Towards a

Data-Driven Future

STATE OF INTERNAL AUDIT 2020

IDEA
 The Age of Data is Upon Us
The bedrock of internal auditing does not change. However, no profession
operates in isolation, and just as technology continues to revolutionize the
way we do business in the 21st century, audit is not immune from disruption.
Indeed, it is one of the fields most affected by it, and in today’s business climate
it all comes down to one operative word: data.

We do not have to look far to see that the global business environment is
changing rapidly in the face of the data revolution. Read any recent business
blog, analyst brief, or annual report, and it is not hard to find some reference
to the omnipresence of data in our daily lives. And it is only becoming more
IDC predicts
present: IDC predicts that worldwide data will increase 61% to 175 zettabytes
that worldwide by 2025. Data affects all businesses, for what organization is not touched by
data will data in some way?
increase 61% to
175 zettabytes What is new is the ubiquity and volume of data. From big data to data science
by 2025 to predictive analytics, data is everywhere. Data may not be the New Oil, as is
sometimes proclaimed, but those who have made the comparison are wisely
underscoring the importance of data in today’s economy.

But internal audit is one of the professions where developments affecting data
(data availability, data sources, data analysis, etc.) are particularly resonant and
impactful. To that end, data is a key focus throughout this report, just as it was
an underlying theme in the findings of our State of Internal Audit 2020 Survey,
upon which this report is based.
 About the Survey
To get a better sense of the current state of internal audit, we turned to those who know it best:
internal auditors themselves. In late 2019, we asked internal audit professionals from around the
globe to respond to a number of questions on their approach to auditing as the year drew to a close.
The survey was active for one month, during which time we collected responses from internal
audit professionals from around the world. This paper takes a high-level look at the findings of
that survey. We will be looking at each of the addressed areas in greater depth throughout 2020.

Who Was Surveyed?

We surveyed nearly 400 internal audit professionals from junior auditors to the C-Suite. Over
half (59%) of respondents indicated they were auditors or entry-level staff, and the rest indicated
they were at the management, VP/Director, or C-Suite level. A number of respondents indicated
they were students or consultants, but we excluded their feedback from this report.

C-Suite / Executive Team / CFO

4.66%

VP / Director
10.56%

Management
25.78%
Auditor
or Entry-Level Staff 59.01%

Geographic Distribution
The survey was promoted globally across
multiple channels. Although a plurality (42%)
of respondents operate out of North America,
the survey results reflect the views of audit
professionals from all major global geographic
regions, including Asia Pacific (20%), Latin
America (17%), Europe (11%), Africa (8%), and
the Middle East (2%).

Disclaimer: It is important to note that although CaseWare IDEA conducted the survey, participation was extended
to a broad audience of audit professionals, regardless of whether they use IDEA solutions or not.
 Survey Findings
Executive Summary
Our survey findings suggest that individuals and leadership
within the internal audit profession are aware of the unique
opportunities afforded by new technologies and data
analytics, but are struggling to:

• Embrace and adopt these new technologies.

• Train internal audit staff on technology tools.

• Move from traditional, manual processes to data-driven

auditing processes.

Topics Covered Compliance demands – a perennial challenge for internal audit

– continue to rank as one of the top priorities for auditors, and
We asked respondents for
data ethics is taken seriously by most respondents. The year
feedback on the following areas:
ahead for internal audit will be marked by:
• Current and planned
elements of internal audit
approaches
• The adoption of data analytics technology.

• Most significant internal • The optimization of existing audit technology.

audit challenges

• Compliance demands
• Training auditors on audit technology.

• Data analytics in Many of these challenges and priorities are interconnected,

internal audit and together they represent a global movement towards the
• Artificial Intelligence and data-driven audit.
machine learning in internal
audit activities

• Cloud technology in
internal audit
It is important to note that we approached this
• Training and adoption of project from a vendor-agnostic standpoint. At no
audit technology point in the survey or this report do we address
• Priorities for 2020, and specific technology vendors or solutions, because
much more our intent is to offer an unbiased assessment of
the state of internal audit in 2020.
 Challenges Overview
In the survey, audit professionals were asked to address their biggest audit challenges currently,
and the answers reflect the views of respondents as they stood at the close of 2019. When asked
to name their top internal audit challenges, three clear priorities emerged as the top challenges
faced by auditors, regardless of role or geographic location.

Leading the charge was the need to move from traditional, manual processes to the data-driven
audit, a priority 62% of respondents named a top audit challenge. Close behind were the need to
adopt new audit technology (57%) and addressing the skills shortage (47%).

Top Internal Audit Challenges

Moving from traditional,

62% of survey manual processes to the 62%
data-driven audit
respondents said
moving from
traditional, manual Adopting new
processes to the audit technology 57%
data-driven audit
is a top challenge
Lack of training
and/or skills shortage 47%

These key challenges map well to respondents’ key priorities for 2020, which we present in the
paper ahead. It is notable that all three of these challenges are deeply intertwined: moving away
from manual processes is almost always linked to adopting new audit technology. Adopting new
audit technology means having the right audit personnel trained on the right technology, hence
the lack of training and skills shortage being identified as two of the most critical challenges faced
by the profession.

These challenges are distinct, which is why they were presented as unique options for survey
respondents. But their close relationship in combination with their position as the top three
challenges internal audit faced in 2019 (and continues to face in 2020) is very telling: the profession
is aware of the need for digital transformation but also contending with a poor alignment of people,
processes, and technology.

For comparison, the fourth item auditors collectively ranked as a top challenge in 2019 was the
need to make sense of massive amounts of data, which scored at a comparatively low 39% – high
enough to register as a popular challenge, but eight points below the third largest challenge. It is
also worth noting that this challenge is also linked directly to the technology factor, as “making
sense of massive amounts of data” almost always involves technology broadly and data analytics
solutions specifically.
 On the Data-Driven Audit
Since it is so central to the conversation on the state of
internal audit in 2020, it is worth clarifying what we mean
when we refer to the “data-driven audit”. Increasingly used
by the Big Four global audit and accounting firms (Deloitte,
Ernst & Young, KPMG, PricewaterhouseCoopers), the data-
driven audit leverages technology, big data, data analytics,
and even predictive analytics to shift the internal audit
from a manual exercise to a data-centric, risk-sensitive,
technology-enabled, continuous activity.

In the words of Peter Russel, KPMG’s Audit and Data

Analytics Lead for Australia, although the data-driven audit
The data-driven audit is rooted in technology, it is ultimately about redefining the
uses technology, big relationship between auditor and client.
data, data analytics,
even predictive analytics “Data-driven audits can mitigate your risks today by
showing back to you how your business is performing
to make auditing a data-
against your risk framework that you’ve set,” he explains.
centric, risk-sensitive, “Are you obtaining the sorts of loans, the sorts of customers,
technology-enabled, the sorts of business that you’ve wanted in accordance with
continuous activity. your strategy and in accordance with your risk appetite?
This changes the relationship between auditor and client
from a reactive to a proactive one.”

In short, data-driven auditing is an approach marked by:

• The use of data analytics technology.

• A decreased reliance on manual tools and processes

(e.g., traditional spreadsheets and sampling).

• Results-based decision making that enables both the

auditor and client to find more value in an audit.

• Using these approaches to enable management to

minimize risk.

The data-driven audit shirks conventional, manual

approaches to auditing to realize a future of data-based
decision making.
The Road Ahead
As readers will see in the survey findings presented throughout
these pages, the road ahead for internal auditing in 2020 will be
defined by the following considerations:

• Data analytics: As organizations move towards the data-

driven audit, they will continue to adopt and exploit the great
potential presented by data analytics tools.

• Training and adoption: Auditors are acutely aware of the

promise offered by data analytics solutions but struggle
to adopt and exploit such tools due to skills and training
deficiencies. Expect to see this addressed throughout 2020
through new training approaches and programs, but also
through talent acquisition strategies that focus on technology
skills as a key consideration.

• Compliance: Just as it has been a priority in the last 18 years,

namely since the passage of the Sarbanes–Oxley Act in 2002,
compliance will continue to rank as a top priority in 2020 and
the years ahead.

Read on for our breakdown of some of the key findings of the State
of Internal Audit 2020 Survey.
Data Analytics
Just as there is no escape from the seismic technological changes affecting business in the 21st
century, references to data analytics are abundant. The internal audit profession is affected
accordingly, and data analytics has become a must-have tool of audit in 2020. Though data
analytics tools have been available for years, internal audit is becoming increasingly aware of
possibilities presented by related technologies.

In our survey, we found that most respondents around the globe had either already incorporated
data analytics into their internal audit approach or were planning to adopt data analytics in
2020. This suggests that 92% of respondents identify the value of data analytics in their audit
approaches and have either adopted it or plan to adopt it this year – a good indication for the
profession at large.

A small percentage of respondents indicated that they do not use data analytics in auditing and
had no plans to use it in the future. On a maturity scale, these respondents would be categorized
as laggards; they have not yet ‘seen the light’ and data analytics are not in their near-term plans.

Current or planned elements of internal audit: data analytics

Not Used,
No Plans 8.7%

Planned
for 2020 29.8%

Currently
Used 61.5%
When asked to characterize the degree to which they used data analytics within their audit
program, respondents’ answers varied, showing some had adopted a fairly robust, mature, and
comprehensive data analytics approach (8.1%) while others indicated they were just getting
started (17.1%).

Does your organization use data analytics in your

internal audits and to what degree?

No, and we have

no plans to 4%
No, but we
plan to 21.1%

Yes, but we are just

getting started 17.1%
Yes, but only on an
ad hoc basis 19.9%
Yes, we use it regularly
on our audits 29.8%
Yes, we have an advanced
data analytics program 8.1%

A positive takeaway from this is that, while the degrees of maturity vary, most of these
respondents have begun their journey towards a data analytics-informed future.

We will unpack these findings for insights throughout 2020, in future reports and articles, but
in the meantime, we can assert with confidence that the age of data analytics in internal audit
is upon us and organizations that are either slow to adopt data analytics solutions or, worse
yet, unaware of the potential data analytics offers, ought to take heed and shape their strategic
plans accordingly.
 Audit Technology Adoption
and Training
As indicated in the introduction to this report, the adoption of new audit technologies is a key
challenge and top priority for internal auditors around the world. But adopting new technology
across a large global organization is no small feat, especially when it is challenging enough to train
a workforce on existing audit technology.

And that is exactly what our findings pointed to. When asked to rate the top strategic priorities for
2020, respondents overwhelmingly named training their workforce on audit technology either a
medium priority (45%) or high priority (41%).

Rate the strategic priority of attracting and recruiting

tech-savvy talent in 2020

Low Priority
36.9%

Medium Priority
37.8%

High Priority
25.3%

As the third-largest strategic priority for 2020, training is undeniably an organizational concern.
And at least some auditors are looking at the problem through the training and recruitment lenses.
Among the many strategic priorities identified by respondents, attracting and recruiting tech-
savvy talent was named as either a high priority (25.3%) or medium priority (37.8%) for 2020.

Most audit organizations know they have to address the skills shortage in internal audit, and a
combined 63% are addressing the challenge by hiring the right talent in 2020. That is not to say
that existing staff are being ignored. It simply shows that organizations are taking a multifaceted
approach to address the problem.

One insight here is that leaders in internal audit realize that, in order to adopt, implement, and
exploit the power of data analytics and other audit technologies, they first need a workforce that
is capable of using the tools from a skills perspective. The adoption problem within the audit
profession is a far-reaching and longstanding issue we explored in a recent article and one we will
continue to discuss throughout 2020.
 Artificial Intelligence and
Machine Learning
Just as data analytics is all around us today, AI is driving the conversation in just about every
area of business around the globe. Businesses worldwide are investing heavily in the promise
of AI: a scant four years ago, only 10% of respondents to Gartner’s sweeping CIO survey
indicated they had deployed AI solutions, a number that has swelled by 270% in just four years.
As Gartner’s Research VP Chris Howard noted when survey results were published in 2019, “If
you are a CIO and your organization doesn’t use AI, chances are high that your competitors do
and this should be a concern.”

The same survey results also indicate that by 2021, 80% of new
technologies will feature foundations in AI, suggesting AI will only
“If you are a CIO and become more relevant and pervasive in the years ahead. A 2019
your organization IT Audit survey by Protiviti and ISACA bolsters the idea that the AI
doesn’t use AI, chances transformation can fuel long-term growth, but Protiviti’s recent global
AI survey also shows many companies are still at square one when it
are high that your
comes to figuring out how to measure ROI, determine use cases, and
competitors do and this define analytics capabilities.
should be a concern.”
In internal auditing, the possibilities presented by AI are considerable.
Chris Howard,
From contract review to unstructured data analysis to supporting
VP of Research,
fraud investigations, AI is poised to transform internal audit. But in
Gartner
accordance with some of the results found by Gartner and Protiviti,
many in the industry have no plans to incorporate AI into their internal
audit approaches, or do not know where to begin.

Rate the strategic priority of building AI and Machine Learning

into your audit process in 2020

High Priority
13.8%

Medium Priority
26.9%

Low Priority
59.2%
 In our survey, most individuals responding (59.2%) ranked building AI and machine learning
into audit processes as a low priority. This shows that while 13.8% view it as a high priority,
there is still much room to grow.

When asked to characterize the extent to which they used AI in their audits, a small fraction
of respondents said AI was baked right into their audit strategy and is a part of their daily
activities.
Are AI and Machine Learning currently incorporated into your
audit processes, and if so, to what extent?

Not sure
10.9%
No, and we have
no plans to 45.4%
No, but we plan to
integrate AI/ML into
our audit approach
27.6%
Yes, but we are only
beginning to explore
these applications
5.9%
Yes, but we only use
it on certain audits 7.9%
Yes, it is baked into our
digital audit strategy and
part of our daily activities
2.3%

These results show that only a handful of internal auditors are using AI in a committed and
organized way, and nearly half have no plans to incorporate AI into their internal auditing
processes. Since most other businesses globally are investing in AI at an increasing rate, the
comparative disinterest in these technologies by organizations within internal auditing is an
area of concern.

As the year unfolds, expect to see awareness of the role of AI in internal audit expand especially
as examples of its use among maturity leaders are illustrated through example.
Towards the Data-Driven Future
Like many industries, the world of internal audit today is very much defined by new
technologies, barriers to adoption, and the promise of a data-driven future.

Compliance demands will continue to play a key strategic role in the priorities of any audit
organization. SOX compliance and other emerging and new compliance requirements will
also play a large role as electronic record management will ever be under the microscope, and
any auditor will need to maintain compliance simply to do business and avert the monumental
costs of noncompliance.

But alongside addressing compliance requirements, leading audit organizations will spend
2020 in pursuit of the data-driven audit through a combination of addressing the current
skills shortage, acquiring tech-savvy talent and optimizing their use of existing audit
technology solutions.

Though the potential of AI and machine learning has not been fully embraced by the industry,
many leaders have already adopted AI in their audit approaches and many others are aware
of its potential, in spite of the fact they do not expect to adopt AI this year. Also, recall that
while the value of data analytics in internal audit wasn’t universally apparent 20 years ago,
the organizations that ‘saw the light’ early are among the global success stories today. Early
adopters often graduate to become top performers and global leaders, so expect to see the
same dynamic emerge in the AI conversation throughout 2020.

If the data-driven audit is the destination (as survey findings indicate) and audit technology is
the vehicle, then it stands to reason an optimal alignment of people, processes, and technology
is the way that will bring the profession to the promised land of a data-driven future.

Report by Paul Leavoy, who writes on internal auditing and data analytics with CaseWare IDEA.

Begin your journey towards the data-driven audit by

engaging with our team today. We will assess your
current state and define a simple, achievable plan to
help you realize a results-based, data-driven future.

Visit idea.caseware.com
 CaseWare IDEA Inc.

1400 St Laurent Blvd., Suite 500, Ottawa, ON K1K 4H4 Canada

1-800-265-4332 | [email protected] | idea.caseware.com

CaseWare IDEA is an internationally recognized data analytics software company that delivers cutting-edge solutions to
help accounting firms, corporations, and governments across the globe optimize audit processes through data efficiency
and continuous innovation. A leader in data-driven auditing for over 25 years, IDEA tools help auditors, accountants, and
other finance professionals execute swift and comprehensive audit data analysis. IDEA uses artificial intelligence and
machine learning to augment audit data capabilities for measurable returns on efficiency, quality, and value. CaseWare
IDEA is a division of CaseWare International, which has led the industry for over 30 years and is used by more than 500,000
people across 130 countries in 16 major languages. To learn more, visit idea.caseware.com.