Internal Audit Leaders Adopt Agile Methods to Meet Next-Gen Audit Expectations

Michael Thor, Managing Director Leader of Internal Audit Services for the Financial Services Industry, North America
Liz Berger, Director Internal Audit and Financial Advisory

The Protiviti View has been examining some of the ways internal audit departments around the world are reinventing themselves, drawing on the experience of 16 innovators profiled in Internal Auditing Around the World, Volume 15. This post looks at ways internal audit teams are adopting fast and flexible “agile” development methodologies to better align audit activities with business processes.

“Agile” is a project management discipline created by software developers, in which challenges evolve and are resolved through the continuous collaboration of small cross-functional teams. Internal audit departments are adapting these methodologies to their work to provide the faster, deeper and more valuable insights demanded of next-generation internal audit teams.

These internal audit adaptations do not necessarily follow the capital “A” Agile textbooks to the letter – but they borrow enough of the methodology to foster an agility, with a lower case “a,” that makes governance, risk and control practices more flexible and relevant, and less disruptive.

This is the case with most of the companies profiled in the latest edition of Internal Auditing Around the World. Auditors at Brinks Home Security, as well as retailer Country Road Group and David Jones, for example, have begun working more closely with business partners, circulating interim audit reports and holding progress meetings to increase transparency and minimize surprises in the final audit report.

Such changes are occurring across sectors, but are most prevalent in the financial services industry, where agile methodologies have been getting a lot of attention as the industry adapts to the disruptive advance of technology-based internet banking and insurance companies — the so-called “fintechs.”

Capital One, for example, conducted “empathy research” to learn how both auditors and auditees experienced the audit process and worked closely with the technology department to improve analytics and create new data visualizations to make audit reports more relevant to business users. Why is this approach agile? Because it makes the audit process less rigid and more adaptable to the needs of its stakeholders. The internal audit team at Capital One has gone so far as to pilot “agile pods” — small cross-functional, multi-disciplinary teams combining auditors and business partners assigned to a specific task and related risk – and is, in fact, using the capital “A” Agile process of short “sprints” separated by progress meetings, or “scrums.” This has not only improved relations with business partners, but also reinvigorated the internal audit team and helped to attract top talent.

Fidelity Investments has taken things a step further, creating an Agile Auditing Center of Excellence staffed with tenured Agile coaches and veteran auditors. This team, embedded in Fidelity’s Audit Innovation and Enablement Team, has been tasked with using design thinking to find ways to conduct the same auditing work in less time, and with fewer disruptions to business processes. As part of Fidelity’s “all-in” approach, business partners have agreed to respond more quickly to information and data requests and to make senior business leaders available for status reports every two weeks.

Fidelity piloted this approach for nine months, with five teams of five or six members, and expanded it to the entire internal audit function by the end of the first quarter of 2019.

Such sweeping changes do not come without their share of disruption. Agile auditing has necessitated a change in key performance indicators. Audit teams that have adopted these new methods say they now place less focus on productivity and report volume, and more emphasis on value creation and increasing velocity. But while any change can create apprehension, internal audit leaders profiled by Protiviti reported overwhelmingly positive outcomes, including accelerated audits, elevated trust from business partners, increased career development opportunities for auditors, and a re-energized audit team excited to be practicing their craft in a new way.

To learn more, download a complimentary copy of Internal Auditing Around the World, Volume 15, from our website.

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