Rethinking Internal Audit Budgets: Embracing Technology and Smarter Work Methods

Rethinking Internal Audit Budgets: Embracing Technology and Smarter Work Methods

Budgeting is essential, but it can severely limit how we view performance. Too often we focus on inputs and outputs instead of outcomes and impacts. In our profession, that means we set quantitative metrics to support our budget requests (e.g., auditor days and reports delivered), but fail to consider service effectiveness.

I’m not saying we should ignore the inputs and outputs, but we need to shift our emphasis. When our budget horizon is next year’s audit plan, our outlook is limited. I welcome the spotlight in the Global Internal Audit Standards on strategic planning and the importance of creating a vision “designed to inspire internal auditors to continuously improve.” Three areas of importance are flagged:

  • Developing auditor competencies.
  • Applying technology.
  • Improving internal auditing.

This aligns completely with my thinking. We mustn’t settle for our present maturity – whether high or low. Too many CAEs adopt a Groundhog Day mentality to planning and budgeting. Sadly, the same inputs and tools will deliver the same results.

We need a new way of thinking about budgets. Why now? I say, why not? It’s like the joke: when is the best time to plant a tree? 20 years ago! But the next best time is now. Rather than building budgets from historical figures, I prefer a zero-based approach, beginning with an analysis of client needs three-to-five years ahead rather than starting with salary costs and adding bits around the edges. It’s not about how many audits we are going to do or reports we are going to write, but how much value we will deliver in terms of assurance, insight, and foresight. 

This is the first in a two-part series on internal audit budgets in which I want to persuade you to take a long, hard look at your priorities.

Risk in Focus 2025: North America

Slicing and Dicing

I began my career in 1983 when advanced technology meant a four-colour biro. Much of my experience has been with public sector entities, but I don’t believe budgeting issues differ significantly in private organisations. Unless we demonstrate our value and our willingness to continuously improve, we will always be regarded as an overhead rather than an investment. 

We can think of our budget in slices. How much are we going to need for new technology, remote hardware, advanced apps, artificial intelligence, training, and subject matter experts, and what improvements in outcomes do we expect? According to The IIA’s latest Pulse Study, 50% of CAEs believe their budget is insufficient – and perhaps we always will – but encouragingly, 40% are researching the use of AI and 15% are actively using it.

It is easy to make excuses – Hal Garyn describes this well in his excellent article “Why Internal Audit is a Tech Laggard – and How to Fix It” – but even small teams can find creative ways through networking and sharing ideas and resources to advance their maturity.

Leveraging Technology to Work Smarter Not Harder and Deliver More Value

Such is the rate of change that without technology we could scarcely keep pace. It is the great multiplier. Automation tools and artificial intelligence can handle repetitive and time-consuming tasks, helping us streamline our processes, reduce human error, and enhance the accuracy and value of our findings. Data analytics allows us to examine whole sets of qualitative and quantitative data, identify anomalies and trends, and deliver more comprehensive insights in less time than “traditional” approaches where we rely on samples we hope are representative.

Investing in an audit management system has allowed us to offer our clients real-time, dynamic dashboards. Previously our Audit Committee had no idea what internal auditing was up to from one quarter to the next. Now they can view progress and check the status of our audits 24/7. We have also started using ChatGPT for an initial heads-up on risks and controls when we plan an audit.

The integration of collaborative tools and remote working technologies has revolutionised how audit teams operate. Covid forced us to adopt much smarter approaches using cloud-based platforms. These are now considered basic tools and subject to continuous innovation. We are using Microsoft Copilot to provide instant summaries of online meetings. This not only enhances productivity but also allows for a more flexible and dynamic working environment.

Moreover, these platforms facilitate better communication and information sharing, ensuring that colleagues are “on the same page” and can access the latest data and insights. This joined-up mindset leads to more robust and cohesive audit processes.

As risks become ever more complex and nimble, former auditing methods do not serve us well. Advanced technological solutions can significantly enhance risk management capabilities. Machine learning algorithms, for example, can predict potential risks from historical data, thus protecting the organisation from potential negative impacts.

Building Team and Talent

An investment in technology means a shift away from 90-95% of our budgets being human resources and may mean we have fewer, higher-skilled, higher-paid members in our team in future. However, investing in the best tools to do the job and the training to go with it has a positive impact on recruitment, retention, morale, and effectiveness. It also ensures our auditors remain marketable. We have an obligation to support continuous personal and professional development, recognising people changing jobs is natural and healthy.

Continuous improvement is at the heart of effective internal auditing. By reallocating budget towards technology, organisations can ensure that their audit teams are equipped with the latest tools and training. 

Rethinking Budgets for the Modern Internal Audit Team

As the landscape of internal auditing evolves, our budgets need to reflect the challenges and opportunities presented to us. There must be a continuing shift towards a more strategic investment in technology and smarter ways of working. It is not a trend but a necessity. Only by embracing these changes can organisations enhance efficiency, improve risk management, and support continuous improvement enabled by more effective and impactful internal auditing.

The Audit Committee may not be driving this, and we must be our own best advocates. Instead of burying our heads in the sand, we must be prepared to raise them above the parapet. It may be difficult to advocate for a bigger budget and a shift in the allocation of resources, but we must be brave to fulfil our purpose. Returning to the Global Internal Audit Standards, we must strive to ensure the function has technology to support the internal audit processes and present well supported bids to fund technology.

David

David Hill is the CEO of SWAP Internal Audit Services based in the UK. David has nearly 40 years of audit experience, is currently Chair of the Local Authority Chief Audit Network, and is a former member of the Global Guidance Committee. Connect with David on LinkedIn.