Impact of Remote Work on Internal Auditing: Challenges and Solutions, Monografías, Ensayos de Auditoría

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Challenges, Opportunities, and New Ways of Working ARES INTERNAL AUDIT € Y AUDITBOARD FOUNDATION”  2 CONTENTS INTRODUCTION ............................................................................................................................................ 4 Hybrid Is Here to Stay .......................................................................................................................... 5 Audit Stakeholder Relationships ........................................................................................................ 6 Technology Solutions for Remote Audit Challenges ........................................................................ 7 Maintaining a Positive Culture ............................................................................................................ 8 Cultivating an Adaptive and Intentional Mindset ............................................................................... 9 CONCLUSION ...............................................................................................................................................11 New Strategies to Meet New Priorities ..............................................................................................11 5 Hybrid Is Here to Stay Looking at audit functions specifically, 58% of chief audit executives (CAEs) say their teams are doing all or most of their work remotely, according to data captured by The IIA’s annual North American Pulse of Internal Audit survey in October and November 2021. On the other end of the spectrum, 18% of the more than 500 respondents report that all or most of their work is being done in person, while another 22% say their teams have a roughly equal mix of remote and in-person time. The extent to which internal auditors are in person or remote varies by industry; auditors in educational services, public administration, and manufacturing are more likely to have face time at the office, while auditors whose organizations focus on business services, health care and social assistance, and finance and insurance are more likely to be working from home (see Exhibit 1). As the pandemic continues to evolve, those numbers are expected to change. While some internal audit functions will see a return to a 100% in-person model, for many others, the hybrid work experiment of 2020 and 2021 has been normalized. Home offices have been set up, employees have proven their ability to be productive away from the office, and both employees and employers have seen the value of shorter commute times, a smaller office footprint, and a wider potential talent pool. Moreover, the decision to audit remotely may be out of the hands of CAEs. Even if audit leaders want to return to an all on-site model, many audit clients may still be remote. To underscore the degree to which the landscape has irrevocably changed, in a recent McKinsey & Co. survey of 100 executives across industries and geographies, nine out of ten reported that they expect to combine remote and on-site working in the post-pandemic future.1 1. Alexander, Andrea, Cracknell, Rich, De Smet, Aaron, Langstaff, Meredith, Mysore Mihir, and Ravid, Dan, What Executives are Saying About the Future of Hybrid Work, May 2021, McKinsey & Co, https://www.mckinsey.com/business 6 Audit Stakeholder Relationships Remote and hybrid work may be here to stay, but there are challenges to doing the work of internal audit remotely. In an informal IIA and AuditBoard poll on LinkedIn conducted in September 2021, 52% of the more than 1,800 respondents say that building key relationships is the biggest challenge to auditing remotely, while 27% see accessing information as a major impediment. Other concerns captured by the survey are maintaining quality (13%) and testing new assurance methods (8%) (see Exhibit 2). Certainly there are additional challenges depending in part on industry, maturity, and culture. In a separate survey conducted by AuditBoard in September, audit leaders reported that their biggest concern with remote operations was not their own audit team but other employees — with 40% saying that relationships with non-audit personnel in the organization had weakened.2 Harold Silverman, The IIA’s director of executive membership, who works remotely in Columbus, Ohio, says maintaining stakeholder relationships was a topic of much discussion at a roundtable hosted by the Audit Executive Center in November. “People are having to make a much more conscious decision to do reach-outs, to schedule time, or even to text someone a simple ‘hey, do you have a couple of minutes?’” The inability to pass someone in the hall and start a casual conversation is “challenging,” says Doug Block, vice president of internal audit at Granite Construction in Houston, Texas. “Auditors have to schedule meetings with stakeholders for everything, and it can be a challenge to keep up with relationships if you don’t have a structured process in place,” says Block. functions/people-and-organizational-performance/our-insights/what-executives-are-saying-about-the-future-of-hybrid- work. 52% 27% 13% 8% Building key relationships Accessing information Maintaining quality Testing new assurance methods Exhibit 2: Biggest Challenge for Auditing Remotely Note: LinkedIn Poll through The Institute of Internal Auditors. Question: Which of these is the biggest challenge for auditing remotely? September 16, 2021. n = 1,890. 7 To counteract the relationship atrophy, Silverman says he’s talked to audit leaders who are scheduling no- agenda “coffee talks” with non-audit peers to keep the conversation flowing. Elizabeth McDowell, assistant vice president of internal audit at Elevations Credit Union based in Boulder, Colorado, regularly schedules “collaboration meetings” with stakeholders — some monthly and others quarterly. McDowell started these collaborations well before the pandemic, and continuing this technique has helped her team maintain good communication while fully remote. “We continued that successful cadence — just over Zoom, instead of in person,” McDowell explains. Maintaining relationships with audit stakeholders not only impacts their willingness to cooperate on future engagements, it may also affect the quality of the audit overall, points out Jim Pelletier, a vice president at The IIA in Lake Mary, Florida. Without regular contact, auditors risk “missing out on a lot of valuable chatter that can help you to understand what’s really going on in the area you’re auditing,” says Pelletier. “So I think purposefully finding time for that is important.” Silverman adds that the job of relationship building should not rest solely on the CAE. As with McDowell’s example, the internal audit team should be making connections with audit stakeholders at all levels. “The important relationships don’t just happen at the top of the function; it’s not just from the chief information officer (CIO) to the CAE,” says Silverman. “It’s also the audit managers to the IT manager and the accounting managers and the marketing managers. It should really be happening all the way through, because that’s oftentimes how you find out about issues in a successful internal audit function.” Technology Solutions for Remote Audit Challenges Not being able to conduct in-person audits has spurred investment in technology, according to a second IIA and AuditBoard poll conducted in September via LinkedIn. More than half of the 598 respondents affirm that since the start of the pandemic, their organizations have acquired cloud-based technology to help with remote collaboration and risk management (see Exhibit 3). In addition to cloud-based technology like audit management platforms, business intelligence applications, and data analytics tools, audit teams have made use of video conferencing applications for audit work and walkthroughs, existing security camera networks to replace activities requiring physical observation, and even drones for certain kinds of site inspections. Organizations are also focusing on upskilling employees and improving data literacy. Silverman says he is clearly seeing evidence of audit leaders prioritizing technology solutions, 51% 41% 8% Yes No Unsure Exhibit 3: Acquired Cloud Technology for Collaboration, Risk Since COVID-19 Note: LinkedIn Poll through The Institute of Internal Auditors. Question: Has your organization acquired cloud-based technology since the start of COVID-19 to enable remote collaboration and risk management? September 13, 2021. n = 598. 10 In another example of process changes affected by the pandemic, some organizations have had to move from manual sign-offs to verification via electronic or other means. According to Pelletier, the key here is to make sure that alternative procedures address the same risk as the original controls, and any modifications to Sarbanes-Oxley controls are discussed in advance with external auditors. Pelletier also points out that there are more gaps in communication when auditors are remote. Auditors working together need to be deliberate about checking in with each other to make sure they are “aligned and moving in the right direction,” he explains. An intentional mindset can alleviate this challenge, as iterative audit planning allows teams to frequently circle back to make sure everyone has a clear understanding of objectives and risks. Silverman says he believes that successful internal auditors in the future will embrace the innovations created during the pandemic and blend them with tried and true methodologies previously established. “I have been proud and impressed by the flexibility and agility demonstrated by internal audit functions to respond to these sudden changes caused by the pandemic,” he says. “I believe that successful internal audit functions going forward will continue this accelerated evolution and adapt to the future of work.” 11 CONCLUSION New Strategies to Meet New Priorities The pandemic has created hardships and challenges for nearly all organizations. At the same time, it has also revealed new ways of working, particularly with innovative uses of technology. As the data indicates, the transition from largely in-person operations to a hybrid and remote model will not end with the pandemic, and leaders must adjust their strategies when it comes to audit stakeholder relationships, technology solutions, developing employees and promoting a positive culture, and cultivating an intentional mindset. The global disruption revealed strengths and weaknesses across a broad spectrum of economic, geopolitical, and social issues. For the internal audit profession, it shined a spotlight on its remarkable ability to pivot in times of crisis. The innovative responses from practitioners around the globe to new challenges created by remote work offer positive proof of the profession’s agility and adaptability. The response also may provide sufficient impetus for the profession to embrace technology. There already is ample evidence of this occurring, from the growing use of drones and software solutions in lieu of on-site audit work to leveraging technology to improve internal audit processes. The fallout from the pandemic will continue to evolve and influence thinking on a myriad of issues, including work/life balance, stakeholder expectations, social justice, and sustainability. In order to thrive in a post-COVID world, internal auditors must embrace change and adopt an intentional and adaptable mindset. 12 ABOUT AUDITBOARD AuditBoard transforms how audit, risk, and compliance professionals manage today’s dynamic risk landscape with a modern, connected platform that engages the front lines, surfaces the risks that matter, and drives better strategic decision-making. More than 30% of the Fortune 500 leverage AuditBoard to move their businesses forward with greater clarity and agility. AuditBoard is top-rated by customers on G2 and Gartner Peer Insights, and was recently ranked for the third year in a row as one of the fastest-growing technology companies in North America by Deloitte. To learn more, visit: AuditBoard.com. ABOUT THE INTERNAL AUDIT FOUNDATION The Internal Audit Foundation strives to be an essential global resource for advancing the internal audit profession. The Foundation’s research and educational products provide insight on emerging topics to internal audit practitioners and their stakeholders and promote and advance the value of the internal audit profession globally. Through the Academic Fund, the Foundation supports the future of the profession by providing grants to students and educators who participate in The IIA’s Internal Auditing Education Partnership Program. For more information, visit www.theiia.org/Foundation. Copyright © 2021 by the Internal Audit Foundation. All rights reserved. Copyright © 2021 by AuditBoard Inc. All rights reserved.