How important are data analytics skills to internal auditors?
Internal audit is a core part of the three lines of defence in corporate governance, and many businesses expect the function to become increasingly important to risk management processes in the future.
The 2016 PwC State of the Internal Audit Profession Study revealed that 62 per cent of organisations believe auditors will become ‘trusted advisers’ in the coming years. This term means they provide value-added services and proactive recommendations to help businesses grow.
In order to meet these expectations, many internal audit departments will have to optimise their use of technology to deliver the necessary insights to support innovation and set strategic direction.
The impact of data analytics has been profound across many sectors, enabling companies to leverage the structured and unstructured information they possess to identify trends, predict the future and evaluate performance.
But are internal auditors making best use of data analytics? And what analytics skills do professionals need now and in the future to remain competitive?
The current state of play
PwC’s recent Global CEO Survey revealed that 80 per cent of business leaders feel data mining and analysis are strategically important to their operations. Yet, only 40 per cent believe their internal audit department performs well with technology, including data analytics.
Deloitte research revealed that analytics adoption across internal audit departments is currently fairly basic. While 86 per cent of organisations use analytics, only seven per cent of these do so at an advanced level. Two-thirds instead use ad-hoc analytics, such as spreadsheets.
Meanwhile, 57 per cent of respondents said they weren’t satisfied that their internal auditors have the skills and expertise to deliver insightful reports and effective decision support.
Clearly, there is a gap between the data analytics skills that internal auditors currently possess and the expectations that business leaders have of their departments driving value through better analytics capabilities.
The search for talent
Barclay Simpson’s own research tells a similar tale. We are seeing huge demand for subject matter experts in internal audit, with big data and data analytics becoming increasingly popular as auditing tools.
Unsurprisingly, IT auditors with data analytics and data assurance skills are highly sought after, making professionals with technical capabilities currently more desirable than general auditors.
The Institute of Internal Auditors lists four broad areas where professionals currently use data analytics:
- Increasing understanding of current risks
- Identifying new risks
- Providing better assurance coverage
- Offering additional insights to management
However, it is possible to drill down into these categories in more detail. At Barclay Simpson, we’ve seen incredible demand for internal auditors who specialist in financial crime, for example.
This trend appears to be borne out in PwC’s figures; fraud management is currently the area where data analytics are currently applied the most in internal auditing. Forty-eight per cent of companies already use data analytics for fraud management and 33 plan to do so.
Where will internal auditors need data skills?
Aside from fraud management, internal auditors may be expected to utilise data analytics across multiple areas in their existing roles and for future opportunities. PwC listed the most common data analytics applications as:
- Compliance monitoring of operational costs
- Risk analytics
- Vendor analysis
- Customer- and revenue-related analytics
- Dashboard reporting
- Anti-money laundering
The importance of data analytics skills to internal auditors will likely vary depending on the size of a company and its industry. Big players in the financial services sector are expected to be more familiar with data analytics platforms and tools than smaller, less-regulated firms.
Larger internal audit departments will also usually have technical specialists who shoulder the heavy lifting when it comes to collecting, cleaning and analysing data. This may include data experts who are proficient coders and work closely with advanced statistical applications and programs.
However, even general auditors will increasingly be expected to understand how data is handled within the department, as well as translate complex reports and visualisations to the board in plain English.
Filling the skills gap
It is undeniable that the data analytics field is beginning to have a greater impact on the internal audit function, and professionals who have these technical skills are more in demand than other applicants.
Business leaders expect internal auditors to become trusted advisers, as PwC puts it, and provide valuable strategic direction based on new insights derived from data.
However, there appears to be a disparity between the skills that organisations want and the number of candidates who possess these capabilities. This puts data-driven internal auditors in a strong bargaining position when looking for new opportunities.
Meanwhile, applicants who want to increase their chances of progressing their career – but don’t currently have data analytics skills – may wish to consider upskilling in this area to boost their competitiveness.
Our Market Reports combine our review of the prevailing conditions in the internal audit recruitment market together with the results of our latest employer survey.
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