A staggering 60% of Chief Audit Executives (CAEs) believe that their functions do not have a strong impact and influence within their organisation, an improvement of 18% from 2016, according to the Deloitte 2018 Global Chief Audit Executive survey.
As digitalisation and innovation become commonplace in corporates across various industries, the 2018 Global Survey of Internal Audit leaders surveyed more than 1,100 practitioners in 40 countries show that there is a rising trend and pressure to innovate the function’s current processes and practices, to keep pace with the evolving needs of their organisations.
Cheryl Khor, Asia Pacific and Southeast Asia Operational Risk Leader of Deloitte Malaysia said, “As organisations adopt new strategies and harness risk while pursuing new opportunities, the Internal Audit function provides vital support, and is poised to do more. Particularly in the current environment of ongoing disruption, executive teams and boards benefit from the objectivity, integrity, and enterprise-wide, holistic viewpoint that Internal Audit provides.”
The research points at several key findings:
• Feeble or apathetic perception – Even though awareness of the function by internal audit stakeholders is high, only a small percentage of the group views the function ‘very positively’
• Shortage of new skills in talent – More than 40% of CAEs believe current practitioners lack strong key skills in specialised areas, displaying a need to strengthen the talent pipeline considerably
• Innovation leads to stronger impact and influence – CAEs believe that innovative approaches and technologies will impact and transform the internal audit function
• Access to specialised skills through alternative resourcing – About 20% of internal audit practitioners do not have alternative resourcing models, which address gaps related to skill, knowledge transfer and budget flexibility
These findings indicate a need for internal audit to deliver more value around issues and risks that impact an organisation’s ability to keep the role of internal audit relevant, and to improve reporting, communication and internal branding.
A roundtable session with prominent Malaysian CAEs reveal similar sentiments are shared in the country. Hosted by Deloitte Malaysia, the session helped 20 top internal audit leaders from MNCs and large corporations identify their most pressing challenges as well as pinpoint practical solutions, in order to enhance the impact and influence of the function in the business.
Leading the knowledge sharing session, Terry Hatherell, Deloitte Global Internal Audit Leader said, “As a function, internal audit must address their priorities to deliver even more value in the changing organisational landscape. External forces are rendering current tools and methods less effective, hence it is important to look into adopting modern approaches and technologies such as data analytics, robotic process automation, predictive analytics, risk sensing, Agile Internal Audit and integrated assurance which represent the future of internal audit – Internal Audit 3.0.” “Adopting new technologies and processes is the first step towards developing an innovation-driven mindset, as opposed to compliance-driven, in an effort to future proof internal audit against the unprecedented speed of change seen. A proactive approach to innovating current practices would greatly benefit the function and, as a whole, the organisation, in the long run.”
Sharing her views at the roundtable session, Dato’ Merina Abu Tahir, Head, Group Internal Audit of Malaysia Airlines Berhad agrees that it is high time organisations upgraded their Internal Audit functions. “With the changing economic landscape in the country, it is only fitting that Internal Audit too change and adapt to new technologies and processes as a practice in instituting good governance. Through appropriate structuring, comprehensive consideration of risk and effective reporting, Internal Audit can add significant value to the organisation”.
Deloitte’s Global Chief Audit Executive Survey 2018 report titled “The innovation imperative: Forging Internal Audit’s path to greater impact and influence”, explores the current state of Internal Audit functions worldwide, focusing on those with the greatest impact and influence within their broader organisation. The survey findings indicate progress over the last two years in the extent to which CAEs perceive their functions to have impact and influence. A deeper look reveals significant need—and opportunity—for Internal Audit groups to embrace innovation to meet the evolving needs of the organisation and deliver more value.