Technology and innovation should be top of mind for internal auditors in 2018, both in terms of how it produces business risks and how internal auditors help identify and address them.
That’s the gistt of PwC’s latest “State of Internal Audit” study, issued in time for the start of the Institute of Internal Auditor’s annual conference. “Innovation is part of every company’s strategy, and it’s moving faster than we’ve ever seen before,” says Lauren Massey, a partner in risk assurance at PwC. “Can internal auditors keep pace with that?”
The best approach, says Massey, is for internal auditors to focus on both sides of the innovation challenge — both how it affects companies and how internal auditors can leverage it to their advantage. The firm’s annual study gathered the views of more than 2,500 board members, senior executives, and audit professionals in 92 countries.
“We learned that the internal audit functions that are most advanced in their technology journeys are evolving their technologies and talent models in lockstop,” the report says. “They are fusing those capabilities in order to create functions wherein technology-enabled talent is the norm.” PwC labels such internal audit groups as “evolvers.”
While the study identified only 14 percent of internal audit group as “evolvers,” it determined 75 percent of stakeholders in evolving internal audit groups regard them as providing significant value to the organization. The study said 46 percent of internal audit groups could better be described as followers, or those that are taking notice of emerging technologies but adopting at a slower pace. Among that group, 54 percent of its stakeholders see the group as adding significant value to the organization.
Then there are the observers, which constitute 37 percent of internal audit groups, the study determined. Observers have more limited or “basic” use of technology, and only 34 percent of their stakeholders consider them to be adding significant value to the enterprise. Last year, PwC's study focused on the ability of internal auditors in general to meet the needs of stakeholders.
The current PwC report identifies eight groups of technology that internal audit needs to learn, and learn to leverage — artificial intelligence, augmented reality, virtual reality, blockchain, robotics, drones, 3D printing, and the internet of things. The typical internal audit team may have access or exposure to a more limited range of technology, PwC says, such as enterprise resource planning systems, cloud, and perhaps big data and data analytics.
“We’ve talked about technology and data analytics for years, and we’re not seeing the rapid adoption that everyone would like,” says Massey. “As the cost of entry has dropped, we’re seeing an opportunity for internal audit to make a leap forward and be in step with the business as it goes on this innovation journey.” A significant number of companies described it as part of their plans looking two to five years into the future, she said.