Analytics: Good practices for (smaller) IAFs

The following report, ‘Analytics: good practices for (smaller) IAFs’, sets out the findings of a field study commissioned by the Professional Practices Committee of IIA Netherlands. The
aim of this report is to encourage and support the use of analytics in Internal Audit Functions (IAFs). Analytics has been part of our ‘toolset’ for many years, but recently rapid advances
have been in the available techniques.

“The world hates change, yet it is the only thing that has brought progress.” (Charles Franklin Kettering). The auditing profession first emerged during the industrial revolution, and its original
aims were to provide (additional) assurance to clients such as executive and supervisory directors and other stakeholders such as regulators and the general public. Since that time,
the profession has steadily progressed and professionalised. However, in recent years many audit and control functions seem to struggle to keep up with the pace of the increasing
digitisation and real-time developments in the economy. Traditional auditing in the sense of ‘retrospectively checking the figures’ is becoming increasingly inadequate. (2012, AICPA
White Paper). Solutions to this are sought, including by: involving non-financial perspectives, such as client perspectives and those based on operational management and innovation,
increasingly using (upfront) system audits, and increasingly incorporating ‘soft controls’ (culture and behaviour). These are all useful steps, but they are not sufficient. A promising
solution that is already feasible for many audit functions is the use of analytics. It is expected that the use of analytics will enable auditors to substantially improve their effectiveness
and efficiency. Furthermore, in the near future the use of analytics will no longer be the exclusive domain of IT auditors, but will increasingly expand to other audit disciplines such
as financial and operational auditing, as well as ‘second-line’ functions such as the internal audit, risk management and compliance functions.

All this calls for research into the use of analytics that looks into the wishes and requirements of IAFs as well the practical experiences they have gained. We hope this field study will
inspire and support professionals in the use of analytics and will contribute to the further development and embedding of analytics in the internal audit profession.
We would like to thank the auditors who contributed to this study for sharing their experiences and insights.