A new report finds most internal audit shops aren't very advanced when it comes to data analytics
Data analytics is supposed to be the great savior of the internal audit function. It has been heralded as the set of tools that will give organizations new insights into risk management, fraud, and corruption. It would free up internal auditors to use their skills on assessing non-traditional areas of the business and lower the cost of internal audit. It would change the internal audit profession entirely.
Here's the catch: most companies are still not very advanced in their use of data analytics. A new report out from Deloitte finds most companies are barely off the ground with the use of analytics and some haven't even started. "The use of analytics is largely at basic levels," the report's authors write.
"According to the Deloitte report, only 7 percent of audit leader respondents say they are using data analytics at an advanced level, and most (66 percent) use basic, ad hoc analytics, such as spreadsheets, or do not use data analytics at all. In fact, 11 percent of respondents said their departments had no data analytics capability. "Those that use them do so mainly in fieldwork and would benefit by expanding their use in audit scoping and planning," the report states.
The biggest barrier to the more advanced use of data analytics, says the report, is getting the proper skills on the internal audit team. "Internal Audit's skills remain heavily weighted toward auditing operational and financial areas; analytical and technology skills need to be upgraded," says the report. More than 50 percent of the chief audit executives surveyed by Deloitte say the largest barriers to advancing the use of data analytics at their companies are lack of technical talent and inability to easily access quality data.
According to Neil White, partner and global internal audit data analytics leader at Deloitte, there are some ways companies can overcome these barriers. He says they need to rethink talent models for internal audit professionals, invest more in training, and develop better strategic relationships with individuals in the business and the IT department.
He remains confident in the potential of the field. "Nothing has the power to transform internal audit more than analytics," says White. "There is no doubt analytics will help internal audit increase efficiency, value, and impact."
A Brighter Future?
The good news is that chief audit executives hope to expand the use of data analytics by their departments. Indeed, 58 percent of respondents expect to be suing analytics in a least 50 percent of their audits in the next three to five years. Another 37 percent say they expect to employ analytics in at least 75 percent of their audits.
That may just be wishful thinking. That's because those same respondents don't see a big investment in internal audit, whether to fund the more advanced use of data analytics or otherwise. According to the Deloitte report, "almost all Internal Audit budgets will remain flat or increase slightly, which may not be enough to fund needed enhancements to the function."
Moving to more advanced levels in the use of data analytics won't come cheaply, especially if internal audit departments need to invest more in personnel to get there. With budgets expected to remain flat, it could remain an area of untapped potential.