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Building Your Internal Audit Toolkit to Become the Auditor of the FutureJIM HANNANNATIONAL PRACTICE DIRECTOR

IFG FINANCE AND ACCOUNTING AND RISK SOLUTIONS


RAJ V. NAGARAJAN

SENIOR VICE PRESIDENT – CHIEF AUDIT EXECUTIVE

WINTRUST FINANCIAL CORPORATION

Agenda and Objectives: Building Your Internal Audit Toolkit to Become the Auditor of the Future

What is the Auditor of the Future?

What skills will you need?

How to you build these skills?

Audit Basics – what makes a good auditor?

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Auditor of the Future

Audit Fundamentals

Agile and responsive

Understands Organizational Needs and the

Business

Understands Business Processes

Understands IT systems Uses Technology Communicates

Effectively Innovative


Creating tools in each of these areas will prepare you for the future of auditing

Audit Fundamentals◦ Understanding the risks and audit objectives◦ Designing and Performing Audit Procedures◦ Gathering the Evidence and Identifying issues◦ Dealing with People:

◦ Being efficient with people’s time◦ Getting information from people

◦ Being organized and good documentation


Understanding the Risks and Audit Objectives◦ Risks and objectives are the why and what of an audit◦ Audits are planned as the result of a risk assessment◦ The risks identified have been assessed to be a high priority, or

the audit would not have been planned◦ How do we understand the risks?◦ How do the risks relate to the audit objectives?◦ Discussing risks with management and process owners◦ Not everyone may see the risk◦ Dealing with “so what”


Understanding the risks and objectives will help direct your efforts and keep you focused on the audit objectives

Experience with risks is an essential tool in your toolkit

Designing and Performing Audit Procedures◦ Beginning with the Risks and

Objectives◦ Understanding the Process◦ Understanding the Systems◦ Understand how the risks are

managed◦ Asking the Right Questions◦ What is the population?◦ What is the inverse of the

population?◦ Being creative◦ Using technology


Gathering the Evidence and Identifying Issues◦ Going beyond audit exceptions◦ Asking the Right Questions, again◦ What is not there that should be?◦ Is there an elephant in the room?◦ Sorting through the noise◦ Seeing the Big Picture◦ Missing the forest for the trees◦ Denial and resistance


Is that a real bear about to eat this man?

Developing the ability to find and identify issues is an important tool in your toolkit

Dealing with People◦ Coordinating audit work with work schedules◦ De-personalize◦ Developing a relationship with the auditee◦ Getting people to help you◦ Finding allies◦ Interviewing Skills◦ Asking the Right Questions, again◦ The brush-off and hostile auditees


Not everyone appreciates being audited

Develop relationships with auditees and throughout the organization - Effectiveness in dealing with People can be the difference between an impactful audit and a bust

Communicates Effectively◦ Written Communication◦ Verbal Communication◦ Timely Communication◦ Cutting through the clutter◦ Concision

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Agile and Responsive◦ Agility: the ability to move quickly and easily.◦ Responding to events and changes◦ Doing the work better and faster◦ Measure the audit process – where is time spent and how can time be

reduced◦ Targeted “quick hit” audits◦ Using Technology◦ Using Agile Methodology◦ Requirements and solutions evolve based on need◦ Collaborative and adaptive◦ Rapid and flexible response to changes◦ Adaptive planning, evolutionary development, empirical knowledge, and continual

improvement, and it encourages rapid and flexible response to change


Developing agile capabilities is a tool that can be applied to many situations to produce results faster

Understanding Organizational Needs◦ What is the organization’s mission and strategy?◦ How does audit adds value?◦ What are the key areas of focus of IA department and

organizational needs?◦ Understanding the audit plan and why


Linking our activities with the how audit adds value and the organization’s mission and strategy makes us more valuable

Understanding Business Processes◦ How does the business operate?◦ Standard Business Processes – more similarities than

differences◦ Industry Unique Processes◦ Organizationally Unique Processes◦ Best Practices◦ Common Issues◦ Mapping out the Process


Understanding how Business processes work as well as what can go wrong is an important tool in your kit

Understanding IT Systems

What systems are being used?How and Where do systems store Data?How is data processed by the systems?How do systems link and work together?Understanding RisksCybersecurityCloud Assessments


Understanding how IT Systems work as well as what can go wrong is an important tool in your kit

Uses Technology◦ GRC Tools◦ Understanding and Getting Data◦ Advanced Excel◦ Data Analytics Tools◦ Predictive Analytics◦ Robotic Process Automation (RPA)◦ Cognitive Intelligence◦ Reporting


GRC Tools Can support comprehensive view of audit universe

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Data Analytics


Getting DataKnowing the systems used

Understanding the Data

Getting Access to the Data

Using your relationships


Advanced Excel• Having advanced Excel skills is extremely useful in internal and

other areas as well• Excel can be used for data analytics by sorting, comparing,

summarizing and filtering data • Become knowledgeable about the many operations on the data

and formulas menus and how to use pivot tables• VLOOKUP, pivot tables, SUMPRODUCT, logical statements such as

IF and writing complex formulas are just a few examples of advanced excel


Becoming the “Go-To” person to perform advanced excel work makes you extremely valuable is an important tool to add to your kit

Data Analytics ToolsTo perform advanced data analytics, excel has limitations especially when applying complex logic, comparing multiple elements and using very large sets of data

Commonly used data analytics tools include ACL and IDEA

Using these tools, especially ACL, requires some knowledge of programming

Many internal audit departments struggle to effectively use these tools due to the investments required to learn how to use them, write the scripts, obtain the data and then analyze the results


Knowing how to effectively use these data analytics tools makes you extremely valuable is an important tool to add to your kit

Analyzing DataUnderstanding what you’re looking for

What is the data telling you?

Anomalies

Seeing the signal in the noise


Knowing how to analyze data will

Predictive AnalyticsPredictive analytics is the branch of the advanced analytics which is used to make predictions about unknown future events.

Predictive analytics uses many techniques from data mining, statistics, modeling, machine learning, and artificial intelligence to analyze current data to make predictions about future.

Using Predictive Analytics in Internal Audit


Robotics and Cognitive Intelligence


Robotics process Automation (RPA)Many companies are deploying RPA to automate tasks

RPA is still in its early stages but is expected to grow exponentially

Companies initially struggling with ROI on RPA

Candidates for RPA are repetitive, standardized tasks that take up significant time and are performed on a large scale consistent tasks

Using RPA in Internal Audit

Providing assurance regarding RPA


Internal Auditors will need to become proficient in RPA software and how RPA is deployed

Machine Learning and Artificial IntelligenceAs is well known, AI is making great strides and machines are capable of performing very advanced functions such as driving a car

AI is still in its early stages

Using AI and machine learning in Internal Audit

Providing assurance regarding AI and machine learning

Data Quality


Internal Auditors will need to become proficient in how AI is deployed

Innovates◦ Develops new Ways of doing things◦ Uses creative approaches◦ How to foster creativity◦ Finding your voice

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Putting it all Together - Auditor of the Future

Audit Fundamentals

Agile and responsive

Understands Organizational Needs and the

Business

Understands Business Processes

Understands IT systems Uses Technology Communicates

Effectively Innovative


Creating tools in each of these areas will prepare you for the future of auditing

Agenda: Building Your Internal Audit Toolkit to Become the Auditor of the Future

The Auditor of the Future

Audit Basics

Understanding the Needs of the Organization

How to Equip Yourself to Address the Organization’s Needs

Technology and Audit

Other Areas


Questions and Answers?END OF PRESENTATION


Thank you for your time and attention!IIA CHAPTER CHICAGO | 59TH ANNUAL SEMINAR


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