Internal audit (IA) of the future has a major role to play in helping organizations seize the opportunities that surfaces from the disruption of this era, which such organizations must be prepared to promptly adjust to.
As compared to the traditional internal audit framework where flexibility is not practicable in the areas of audit planning, execution and reporting, the future internal audit is required to be flexible. IA will be required to ensure valuable insights are delivered quickly, in order to meet the quick demand of stakeholders and give the help that is needed by organizations.
Agile IA is now the new method several growing organizations adopt, and it sees to the increase in stakeholder engagement. This type of audit is done by teams that are self-organizing and support consistent improvement. An Agile audit makes use of an iterative aspect and a method that is time-boxed to planning, fieldwork, and reporting.
Though this audit approach may be new, its popularity is swiftly increasing. In a recent research survey, it was noted that several Chief Audit Executives have either
started using the agile approach or planned to use it soon. Several benefits such as more streamlined documentation, insightful results, clients’ engagement, empowered IA teams, and timely audits, have been experienced by the CAEs who have used the agile IA.
What is Agile Internal Audit?
Agile Internal Audit, unlike traditional internal audit, operates with the attitude that involves the speed up of audit cycles, pay attention to the needs of stakeholders, minimize wasted effort, produce minimal documentation and drive prompt insights. Having considered upfront by both the internal auditors and stakeholders the level of assurance required, the risk that are most important and the value that needs to be delivered by a project or audit. Then, the audit focuses on producing such value. In addition, Agile internal audit prioritizes projects and audits based on urgency and importance.
Also, the focus of reporting is on providing insights and not on documenting the work.
When to Consider Agile Internal Audit Methodology
Audit approach should be considered if there is a need by internal audit function to boost better relationships with stakeholders, have little documentation with more insightful & relevant reports, and finish more audits within a short period of time.
What is the reason for agile audit popularity?
Planning, fieldwork and reporting are the three main stages traditional auditing can be broken down into. Each stage is usually concluded by auditors before commencing the next one. For instance, when the annual audit plan is in place, which is the plan that is created first, the fieldwork for each audit program is carried out and concluded before the final report is done and submitted when all the findings are in.
This approach, however, is perceived by many businesses to be a plan that fails to adjust to emerging risks within an appropriate timeframe. This is because the approach locks them into a plan that is long term and inflexible.
How can Agile Method be applied to auditing?
The three broad phases of auditing can be remodeled by agile techniques through various key methods:
1) Planning: ‘Backlogs’ to replace audit plans
A backlog system is typically used in combination with an audit plan. The various work items that must be done is contained in the backlog and this is constantly prioritized based on risks that are most prominent. As removed or added to the backlog. This allows auditors to address pressing issues as they emerge while still having projects that are of a single authoritative source.
The parameters of the items that are added to the backlog must be agreed on by both internal auditors and stakeholders before it can go ahead to production. This will help to indicate what is needed to be tested or reviewed in addition to the goal and the value expected from the exercise. In Agile teams, the term ‘definition of ready’ (DoR) is mostly used to discuss
the least information and resources needed before tasks can commence.
2) F i e l d w o r k : Introducing ‘sprints’
The tasks connected with an action is divided into sprints once an item is ready. A sprint is the period that a deliverable or process must be completed. In software
development, sprints are normally one to two weeks, however, they can go for about four weeks or more in other agile systems.
Several individuals or teams can commence the completion of jobs to concise deadlines at once after the splitting up of fieldwork into different tasks has been done by auditors. When the delivery cycles are accelerated and little time is devoted to documentation, then more efforts will be channeled towards providing assurance.
3) Reporting: Move to iterative reports
Stakeholder engagement and ongoing communication are stressed by agile auditing instead of relying on one final report after the completion of all tasks. In some instances, Auditors will put together a short report after every sprint in order to spot key findings and have the results sent back to important people.
In some organizations, daily stand-up meetings are being implemented which are mostly around 5 and 15 minutes long, in order to discuss progress and obstacles. Stakeholders are promptly and frequently informed of developments than in historical audit processes.
Benefits of Agile Auditing
According to Deloitte, several benefits are enjoyed by internal audit teams that implement agile methods. These benefits are:
Ÿ Enhanced planning
Ÿ Empowered teams
Ÿ Accelerated delivery cycles
Ÿ Clearer outcomes
Ÿ More valuable insights
Ÿ Increased engagement; and
Ÿ Less documentation
When it comes to agile auditing processes, many businesses have started leading the change. For instance, Barclays in 2015 started piloting agile audits using Scrum – a well-known agile framework that uses sprints and daily stand-up meetings. As at 2018, after seeing more engagement amidst audit teams and a 10%-20% reduction of time spent per audit, Barclays committed to become a 100% agile internal audit function.
Pitfalls of Agile Auditing
Now, there are not so many independent researcher available to validate that agile auditing always produces results, however, there is positive early anecdotal evidence for agile auditing.
Some hurdles which businesses must overcome have been identified by Barclays and some early adopters to make sure their agile audits have the greatest chance of success. These hurdles are:
¬ Avoid Burnout: Agile audits can be rigorous, which can result in burnout and negativity when not adequately managed.
¬ Changing Mindsets: Agile auditing revamps existing processes, which usually causes tension amid teams resistant to change.
¬ Apply Agile Correctly: Not every audit is may need a hybrid framework to take care of unique tasks rather than squeezing every project through an agile system.
¬ Accessing support: Development and Third-party coaching may be needed to embed agile methods into auditing functions effectively.
The agile approach, which began in software development as a method to accelerate the development process and accommodate course corrections on the fly, has been embraced in other areas, including internal auditing. In internal audit, adoptees utilize Agile to make better collaboration and transparency, and reduce turnaround time.