Internal audit departments are starting to embrace data analytics, but many have far to go to achieve their full potential, according to a survey from global consulting firm Protiviti.
The Embracing Analytics in Auditing report, released on Monday, involved the participation of more than 900 internal audit professionals to assess data analytics capabilities and practices among internal audit functions, as well as to identify top priorities for chief audit executives (CAEs) and internal audit professionals this year. Although the survey was conducted globally, the majority of responses came from North America, Protiviti reported in a statement.
The survey found that 66% of internal functions now employ some form of data analytics in audit processes. However, despite this positive trend, many audit departments (34%) do not employ data analytics as part of the audit process, and “have not started the journey to realize the significant benefits that analytics technologies and resulting insights can provide,” the statement said. Of those who currently use data analytics, a mere 10% rate their data analytics functions as quantitatively managed or optimized.
“The pace of change in our world is having a dramatic impact on how organizations operate,” said Brian Christensen, executive vice president, global internal audit and financial advisory, with Protiviti. “Internal audit professionals must be adept in applying new tools and techniques to understand and manage risk. The use of advanced data analytic techniques is the runaway winner as a best practice of the future.”
Christensen added that many of the organizations that are already employing data analytics within their audit departments are beginning to experience “significant value” in the results. “As recognition of these benefits grows, we expect to see CAEs work with management and the board of directors to make further investments to increase their data analytics capabilities, in terms of both tools and skillsets, as the practice of internal auditing shifts increasingly to analytics and continuous auditing and monitoring,” he said.
Although they are in the minority amongst their peers, internal audit functions with mature, continuous monitoring and auditing programs are achieving impressive benefits, the release added. These benefits include strengthening risk assessments; more effectively tracking fraud indicators and key operational indicators; enabling a real-time view of organizational risk; and conducting risk-based audits.
On the other end of the spectrum, internal audit groups in the developmental stage may not know yet how to properly elevate and optimize their analytics, largely due to the lack of understanding about the benefits these capabilities can provide.
The survey also revealed that internal audit functions face numerous challenges, such as:
73% of all organizations performing analytics say demand for data analytics has increased – even more so among organizations in the “best practices” segment;
34% are planning to add analytics headcount;
Identifying where data resides is a challenge for 60% of organizations as are system constraints (56%);
Data quality is an issue as well – only 22% rate it to be excellent or good.
“It can be overwhelming for organizations just getting started with using data analytics,” Christensen acknowledged. “There may be budget and resource constraints, employees need to learn new technologies and new processes need to be developed. We’ve found that companies just need to pick a starting point and get the help they need so that, over time, they can truly optimize their internal audit functions.”
In addition to the 2017 study’s special focus on data analytics, the Protiviti report includes sections on general technical knowledge; audit process knowledge; and personal skills and capabilities. In these sections, data analytics, continuous auditing and emerging technologies stand out as areas that CAEs and internal audit professionals need to improve their knowledge and expertise.