Adapting to a dynamic business environment: Why the need for Agile Auditing

As a result of the ever-evolving business environment, auditors now face new challenges in evaluating emerging risks and controls. This is also premised on the fact that the usual traditional auditing methodologies are unable to keep pace with new business models and processes being driven by new technologies.  In that regard, auditing requires agile approaches to respond more effectively and efficiently. The agile auditing approach is adapted from a software engineering principle characterized by short sprints. It was adopted in the design, running and management of conventional organizational tasks. At the heart of agile auditing is software integration with proper documentation to adjust to a dynamic business environment.

Implementing Agile Auditing

Implementing agile auditing requires careful planning and execution. Implementation involves setting objectives and scope of the audit, training audit staff to equip them with the necessary skills, tools and techniques. It also requires the need to conduct a thorough assessment to identify areas for improvement and opportunities to incorporate agile principles. Executing agile auditing also involves undertaking a pilot exercise to test new approaches, gather feedback and refine the framework before full-scale implementation. Considering the fact that agile auditing was developed from software engineering, it is imperative to utilize modern technology or data analytical tools to enhance the efficiency and effectiveness of audit procedures. A robust technological application also enables real-time monitoring of risks and controls and facilitates seamless communication and collaboration among audit team members.

Benefits of Agile Auditing

• Agile auditing improves overall enterprise–wide risk management by providing timely and relevant insights into emerging risks thereby enabling an organization to take proactive measures to establish its risk tolerance.
• Agile auditing increases the agility of the internal audit function to adapt quickly to changing business priorities and respond effectively to emerging risks.
• Agile auditing improves efficiency by focusing on areas of highest risk, streamlining audit processes and optimising the use of resources.
• Agile auditing improves stakeholder satisfaction by delivering timely, relevant, and actionable insights that address their concerns and support decision-making.
• Agile auditing prepares the internal audit function for the future by fostering a culture of continuous learning, collaboration, adaptability as well as innovation. This enables it to thrive in a dynamic and ever-changing business environment.

Developing Agile Auditing Framework

The ability to effectively implement agile auditing also hinges on a framework as a signpost. The agile auditing framework outlines the principles, practices and necessary tools. Auditors must first understand these agile principles and techniques.

A) Agile Auditing Principles

Agile auditing emphasizes four key principles and values. These are:

• Iterative and Incremental Approaches: Agile auditing breaks down the audit process into smaller and more manageable phases or sprints. These approaches allow auditors to deliver value-added audit findings and recommendations for continuous improvement.
• Collaboration and Communication: Agile auditing promotes close collaboration with key stakeholders. Collaboration fosters a culture of effective communication, understanding of business processes and identification of risks and controls.
• Flexibility in Scope: Agile auditing is open to flexibility over a fixed audit plan. It allows for changes in audit scope, objectives and procedures to contain any significant risks which arise during the audit process. This allows auditors to be more responsive to emerging risks and to adapt their audit plans accordingly.
• Continuous Improvement: Agile auditing prioritizes learning and improvement. It embraces regular review of business processes to contain data on emerging risks, seeks feedback from stakeholders to enhance the effectiveness and efficiency of the audit process.

B) Incorporate Continuous Auditing

Agile auditing calls for continuous monitoring to ensure risks are rapidly identified and mitigated. This shift allows the audit function to keep pace with the agile project’s rapid development cycles.

C) Cross-Functional Teams

i) Multi-disciplinary Audit Team: Agile auditing requires constituting a cross-functional audit team of professionals with technical, operational and business skills-set.

ii) Collaborative Teamwork: It is necessary to foster collaboration and open communication among team members to enhance knowledge sharing and problem-solving.

D) Agile Planning

i) Sprint planning techniques must be used to define audit scope and objectives within specific timeframes (sprints).

ii) It is also important to maintain an audit backlog that prioritizes audit activities based on business value and risk considerations.

E) Regular Feedback

i) Regular Retrospectives: Conduct regular collaborative meetings to reflect on overall audit processes, identify opportunities for improvement and adjust strategies for subsequent sprints.

ii) Stakeholder Feedback: Gather feedback from key stakeholders to improve the relevance and effectiveness of audit activities.

F) Adaptive Auditing

It embraces flexibility in audit scoping to accommodate increasing changes in organizational priorities and emerging risks. Adaptive auditing is to respond to changes in audit plans and objectives based on new data and shifting business needs.

G) Automated Testing and Monitoring:

i) Continuous Monitoring: Implement continuous auditing through automated tools and techniques to monitor controls and detect irregularities or deficiencies.

ii) Use Data Analytics: Agile auditing should leverage data analytics to streamline the audit process and gather real-time insights and in-depth risk assessments.

H) Agile Documentation:

i) Prioritize concise and relevant documentation over extensive paperwork.

ii) Maintain living documentation that evolves alongside audit activities and captures key findings, actions and insights.

I) Risk-Based Auditing

Agile auditing prioritizes the needs and expectations of stakeholders and identifies areas of high risks and potential impacts on the business. It involves efforts at ensuring resources are allocated effectively to achieve organizational objectives.

J) Value Risk Over Documentation

Agile auditing must align with the agile principle of valuing working software sprints over comprehensive documentation. Focus must be placed on critical risks instead of producing an extensive or a detailed audit report.

K) Transparency and Communication:

i) Daily Stand-ups: Hold regular stand-up meetings to facilitate quick updates, address challenges, and ensure everyone is involved in the process and have same understanding of it.

ii)Transparent Reporting: Provide transparent and real-time reporting to stakeholders by highlighting progress of work, issues which must addressed and key insights.

L) Continuous Learning

• Knowledge Sharing: Agile auditing encourages continuous learning and knowledge sharing. Thus, post-audit reviews should be focused on learning lessons to guide subsequent audits.
• Skill Development: Invest in training and development opportunities to enhance auditors’ skills in agile methodologies and emerging technologies or software applications.

M) Regulatory Compliance:

i) Compliance Alignment: It is important to ensure agile audit practices align with regulatory requirements and in line with standards relevant to the organization.

ii) Documentation Traceability: Maintain documentation traceability to demonstrate compliance with regulatory expectations.

N) Lean and Agile Tools:

i)Use of Agile Tools: Utilize Agile project management tools to track tasks, manage backlogs and ensure and teamwork.

ii)Kanban Boards: Implement Kanban boards to visualize and manage the flow of work throughout the audit process. Kanban is, indeed, a visualization tool that shows work in progress to help identify bottlenecks thereby allowing a team to optimize the workflow.

What’s more, an organization which has resolved and thereby integrates these elements into its agile auditing framework can enhance the agility and effectiveness of their audit practices. The framework will allow them to adapt to changing business landscapes while maintaining a focus on risk management and value delivery.

Conclusion

Agile auditing offers a more flexible and iterative approach to adapt and respond to emerging risks. The principles underpinning agile auditing aim at ensuring efficiency, effectiveness and relevance in delivering greater value to stakeholders. It is worth reiterating that implementing agile auditing requires careful planning, training and collaboration with stakeholders while leveraging modern technology to achieve those objectives. Agile approach is indeed revolutionizing auditing and empower organizations to stay ahead of the curve in dealing with emerging risks.

BERNARD BEMPONG 

Bernard is a Chartered Accountant with over 14 years of professional and industry experience in Financial Services Sector and Management Consultancy. He is the Managing Partner of J.S Morlu (Ghana) an international consulting firm providing Accounting, Tax, Auditing, IT Solutions and Business Advisory Services to both private businesses and government.

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