The impact of data analytics on internal auditing

Internal auditing is a key function in the corporate governance process, offering businesses independent assurance that their existing risk management and compliance processes are functioning correctly.

 

As technological innovation becomes an increasingly prominent part of the modern workplace, the demand for well-qualified internal auditors continues to rise. Barclay Simpson’s research shows that a growing number of organisations are reporting insufficient resources in these departments, particularly in the banking and asset management industries.

 

Among the most highly sought-after skills in candidates is data analytics. The ability to generate insights and revolutionise traditional auditing techniques through the use of internal and external information is often a crucial differentiator between applicants.

 

Let’s examine some of the ways that internal auditors are optimising their operations using data analytics, as well as the current state of the recruitment landscape and the possibilities for the future.

Deriving auditing insights from data

PwC’s 2015 State of the Internal Audit Profession Study revealed data analytics are currently being used across various audit functions. The most popular is fraud management, with 48 per cent already utilising analytics in this area and a further 33 per cent planning to do so.

 

Meanwhile, 42 and 41 per cent of businesses apply analytics to compliance monitoring of operational controls and risk analysis, respectively. Vendor analysis (38 per cent) and customer and revenue-related activities (37 per cent) also heavily rely on analytics.

 

The PwC report noted that internal audits have traditionally identified risks via executive meetings and limited sets of financial data. However, as data analytics tools become more advanced and firms begin generating more information, predictive capabilities have vastly improved.

 

“Most, if not all, internal audit functions are thinking about how they can better leverage data to be not only more efficient but also far more effective,” the authors noted.

 

“Ultimately, success with data is predicated on connecting data to insights about the business and the risks it is facing.”

Benefiting from data analytics expertise

Embedding data analytics into the internal audit process can provide numerous advantages for businesses. Deloitte highlighted some of the main benefits in its 2016 report Internal Audit Analytics: The Journey to 2020.

 

Faster audits: Organisations that develop insight-driven audits can perform the same tasks much quicker than before. Auditors can also make important connections between datasets and measure performance across processes, business units and products more swiftly.

 

Cheaper audits: Exploratory analytics ensures auditors are more focused on areas of concern that truly matter, allowing the firm to automate less essential tasks. This process saves time and money for internal audit departments while raising productivity.

 

Prioritises innovation: Generating insights using the latest business intelligence tools enables the company to stay on the forefront of new developments. Leveraging technology to continually improve audits can therefore become an integral part of the corporate governance culture.

 

Better quality audits: Faster and more affordable audits don’t always mean better quality, but they can with advanced analytics. Sophisticated data-handling processes provide an added layer of granularity and depth to insights, helping to develop internal frameworks and offer richer results for commercial stakeholders.

 

However, despite the above advantages, some companies have been slow to recruit internal auditors with sufficient experience and qualifications to drive forward assurance. This is due in part to difficulty accessing suitable candidates.

Finding the right skills

PwC’s research showed that while 65 per cent of chief audit executives reported they have access to data analytics skills – either internally or through consultants – there is a lack of analysts with accompanying business acumen.

 

A similar trend was highlighted in a recent survey from the Institute of Management Accountants (IMA). The organisation said soft skills, including industry knowledge and commercial know-how, are now a mandatory requirement for data analytics professionals working in finance jobs.

 

While 62 per cent of respondents said statistical modelling and data analytics skills were ‘important to success’, only 35 per cent had team members with these capabilities. Data mining and extraction was key for 71 per cent of employers, yet only 43 per cent possess the necessary talent.

 

Kip Krumwiede, IMA director of research, claimed there are a number of ways that organisations can attract and retain the right people.

 

“To successfully build teams with the necessary skills, financial leaders need to establish a comprehensive recruiting process and professional development program,” he explained.

 

“Management must support efforts to retain financial professionals with data analytics skills through attractive compensation and benefits, training, a supportive corporate culture, and an emphasis on work-life balance.”

Taking the next steps

The IMA study revealed that 68 per cent of businesses intend to develop business analytics skills from within, while 44 per cent look to hire from outside the company.

 

Identifying the best candidates when skills gaps are prevalent is often a challenge, but businesses can strengthen their workforce with the right support and guidance.

 

If your business is seeking internal audit professionals with data analytics skills, please contact Barclay Simpson to discuss your needs. We can help you find applicants with the right experience and qualifications to enhance your internal audit capabilities.

 

Our Market Reports combine our review of the prevailing conditions in the internal audit recruitment market together with the results of our latest employer survey.

 

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