By CPA Denish Osodo
Audit Value in A Rapidly Changing Business Environment
In the last few years, internal audit functions have been under a lot of pressure. They have been expected to deliver timely and relevant audits while at the same time providing forward-looking insights on both existing and emerging risks. These high expectations are largely due to the changing business environment as well as advancements in technology. As a result, traditional audits, characterized by rigid annual plans and sequential workflows, have become increasingly insufficient and viewed as not responsive to today’s dynamic risk environment. Enter Agile auditing—a transformative model promising to enhance the efficiency, effectiveness, and value of internal audits.
Agile auditing is simply the internal audit process conducted in a dynamic and flexible way. It borrows heavily from principles of Agile project management mostly used in software development. With Agile, the audit is characterized by adaptive planning, iterative processes, early delivery, and continuous improvement. Previously, internal audit was run as a static function, with a focus on compliance and risk management. However, in a world where risks materialize overnight and business priorities shift swiftly, this static nature can render audits obsolete even before they are completed.
While traditional audits follow a linear path from planning to fieldwork execution to reporting, Agile audits are conducted in iterative cycles known as “sprints.” Each sprint focuses on one or two scope areas of the audit, allowing teams to reassess priorities and adjust their focus based on real-time feedback and emerging risks. Once done a sprint is completed, a session is held (a sprint review) to discuss the findings in the sprint and obtain feedback from the process owner.
One other aspect of agile auditing, is that several sprints can run at the same time. For instance, a sprint review could be ongoing with the process owner say for sprint 2, while fieldwork execution is ongoing for sprint 3. At this point, reporting would also be ongoing for issues already discussed in sprint 1. The result is a reduction in idle time for both the auditor and the auditee.
There have been several arguments for adopting Agile auditing. Firstly, it allows internal audit teams to quickly widen or refocus the audit scope in response to new risks or changes in the business environment during the review. This is particularly valuable in today’s fast-paced world where new threats and opportunities can arise unexpectedly.
Secondly, Agile auditing fosters closer collaboration between auditors and auditees. Regular check-ins and iterative reporting ensure that stakeholders are kept informed and can provide timely feedback, making the audit process more transparent and aligned with business needs. Additionally, a continuous and timely feedback fosters closer collaboration with clients as it avoids ambushes while setting the ground for the closing meeting.
Thirdly, by breaking down audits into manageable sprints, Agile auditing helps teams maintain focus and avoid the inefficiencies associated with long, drawn-out audits. This approach also encourages the use of technology and automation, further streamlining audit processes.
Fourthly, Agile auditing fosters continuous improvement. By emphasizing regular retrospectives (team sessions at the end of the sprint) and feedback loops, enabling teams to learn from each sprint and continuously refine their methods. This focus on learning and adaptation is crucial for staying ahead of emerging risks and improving audit quality over time.
While the benefits of Agile auditing are compelling, transitioning from traditional methods to an Agile approach is neither easy nor without its challenges. A 2020 poll by AuditBoardfound that 82% of internal auditors believed agile auditing has the potential to add value. The same poll reported that 45% cited lack of knowledge or resources as a significant obstacle to adoption.
Organizations must invest in training and change management to ensure that audit teams have the skills and mindset necessary for Agile auditing to work. Further, there is also a need to strike a balance between flexibility and the rigor required for thorough, objective audits.
Several organizations have already reaped the benefits of Agile auditing. For instance, a major financial institution reported a 30% increase in audit efficiency after adopting Agile methodologies. Another multinational noted that Agile auditing enabled them to better anticipate and respond to regulatory changes, significantly enhancing their risk management capabilities.
For internal audit functions looking to remain relevant and value-adding in today’s business environment, adopting Agile methodologies is no longer optional. It is a strategic imperative. By embracing the principles of agility—flexibility, collaboration, and continuous improvement—internal audit can transform from a reactive function into a proactive, strategic partner.
CPA Osodo is the Director Internal Audit, Safaricom PLC
