Internal auditing to undergo major transformation, says IIA
July 16, 2024
The role of the internal auditor is expected to change drastically in the decade to come, according to a new report by the Institute of Internal Auditors.
The report, released Monday by the IIA's Internal Audit Foundation during its international conference in Washington, D.C., predicted the internal audit profession will undergo a major transformation. Technology advances, disruptive trends and emerging risks will lead to changes in how organizations operate, the talent pipeline, and an increase in the internal audit profession's credibility when it comes to auditing new and emerging risks.
The IIA polled more than 7,000 practitioners and stakeholders around the world and found over half (56%) of respondents expect the role of an internal auditor to be substantially or very different by the year 2035.
Much of the change will come from new technology, with 97% of the respondents saying they anticipate technology will increase the complexity and volume of data available for auditors to analyze, while another 93% believe new technology will allow audit functions to develop better insights for recommendations to stakeholders.
Artificial intelligence is expected to help with analysis of in-depth insights, although less than half (48%) the respondents are currently involved in AI-related activities.
"The takeaway from the research is clear: Internal audit must rapidly transform or risk becoming irrelevant to stakeholders," said IIA president and CEO Anthony Pugliese in a statement. "The profession must shift its attention from the potential risks that technology poses to internal audit to embracing how it can optimize operations and expand internal audit capabilities. Leveraging new technology to provide more strategic, actionable insights will enable practitioners to proactively help their organizations stay ahead of emerging trends and risks."
The internal audit function is expected to expand the scope of its services and assume a more strategic advisory role within organizations. When asked to consider the value that internal audit can offer through both assurance and advisory services, 79% of respondents indicated that advisory work will become more essential to audit functions in the years to come while playing a bigger role in internal audit plans. The top areas cited where internal audit functions can provide the most assurance and advisory services include operations and processes (87%), compliance (82%), and risk management (77%).
However, there's an expectation from internal audit professionals and stakeholders that the amount of time spent on assurance services will decline from 76% to 59%, while the amount of time spent on advisory services will increase from 24% to 41%.
The survey takers were also asked about independence and objectivity. A little over half (53%) of the respondents said their organizations understand the importance of independence, but 45% of their organizations only moderately understand or do not understand its importance.
In terms of perceptions, half the respondents reported that being misunderstood or undervalued represents the greatest challenge for the internal audit profession, while 45% see a need for more support from leadership and stakeholders.
The IIA also surveyed students and educators to gauge the future of the talent pipeline in internal audit. When asked about the top barriers keeping them from the internal audit profession, 33% of students cited inadequate networking opportunities with internal audit professionals, followed by lack of mentorship or role models within the profession, and misconceptions about career opportunities within internal audit, both at 28%. From the educators' point of view, 54% reported lack of awareness of understanding of the internal audit profession as a top barrier keeping students from the profession.
Pugliese believes the findings suggest a strong need to increase awareness of the value of the internal audit profession, while providing more opportunities for students and young professionals to explore it as a career path: "Prioritizing the talent pipeline is crucial as we move toward achieving the profession's envisioned future."
[Accounting Today]
