is not alone in this line of thinking as other respectable members of the board all chorused in the affirmative. Internal auditors are expected to take full advantage of RPA (Robotic Processing Automation) as evidenced by the referenced incident.

• Presence of artificial intelligence and machine learning: artificial intelligence and machine learning will be key players in this new dimension of auditing where an auditor who is armed with these tools would be able to make some predictive hypothesis, then prepare a risk register that would address the predicted concern.

• Increased expectation from stakeholders: board members expect their internal auditors to give more than they currently give. According to a recent research conducted by a group of internal auditors in Abuja Nigeria, stakeholders now expect their internal auditors to provide forward looking insights in the area of Cybersecurity and strategic business analysis. This trend is not expected to relax anytime soon. Board members also now expect their internal auditors to be more of a nutritionist and gardener that will help feed and nurture all processes to ensure that business objectives are met – this is in addition to continuously reviewing and making progressive recommendation in the area of risk management.

• Increased misconception as to what internal auditors really do: it is unfortunate that still very many people do not really understand what it is that the internal auditors do. For this reason, too much is expected from the internal and dissatisfaction kicks in when these expectations are not being fulfilled. Another common area of misconception is the fact that people still do not understand that there is a difference between internal audit and internal control.

Impact of internal audit 4.0

• Loss of jobs for the lazy unprepared actors in the internal auditing space: the internal auditors who still believed that it will continue to be business as usual would regrettably loss out on many fronts – job loss inclusive.

• Increased opportunities for those that are initiated into the club of ‘elite 4.0’: those internal auditors that have managed to upgrade themselves into the elite club of 4.0 internal auditors would reap bountiful harvest as a result of these upgrade.

• Increased reliance on the work of internal auditors by stakeholders: the fact that internal audit 4.0 will be more closely aligned with the expectation of the business stakeholders would mean that output from internal audit team will begin to attract more attention from those charged with governance that it currently does.

How to position your self and be safe from the wrath of internal audit 4.0

• Put on an open mind and free-thinking cap: 4.0 internal auditors are critical thinkers. The internal audit 4.0 era will require that outside the box thinking ability becomes the new norm.

• Learn data analytics using computer: the research in the area of data analytics tools continue to move positively with the emergence of numerous data analytic tools like Microsoft Power BI, Python (with packages like Pandas, Numpy, Scikit Learn, Matplotlib, Seaborn etc), R, Tableau, etc. These tools in the data science space is becoming cheaper and more powerful everyday that it will be foolish for anyone one especially the internal auditors not to take advantage of them. Being able to easily and efficiently manipulate data speedily will ensure that you are positioned to be a value-add internal auditor.

• Improve on communication skills: one of the main reasons why their still exist expectations gap in internal audit maybe the fact that many internal audit professional lack compelling communication skills. Therefore, improving on your communication skills as an accountant who measures in internal auditing will put you several steps ahead of the rest of the park.

• Apply a customer focused risk based internal auditing technique: rather than approaching internal audit planning and engagement from pure risk-based audit approach, internal audit practitioners should approach internal audit from a risk-based approach that is customer oriented. This way, the benefits of both worlds of performing internal audit from risk approach and focusing on customers’ needs will be met.

Final Remark on Internal Audit 4.0

The internal audit 4.0 is closer to us than many thinks. I urge you to take your self-improvement task as an internal auditor very seriously.

One of the best investments with the highest ROI that can be is the investment in developing ourselves to align with the trend in any field we find ourselves. A big question that should be in the mind of all internal audit practitioner now and beyond is; ‘am I ready for the new internal audit frontier that internal audit 4.0 in bringing?’