7 Steps to Prepare Your Financial Services Audit Team for an Agile Transformation
Auditors in financial services face a broad spectrum of challenges as they tackle a dynamic and complex regulatory environment, rigid frameworks, and dated audit technology. A successful transition to agile auditing aids in overcoming these challenges and prepares the audit function for the rapidly evolving risk landscape of the future.
An agile audit approach can help overcome common challenges for financial services audit teams. Learn seven best practices financial services audit teams should consider when building an agile auditing transformation plan, and download AuditBoard’s full guide, Conquering Heightened Risk Exposure in Financial Services: 7 Steps to Transform With Agile.
Dynamic Challenges for Financial Services Need an Agile Solution
Often, the biggest hurdle for financial services is keeping up with regulatory change. Whether you’re a retail community bank complying with the FDIC Improvement Act (FDICIA), a bank holding company adhering to the Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Stress Testing (DFAST), or a securities broker-dealer reporting to the Financial Industry Regulatory Authority (FINRA), remaining current in an ever-changing regulatory landscape requires continuous updates to the audit approach to stay compliant and minimize business disruption. By adopting an agile mindset, internal auditors assume that changes are always coming, and the resulting audit plan embraces the dynamic nature of regulatory change.
Additionally, an organization’s current audit process and methodology may not be designed to accommodate the rapid iterations needed to keep up with the dynamic risk and regulatory environment. A successful shift towards an agile audit approach must recognize these limitations as potential roadblocks so the audit team can take appropriate steps.
Another challenge internal auditors must overcome is the use of dated audit solutions. Legacy audit tools were designed for a traditional audit life cycle with annual audit plans that generally remain static for the year. These tools support traditional approaches to auditing and may lack the flexibility to support agile auditing, where there may be a need for both risk-based and coverage-based audits to occur simultaneously.
7 Steps to Prepare for an Agile Transformation
Planning and preparation are the keys to a successful transformation from traditional to agile auditing. These seven best practices provide a foundation to help you build your agile auditing transformation plan.
Shift Mindset to Embrace Change as the New Constant
Before formally moving to agile auditing, you can adopt an agile mindset. In an agile way of working, auditors constantly shift based on new information, which requires open communication and transparency with stakeholders. Increased collaboration will solidify the effort to position auditors as forward-thinking change agents. A great place to practice an agile mindset is in your fieldwork. Rather than sticking to hierarchical views, follow the risks and identify where the project value needs to be delivered.
Designate Your Agile Team Members
Someone must lead the transformation effort, even if they are not an agile expert. Thinking of the transition as a project that needs a project manager will help to keep the change on track. This person or team is there to ensure the transformation has the right resources, communication plans, and training to ensure success. Agile is not a new concept; others are likely already using agile in your technology, operations, or marketing teams. Find out what internal resources may be at your disposal — you might be surprised to learn that there are agile coaches ready to help.
Evaluate Current Tools for Gaps
As we have discussed, agile auditing uses a shorter audit life cycle that allows auditors to change direction based on shifts in the risk environment. Your audit technology should also support your agile way of working. As part of your evaluation, ask whether your current tools suit your agile audit transformation.
- Is your audit software easy to use and configure, or does it require expensive skilled resources to maintain, make small changes, and adapt agile plans?
- Does your software easily integrate with existing and modern tools to keep data flowing and enable comprehensive visibility and automation across audit, risk, compliance, and business strategy teams?
- Does your audit solution empower real-time communication and collaboration between auditors and all stakeholders?
- Does it simultaneously support traditional and agile audit methodologies to support a multifunctional audit team?
- Do you have access to sufficient support, training, enablement, and a robust peer community to make the most of your software investment, and quickly ramp new team members as you expand to support a broader audit universe?
If your current tools have gaps, it may be time to explore other modern purpose-built audit solutions with agile in mind. Your audit software should be easy to use and configurable enough to grow and scale with the team as your audit approach matures.
Prepare Your Team With Specific Agile Policies & Procedures and Training
Each agile transformation is unique, so it’s essential to document your agile processes as you go through the changes and make decisions. The documentation should include when and how to use an agile approach and which audit scenarios are better suited to a traditional approach. The guide should be a living document that is revised when needed. The resulting document will look different for each internal audit team based on your business conditions, strategy, and goals. Your agile audit training program should include these policies and procedures. Training sets expectations and provides your team with consistent guidance. As a best practice, prepare training resources that each auditor can refer to in the early days of the transformation.
Implement Modern Technology to Improve Audit Efficiencies
Your full audit technology suite, including automation, analytics, collaboration, and visualization tools, should be geared toward increasing auditor efficiency and agility. Automation can help you become more agile by providing deeper insights into a risk area before you begin testing. Using an automation solution can provide the necessary information and even support testing efforts so the audit team can focus on more value-added testing. Once you incorporate dynamic risk data into the planning effort, the team is better informed about needing to pivot in your audit plan. Collaboration with stakeholders through integrated technology reduces the need for time-consuming emails and manually tracking support requests. All of this can then come together through your data visualization tools that aggregate information and support the team’s ability to make informed decisions.
Tie Audits to Business Priorities to Audit the Right Risk at the Right Time
All the work performed by internal audit should align with the organization’s business strategy. The audits should relate to risks impeding management from achieving their strategic goals. Once we have this connection, agile auditing enables audit teams to proactively focus on high-risk areas in the present rather than just at a specific point in time in the recent past. Connecting the dots between business priorities, risk assessment results, the audit plan, and the controls we audit creates a work product that business management values and a team they look to as trusted advisors.
Be Agile With Your Agile Transformation!
Expect iteration — try out one or two agile components, analyze the results, and adjust based on what you learn. One way to make the transition is to incorporate agile into parts of an individual audit. In planning, for example, you can have the audit team start thinking about risks to address instead of programs to execute. Then in reporting, focus on communicating issues faster so you can remediate them faster instead of endlessly worrying about the wording of written issues. You can also pilot a few audits to test agile tactics and then expand what you learn into more audits. Use your agile mindset in this exercise by testing concepts in sprints, modifying these based on results, and testing again.
Agile auditing improves communication channels among audit teams, stakeholders, and the audit committee — but you don’t need to dive in head first! You can start small and still gain significant benefits by adopting agility in just one phase of the audit life cycle, and then can expand the flexible approach into other areas when you are ready. To learn more about how to successfully transition from traditional to agile audit, download AuditBoard’s full guide, Conquering Heightened Risk Exposure in Financial Services: 7 Steps to Transform With Agile.
Scott Madenburg, CIA, CISA, CRMA, is Market Advisor, SOX & Internal Audit at AuditBoard. Prior to AuditBoard, Scott was Head of Audit at Mobilitie LLC, with nearly two decades experience in operational, IT, and financial auditing, as well as SOX compliance. Connect with Scott on LinkedIn.
Marissa Carducci is a Principal of Product Solutions at AuditBoard, where she has advised some of AuditBoard’s largest audit and risk clients on leveraging technology with both traditional and agile audit strategies. Prior to joining AuditBoard, Marissa worked within EY’s Risk Advisory Services practice supporting both mature and immature SOX programs and internal audit functions. Connect with Marissa on LinkedIn.