Optimizing the Internal Audit Process for Greater Efficiency
04 May 2023
In the current economic environment, companies are looking for ways to gain efficiencies within their Internal Audit processes and procedures. The use of Technology and Data Analytics have transformed the Internal Audit function by enabling:
- data-driven insights into new and emerging risks,
- productivity gains with the automation of labor-intensive Audit tasks,
- increased risk coverage, and
- repeatable processes for continuous risk monitoring
The Evolution of Internal Audit
The Internal Audit function is no longer tasked with simply performing evaluations and assessing the effectiveness of risk management, control and governance processes. Internal auditors are now being tasked with playing a more active role in guiding executive decision-making, leveraging data to identify anomalies and vulnerabilities as well as opportunities to optimize operations across the organization.
Today’s technology and digital tools can be utilized throughout the internal audit lifecycle from information gathering and goal setting, development of risk assessment and audit plan, assessment of plan and performing audits, reporting, and delivering results. Automated workflows and data visualizations have improved the process to be more cost-effective and collaborative to allow for more informed decisions.
The Use of Analytics for Internal Audits
When fully integrated, data analytics can be embedded into all elements of the audit lifecycle providing valuable data driven risk insights in the areas below:
Planning, Scoping & Reporting
- Enterprise Risk Assessment: Data Analytics can be leveraged to help companies quickly gain insights into enterprise risks, controls and to prioritize management’s actions
- Audit Planning: Seamlessly ingest risk and control information from any GRC tool to visualize planned and ad-hoc Audits by owner and auditable entity along with gaining insights into Audit KPIs
- Action & Issues Tracking: Leverages Analytics to continuously monitor Audit issues and action plans to drive behavioral change with how Audit issues are remediated
- Executive Reporting: The use of Analytics can optimize Board and Audit Committee reporting on the status of the overall Internal Audit program to guide executive decision making
- GL Close and Financial Reporting: Analysis of journal entry data can assist companies in quickly identifying unusual and unauthorized journal entries, automate completeness tests and prioritize reviews based on risks.
- Payroll: Payroll data can be visualized to obtain a high-level overview of payroll activity by employee, level and location including deductions, pay rates, and overtime payments. Testing can be automated to identify payments made before hire date or after termination, excessive overtime per pay period and off-cycle payments.
- Travel and Entertainment Expense Process: Analytics on travel and expense data can help companies perform a more targeted and automated review of employee expenses by reviewing data by employee, period, and expense type. Search functions and drill down capabilities can help identify excessive spending, inaccurate or duplicate submissions and non-compliance with company policy. Results can also be used to select a more targeted sample for detailed testing.
- Vendor Master Management: An analytic of vendor master data can provide insights into top vendors, inactive vendors, and vendor data integrity. Predetermined tests can identify vendors with missing, inaccurate, or duplicate data which may lead to an inefficient business process or potential fraudulent business activity.
- Order to Cash Process: Detailed data visualizations can help companies make sense of order and sales activity and customer distribution by product, business unit and time period. Information on items shipped and returned can be used to shape policies governing customer relationships and product sales strategy.
- Accounts Payable Process: Data analytics enables companies to quickly identify inaccurate or duplicate payments, invoice processing delays, segregation of duties, and distribution of invoices processed and paid for a scope period. These results allow management the ability to drill down to root cause and perform timely resolution of risk areas.
- System Access: Leverage data analytics to ensure user access to enterprise systems is accurate and adherence to corporate policy is managed correctly during employee terminations and transfers
An efficient internal audit process leads to efficient operations
Companies operating in economically volatile times can benefit from both a high level and granular view of operations to gain efficiencies in their Internal Audit function. Advancements in digital technology can empower companies to conduct detailed self-audits at regular intervals and continuously monitor risk in a timely, cost-effective, and collaborative manner.
BDO helps clients effectively leverage digital tools to seamlessly plan and perform internal audits enabling continuous monitoring for maximum efficiency.
Original content provided by BDO USA.
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