The primary objective of internal audit should be to provide reasonable assurance to the Board about the adequacy and effectiveness of risk management and internal control in the bank’s operations.
Transaction testing is considered an essential aspect of the risk-based internal audit. However, in an ever emerging world, digitalization is an area that cannot be ignored.
What is Digitalization?
Digitalization is the integration of digital technologies into everyday life by the digitization of everything that can be digitized. The literal meaning of digitalization gives an apparent idea of development and technology dependent world. Digital transformation is about reinventing operations.
It is about accelerating processes and all sort of organizational activities to leverage the opportunities presented by a variety of developed and emerging technologies. Digital transformation represents a changing mind-set which involves constant innovation in ways that can improve the process efficiently.
A typical traditional internal audit model includes audit of key risks areas of the organization and providing management with insights and recommendations on the effective management of the risks identified; the goal being to assist the organization in achieving its objectives, risk assessment and planning, audit engagements and deliverables.
Adopting a digital transformation model will involve creating an internal audit business intelligence portal and extracting data from across the organization. These data can be manipulated to produce strategic, informed insights to management and if possible make predictions. It will also involve investing in automated and real time key risks indicators and predictive analytics.
According to Accenture, Internal audit identified four key areas for enhancement with new technologies:
1) Enhancing audit management with a new global risk and compliance solution – The Governance, Risk Management and Compliance (GRC) solution provides internal audit with a comprehensive, end to end audit life cycle management solution, the operating model of an organization and internal corporate functions.
2) Leveraging analytics to industrialize continuous audit – Rather than the traditional sample testing of transactions and periodic review, there should be an increasing use of analytics in its audit processes, particularly to monitor key processes, transactions and controls.
3) Implementing continuous risk assessment – Investing in a risk assessment software to stay closer to business. 4) Increasing productivity leveraging The use of technologies to effectively support work, especially to collaborate with teams rather than just through travel should be adopted.
eams can meet remotely to share information and documents. Internal audit as a part of the ongoing monitoring of the bank’s system of internal controls and of its internal capital assessment procedure provides an independent assessment of the adequacy of, and compliance with, the bank’s established policies and procedures and as such, the internal audit function assists senior management and the board of directors in the efficient and effective discharge of their responsibilities.
As a result, innovative solution on how best to discharge the internal audit responsibility should be a constant issue and digitalization should be seen, not as an option but rather a necessity to achieve strategic growth in