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Next-Gen Audits – Transforming a Validation Methodology into a Business Enabler

Next-Gen Audits – Transforming a Validation Methodology into a Business Enabler
January 20, 2020

The word audit originates from the word ‘audire/auditus’ in Latin, which means ‘hearing.’ Originally, the audit reports were presented orally and hence the name. However, audits have come a long way from being just a verification methodology to now a business enabler. Organizations are continually trying to improve their business processes by finding gaps with regards to industry best practices and working toward them. Thus, audit plays an essential role in uplifting the best practices of the organization.

The regular IT audits had a standard questionnaire that had to be filled out to find out the gaps against the standard and pre-defined answers. The major drawback was that it was a static process and a reactive approach. The sampling technique used was merely random, and often led to biases if not adequately sampled. The audit reports could also be tampered and skewed at the auditor’s will. All these drawbacks lead to the evolution of the next generation of auditing techniques.

The next-gen audit techniques involve the usage of Robotic Process Automation (RPA), Artificial Intelligence, Cognitive computing (CC), analytics, and blockchain. These technologies have a promising future for ensuring data integrity and efficient auditing. The representation below shows how the new-gen techniques can help to achieve the best auditing practice in an organization.

The next gen audit techniques involve the usage of Robotic Process Automation (RPA), Artificial Intelligence, Cognitive computing (CC), analytics and block chain.

Verification Methodology

With big data and artificial intelligence revolutionizing how organizations operate, scoping, and sampling for IT audits become easier. These technologies allow increased unbiased sample size. AI also helps to monitor security controls on a real-time basis and report any mishap. This is simultaneously recorded and reflected in the audit reports. Soon, with an ever-increasing technological capability, organizations would be able to perform an audit on the whole set rather than just on a sample and ensure data integrity.

RPA performs periodic and repetitive tasks based on pre-set commands. For example, in regular audit process, RPA performs control testing at set intervals and provides the results directly to the respective stakeholders without the involvement of any intermediaries. As a norm, security controls in an organization are tested annually or at a higher frequency, which consumes a considerable amount of time and resources. Manual testing can lead to tampering of results intentionally or unintentionally. Chances of human error are high, which can mislead the observations in a report. With RPA, human error is almost zero, and the testing process is efficient, time-saving, and cheaper.

Next Gen Audit

With the introduction of AI/Blockchain in the audit process, audit reporting becomes transparent with the preservation of data integrity. Tampering audit data without alerting the relevant stakeholders is difficult. Risk identification and remediation have become a much easier process with minimal scope for cyber-attacks. These audit techniques help in time-efficient failover to the recovery centre for disaster or interruption to the business.

Modern technologies are able to make the IT audits more accessible and transparent. However, the auditing technique should be enhanced to accommodate these changes. With the introduction of these changes, new controls and audited processes should be in place. For example, in RPA, if there are any restrictions to ensure that it is secure from cyber-attacks, then those controls need inspection as well. Any processes established for handling big data also needs to be audited periodically.

The top management should be willing to invest time and resources in adopting these technologies to streamline processes and make efficient audits. Being a strategic call, the involvement and guidance of senior management is essential in driving the next-gen auditing. Regulating IT processes and securing private citizen data has become much easier for the regional regulators as well.

Organizations that adopt these future-oriented technologies for auditing will have a strategic advantage over their competitors. But incorporation of these technologies in the auditing process cannot happen suddenly. A careful and detailed analysis should be done to understand the need of the hour and introduce this one by one. With the dynamically changing technological landscape, it’s high time to switch over to these technologies to make the internal or external audits more reliable and trustworthy.