Internal Audit 4.0 Purpose-driven, digitally powered
A lot has happened since Deloitte released Internal Audit 3.0 (IA 3.0), our market-leading framework for elevating the role and expanding the remit of Internal Audit. The IA 3.0 framework supported the concept that internal audit is responsible for balancing three core activities: providing assurance, advising management, and anticipating risks and opportunities.
Striking that balance challenged internal audit functions to increase their impact on their organizations by delivering value through a combination of Assure-Advise-Anticipate. The IA 3.0 has been a useful and durable framework for many internal audit functions as they have evolved their role and remit and inspired innovation in their ways of working.
Over recent years, Deloitte has observed the following key lessons from internal audit functions that have successfully embedded a culture of continuous improvement and innovation.
1. Speed and agility are essential.
Organizations need to anticipate change across the business landscape and accelerate their responses to both crises and slowly unfolding events.
2. Big bang approaches tend not to work.
Big bang approaches often cost more, set unrealistic expectations, and treat evolution as an event rather than a process.
3. Haphazard efforts undermine progress.
Such efforts can slow Internal Audit’s progress or return the function to its previous state and status. Instead, methods for continuous improvement should be embedded in day-to-day operating systems.
Although many internal audit functions have moved into advisory and risk anticipation activities, the pace at which they have done so has often been outpaced by the evolving needs of their organizations and the speed at which risk events have emerged.
Looking ahead, the breadth of demands on Internal Audit, pace and scale of innovation in the profession point to the need for an update, but not an overhaul, of the vision of internal audit of the future— hence, Internal Audit 4.0 (IA 4.0). In Thailand, economic stipulation schemes and investments, e.g., Easy E-Receipts, digital wallet, strategic land bridge project, and Electric Vehicle (EV) policy, could also change the business landscape and create demands for internal audit of the future.
An updated IA 4.0 framework brings three new features to the forefront. By aligning internal audit outcomes with the organization’s purpose, helping accelerate organizational change and learning, and further embracing digital, Deloitte believes Internal Audit can upgrade and maximize its impact and the value it delivers. To assist internal audit in supporting the organization, IA 4.0:
• Starts with purpose and the notion of aligning internal audit activities to the organization’s purpose, vision, and strategy.
• Challenges Internal Audit functions to add Accelerate (a fourth “A”) to the remit to support organizational learning and management action in ways that match today’s pace of change.
• Fully embraces the use of digital technologies to help drive insights, collaboration, quality and productivity.
• Promotes a continuous improvement mindset that enables agility and digitalization through encouraging purposeful and structured focus on incremental improvement.
• Outlines the key principles and building blocks that functions need to consider as they design, build, and evolve their operating models.
For in-house internal audit functions looking to set their future vision, elevate their impact and enhance their performance, regardless of where they are on their journey to internal audit excellence, adoption of IA 4.0 supports internal audit functions from initial design, build of functional processes, assessment of performance and improvement through strategies such as digital, agile, and learning and development. IA 4.0 also helps to consider the function’s target operating model and ways of working, which form the core operating system of the function’s 1) position & organization; 2) process & technology; 3) people & knowledge; and 4) performance & communication. In addition, IA 4.0 suggests a differentiated approach for outsourcing and co-source internal audit support.
Internal audit functions with clarity of purpose are more impactful; they think about the value they are trying to create for their organizations, build this into their role and remit, operating model and ways of working. In short, creating value and impact by design. Individually or collectively, IA 4.0 enable the functions to take coherent steps to enhance their performance, relevance, and impact, designing their version of a purpose-driven and digitally powered function.
Somkrit Krishnamra | Risk Advisory Leader
Kaysarin Angkanurakbun | Director, Risk Advisory
