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The transformation of Internal Audit in times of crisis

Internal audit assignments consist of the accounting practices and fraud activities identi...

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Jul 13, 2021

5 minutes

The transformation of Internal Audit in times of crisis

Internal audit assignments consist of the accounting practices and fraud activities identification that may appear within a company so that they do not obstruct the overall objectives. By setting up these processes, the auditor will control the risks and facilitate the activity’s management. 

 

Multiple consequences for internal audit 

 

With the Covid-19 crisis, the challenge becomes even more critical. Employees mostly work remotely, and this rise several concerns: 

Employees mostly work from home and their activities that concern centralized functions must be carried out in an aggregate manner without the manager supervising daily. 

Moreover, the subsidiaries’ visits are no longer possible, which can lead to the lack of transparency and therefore visibility for the main entity. 

There are numerous consequences of a crisis like this one: economic, social and even regulatory ones. An auditor must introduce new control methods and reform organizational processes in a very short period. State agency’s audits during quarantine challenge the auditor as much as the creation of monitoring tools to adapt to new economic objectives. 

The importance of handling the fraud will also rise as a main subject during the crisis: on one hand, because the perceived lack of supervision can facilitate an attempt of fraud by a user, on the other hand, because social and economic fears trigger biased behavior. 

 

A period revealing the weaknesses 

 

Due to meet with the new health requirements traveling will be limited and working habits will have to be modified. The role of internal audit will be to put in place the procedures to comply with them. 

 

Lockdown, remote work, and partial activity related to Covid-19 will reveal the failure of certain processes, and conclusions will have to be drawn 

 

The new subjects that appeared during the crisis will cause a time lag for the successful achievement of the auditor’s common assignments. Validation of financial statements, for example, could be delayed or be done a little less conscientiously if new urgent assignments are added to the already full schedule. The creation or use of tools which would automate some of these tasks will allow him to focus on the most added value missions. 

 

Lockdown, remote work, and reduced activity related to Covid-19 will reveal the failure of certain processes and conclusions will have to be drawn. Organizations must adapt to this new situation, but also to be prepared for what could come next. It is up to internal audit to put in place procedures which would allow greater flexibility and to rapidly develop new controls for short and medium time steering. 

 

For them to acquire legitimacy and effectiveness, it is important to involve all stakeholders in the new processes and to adapt the methods so that they match with the sustainability and safety’s challenges. Whether for finance or compliance, team managers or operational staff, team collaboration via a common channel can be the key to achieving this. 

 

New audit practices? 

 

The implementation of a transversal and centralized tool will be a real asset due to the audit’s digitization that makes it possible to overcome physical distancing. 

 

It is essential for an internal auditor to be able to analyze accounting practices, monitor user activity or suppliers and customers markets in an efficiently. A new digital tool would allow them to proceed with all these actions almost simultaneously and without parameterization. 

 

In summary, internal audit is one of the departments most impacted by the Covid-19 crisis, which also results in limited travel. However, this function has a central role to play in organizations in order to adapt the internal processes of the organization and to give credibility to the figures. 

 

Within the framework of a business continuity plan, equipping internal audit with a collaborative tool, capable of ensuring global monitoring, but also of detecting errors and anomalies thanks to the accounting of the entities of a group, enables it to achieve its objectives. Even if such a tool will not replace all possible investigations during a visit by the internal audit department, it will limit the risks of negative impacts on the accounts or the company's image. 

Anna Vlchek

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