With additions and revisions continuously being made to regulations, businesses must adapt their audit plans to stay relevant. The previous control-focused approaches are being replaced by risk-centric strategies due to technological advancements and evolving market conditions. According to PricewaterhouseCoopers (PwC) 2023 Global Internal Audit (IA) Survey, inflation and macroeconomic volatility are seen as the most significant threats by CEOs. The results reveal a gap in addressing these concerns, with CEOs indicating that almost 50% of IA functions do not include these threats in their audit plans.
Building an audit plan is essential for addressing top business concerns, ensuring that key risks are identified and effectively managed. Internal audits must adapt to address critical issues such as inflation, macroeconomic volatility, and cybersecurity. Recognizing these trends, strategies should be incorporated to tackle these pressing challenges. By aligning audit activities with the top concerns identified by leaders, organizations can better navigate uncertainties and maintain robust risk management frameworks.
Key trends impacting internal audits
Internal audits are evolving to address dynamic risks. Historically, audit leaders have relied on control-focused methods. However, as businesses expand globally and integrate new technologies, a risk-centric perspective is essential. Auditors must now consider five major trends:
- Globalization: As companies pursue international growth, they face diverse regulatory environments and risks. When building an audit plan, it’s crucial to account for varying compliance requirements and geopolitical risks.
- Technological Advancements: The rapid adoption of new technologies necessitates evaluating the security and efficiency of these systems, including cybersecurity measures and the impact of digital transformation on business processes.
- New Risk Management Priorities: Proactively identifying and managing risks demands a comprehensive understanding of potential threats and the development of strategies to mitigate them.
- Talent and Organizational Issues: The effectiveness of an audit plan depends on the skills and competencies of the audit team. Investing in training and development is crucial to address complex risks.
- Evolving Market Conditions: Economic fluctuations, regulatory changes, and market trends can impact business operations. Audit plans must be flexible to adapt to these changes.
What to include when building an audit plan
A well-structured audit plan is essential for systematically analyzing and managing risks. Here are the steps to build an effective audit plan:
1. Evaluate the risk level
Building an audit plan begins with a thorough risk assessment. Start by identifying all possible events and threats by encompassing every business unit, operation, and process. Each potential risk, whether likely or unlikely, must be considered. This broad approach ensures no risk is overlooked. A comprehensive assessment helps in understanding the full spectrum of risks. It lays the foundation for a robust audit plan.
2. Understand your business model
Knowing how your business operates is vital as it helps in identifying relevant risks. Understanding the industry context is also essential to aligning audit objectives with business goals. It ensures that, when you’re building an audit plan, it’s comprehensive and with a foundational understanding so auditors can see the bigger picture. This step connects the audit plan with strategic business objectives. It also highlights potential areas of concern.
3. Engage stakeholders
Establish open communication with stakeholders so that everyone understands how it aligns business goals and potential risks. Clear communication sets objectives and expectations, fostering collaboration and support. Stakeholder input can be a significant benefit when building an audit plan, as it ensures the plan is comprehensive and practical. It also builds trust and transparency while meeting the needs of your organization.
4. Develop a risk profile
Assess the likelihood and impact of identified risks and create a risk profile that highlights high-risk areas. The profile helps prioritize risks, making it easier for management to allocate resources. It also guides the audit process to ensure focus on the most critical areas. Regular updates to the risk profile keep it current, reflecting changes in the business environment. This step aligns the audit with the organization’s risk landscape.
5. Consider external factors
Political, technological, legal, and economic shifts can impact the business, which is why it’s important to account for global trends and external changes. A broad perspective helps identify external risks. You must consider these factors when building an audit plan to make it as comprehensive as possible External factors can significantly influence business operations. An effective audit plan anticipates these changes by preparing your organization for potential challenges.
6. Identify internal risks
Recognize inherent internal risks like changes in systems, policies, products, and markets. Management changes and expansion also impact risk levels. Regular evaluations keep the plan up-to-date as internal risks are constantly evolving.
7. Periodic risk assessment & testing
Conduct regular evaluations of internal controls. Determine their reliability and effectiveness and reclassify risks based on these assessments. This ongoing process improves audit outcomes, enhancing your organization’s risk management capabilities.
Continuously testing key controls ensures their effectiveness over time. Conditions change, making some controls obsolete. Testing controls identifies weaknesses and areas for improvement, which is why it’s essential for robust risk management.
8. Develop alternative audit plans
Use risk assessment results and address various risks across the organization to create alternative plans. Regular updates reflect new risks. Flexibility is key in building an audit plan, as it showcases your ability to adapt to changing conditions. Developing alternative plans is essential for comprehensive risk management.
9. Prioritize risks
Work with the audit committee and senior management to establish a hierarchy of organizational risks. Prioritization helps allocate resources effectively so that you can focus on high-priority areas. It also improves audit effectiveness for a targeted approach to risk management.
10. Tactical execution
Focus on practical implementation when building audit plan. Establish current and multi-year budgets while providing sufficient resources for auditors. Launch fieldwork promptly to avoid delays so the plan is actionable. Tactical execution aligns resources with audit needs to support proactive risk management.
11. Leverage technology
Building an audit plan involves leveraging technology for efficiency and consistency. Doing so supports a more effective audit process to improve accuracy and efficiency. It streamlines the audit process, enhancing the plan’s robustness.
12. Measure and demonstrate results
Regularly measure and demonstrate audit outcomes. Showcase the value of the audit process, being transparent to build trust with stakeholders. Ensure your plan measures results to show the value of your audit process.
Key considerations when building an audit plan
The role of internal audits is already becoming increasingly critical. Developing a comprehensive audit plan that addresses both internal and external risks is essential for maintaining resilience and achieving business objectives. But, more importantly, it’s important to consider the following:
- Technology’s Role in Auditing: Artificial intelligence (AI) and data analytics help auditors quickly spot anomalies and potential threats. Incorporating technology into audit plans boosts efficiency and accuracy. It also allows for continuous monitoring, allowing you to stay ahead of risks.
- Addressing Emerging Risks: Emerging risks, such as cybersecurity threats and economic volatility, require attention. Traditional methods may not suffice to address these dynamic risks, which is why a proactive approach is necessary. When building your audit plan, include strategies for managing these new threats.
- Continuous Improvement and Training: Regular training for audit teams keeps their skills updated. Training on new technologies and methods ensures auditors can effectively manage emerging risks. Continuous learning and development help auditors stay ahead of industry trends and enhances the overall quality of the audit process.
- Adapting to Regulatory Changes: Staying updated with regulatory changes is crucial as non-compliance can lead to significant penalties and reputational damage. Incorporating regulatory updates into the audit plan ensures compliance. It also helps in identifying potential risks related to regulatory changes.
Read more: The Ultimate Guide to GRC Software: How Integrated Solutions Enable Better Risk Outcomes
Leverage Resolver’s solutions for your audit plan
Building an effective audit plan requires a deep understanding of the business, a proactive approach to risk management, and a commitment to continuous improvement. By following the steps outlined in this guide, businesses can develop audit plans that respond to the challenges of today’s economic landscape. Investing in the right talent, technology, and processes will ensure that audit plans remain relevant and valuable, providing a solid foundation for managing risks and achieving long-term success.
Resolver’s Internal Audit Management solution makes managing risks and achieving business objectives efficient and effective. By integrating Risk, Compliance, and Audit data into a single, secure database, you have a comprehensive view of risks, enhancing decision-making and resource allocation.
With advanced data analytics, automated workflows, and a collaborative document repository, our tools streamline the audit process, reduce duplication of effort, and ensure real-time risk identification. By incorporating regular updates and training, our solution ensures auditor teams stay prepared for emerging risks.
Request a demo today to see how Resolver can help your organization build a comprehensive, risk-based audit plan.
