There have been plenty of regional and country-level reports on internal audit in recent years, but the well has been pretty dry when it comes to global perspectives. It looks like that’s about to change, starting with the “PwC Global Internal Audit Study 2023: Seeing Through Walls to Find New Horizons.”
As a PwC alum, I may be a little biased about the quality of its internal audit thought leadership. But I have found that PwC typically takes a more strategic view. And its latest report, once again, hits the mark when assessing the state of internal audit and the potential for the profession going forward.
The sheer scope of input for this report is noteworthy: It captured the views of nearly 4,700 internal auditors and stakeholders (41% internal audit leaders, 37% board members and executives, 11% second line risk and 11% compliance leaders). What’s more, respondents weighed in from 81 countries and from a wide range of industries.
Survey results offer significant insights into post-COVID internal auditing and provide an inspirational assessment of what lies ahead for the profession.
Here are five key findings in the report:
Megatrends are creating a complex and interconnected risk multiplex.
“Today’s megatrends are driving rapid global change in areas like technology, geopolitics, climate, supply chains, regulation and workstyle reform,” according to the report. It also points out that the current environment is one in which internal audit can “shine.” Based on the survey’s results, high-performing internal audit functions can help their organizations optimize their business processes and systems, inspire confidence in beleaguered decision-makers, and win and sustain trust in external stakeholders, such as investors and regulators.
The report offers concrete evidence that internal audit is engaged on the front lines of megatrends. Respondents validated that internal auditors globally have been addressing megatrend-induced risks. For example, 50% or more said their internal audit functions have already addressed cybersecurity and information management, business strategies and operating models, technology advancement and talent.
But, as the report notes, internal audit leaders still “must be bold. They must voyage into uncharted territory where there is no roadmap.”
Internal audit needs more involvement in strategic areas to remain relevant.
The report found that CEOs consider inflation and macroeconomic volatility to be their greatest threats. However, almost half of internal audit functions are not addressing those risks.
In a revealing indication of where stakeholders would like to see greater involvement by internal audit, management strategy and planning ranked among the top three areas. In addition, PwC found that internal audit “has the opportunity to have more high quality, open and frequent conversations about risks.”
The report includes several examples of strategic areas where internal audit is engaging and ways the function can have better conversations about risks with its stakeholders.
Internal audit can be a unifying force. The report’s authors believe that internal audit should shed its silo mentality and embrace collaboration across the organization. Indeed, the report draws part of its title from the belief that internal audit, because of its unique vantage point, is able to see though the walls of the organization.
While the report does not reveal a tidal wave of improvement underway in the second line, it does offer some valuable advice on how internal auditors can better collaborate with risk managers and compliance teams. In fact, 57% of survey respondents believe their organizations would benefit from greater collaboration on risk monitoring and assessment.
Internal audit’s “superpowers” are more important than ever. I must admit that even I don’t make a natural connection between internal auditors and “superpowers.” But the report’s authors believe that professional skepticism, business knowledge and experience and independence and objectivity set internal auditors apart from others in the organization. By contrast, survey respondents are less inspired by our strategic thinking, technology skills and transformation mindset.
The report includes a thoughtful inventory of superpowers where internal auditors need to focus. So, if we truly want to be the superheroes in our organizations, there’s still work to be done.
Internal audit can boost ROI by changing its approach to technology. This one is not a surprise. PwC notes that internal audit’s technology investment is not yielding the benefits that it should, and that the “window is closing for internal audit to adopt the next wave of technology innovation.”
Survey respondents took a dim view of outcomes achieved from internal audit’s investment in technology over the past year. In addition, they offered little indication that such investment is even an internal audit priority in their organizations.
Clearly, the profession needs to embrace technology to a much greater degree, if it is to realize the full potential that PwC and many of us see for its future.
The report concludes with two survey results that truly sum up the progress we must make as a profession. When asked to classify the overall value and maturity of their internal audit function today, more than half of respondents cited “problem finder,” “assurance provider” or “problem solver.” Yet, looking out three years, more than 50% said they would like to see their internal audit function as “insight generator” or “trusted advisor.”
Fortunately, there are more global reports coming in the next few weeks that are expected to shed even more light on progress internal audit has made over the past few years. In the meantime, I strongly encourage you to download and read PwC’s new report. It offers valuable insights for those in leadership roles.
I welcome your thoughts on this topic via LinkedIn or Twitter. You also can email me at firstname.lastname@example.org.