PARTNER
How technology is shaping the future of public sector audits
By Wolters Kluwer
Auditors must use technology to keep up with the increased risks of a global crisis in a digital age.
In this volatile landscape, public sector auditors are using data analytics to conduct more timely and comprehensive checks on how grants are distributed and used. Modern technology has turned complex analytics previously accessible only to data specialists into tools that are available to all auditors.
“Technology is revolutionising the future of public sector audits,” says Sio Naidoo, Product Manager, Asia Pacific at Wolters Kluwer TeamMate. “Once public sector internal auditors shift to technology-enabled audit work practices, they will almost certainly see the immediate value it delivers through efficiency and effectiveness.”
Digital skills and mindset
Audit departments have traditionally focused on hiring accounting-trained graduates, placing the focus on financial or compliance audits. However, as the risk landscape changes, new skills are required. With the introduction of emerging technologies, there is an increased focus on IT audits on cyber risks.
“Organisations are starting to embrace new technologies such as artificial intelligence and robotic process automation. Audit departments need to respond with a digital mindset, understand the risks that are introduced with these technologies and be able to audit them. Auditors will also have to look at how these technologies can enhance their audit practices,” he says.
Adopting the right technology
As the risk landscape evolves with rapid innovation and increased complexity, auditors need to be on top of the latest risks introduced into the public sector environment, and constantly adapt to better understand and manage them. “That's where technology can help and chief audit executives need to have a robust technology strategy to navigate this dynamic risk environment,” Naidoo says.
However, the alignment of audit activities with strategic objectives can be challenging. Audit departments need to review risk assessment processes and practices, which are often done in a multitude of spreadsheets. Statistically, spreadsheets contain errors, often embedded within formulae, and as a result could expose audit teams to unintentional new risks.
At the enterprise strategic risk level, public sector organisations can leverage technology to replace spreadsheets within an integrated risk assessment tool to ensure that they are accurately capturing and assessing strategic risk factors. Continuing to perform this kind of work is the raison d'être of internal audit departments “to protect and enhance organisational value”, he adds.
Data analytics can provide auditors with a helicopter view of the process, allowing them to find patterns in data and identify high risk areas for audits. Wolters Kluwer TeamMate’s Audit Management platform has over 200 such data analytics tools built-in and are being used by both larger and smaller public audit departments globally. “They help ensure that an audit department can execute complex data analysis easily, by embedding the use of data analytics into their audit methodology.”
With sophisticated audit solutions, internal auditors can conduct continuous auditing, by ensuring that a batch of tests can be built and pre-defined to be run with the click of a button, and this ensures that data analysis can be both efficient and effective. “We are bringing together audit efficiency and effectiveness in our solutions to audit departments”, summarises Naidoo.
Understanding third-party risks
Public service departments are particularly vulnerable to third-party risks from vendors and contractors. These risks can run the whole gamut from corruption to fraud, and waste. However, “the risk increases tenfold if a department is slow to embrace technology”, warns Naidoo.
Public sector audit departments often spend a large proportion of time auditing public funds through grants or other programs which involve third parties. If they still rely on simple random sampling, rather than take a holistic data analysis approach, it increases the risk of incorrect conclusions being drawn from limited sample test results. Data analytics tools allow public sector audit departments to test the entire population to obtain accurate results, and deliver deeper insights.
Internal audit, particularly for the public sector, must operate at the highest level of trust, to safeguard public confidence. Technology like TeamMate+ Audit Management can ensure auditors conform to the International Standards for the Professional Practice of Internal Auditing (Standards), promoted by the Institute of Internal Auditors. These Standards ensure consistent and accurate delivery of risk-based and objective assurance, advice and insight.
During mandatory external quality assessments, internal audit departments often struggle to demonstrate conformance to the Standards. Public sector departments benefit from using technology solutions where, “there's been a deliberate effort in ensuring that the features align to the Standards. By adopting this technology to manage audit. departments can easily show conformance”, says Naidoo.
Government programmes are becoming increasingly complex and riskier, even as the public sector strives towards stronger governance and trust from people. Determination to take a technology-enabled and data-driven approach is now the cornerstone for success of a modern internal audit department.