Embracing Agility: Part 1 - What is Agile Internal Audit and When Should You Use It?

In today's business landscape, change isn't just constant – it's accelerating. Disruptions, technological advancements, and evolving risks mean that the environment organisations operate in is more uncertain than ever before. This presents a significant challenge for Internal Audit functions. How can we provide timely, relevant, and impactful assurance when the ground is constantly shifting beneath our feet?

Traditional, often rigid, audit methodologies designed for a more predictable world can struggle to keep pace. They risk delivering insights that are out of date by the time the final report is issued. But there's a powerful alternative gaining traction: Agile Internal Audit.

What is Agile in the Context of Internal Audit?

At its heart, Agile is a mindset and a collection of principles that emerged from the software development world, outlined in the Agile Manifesto. When translated to Internal Audit, Agile isn't about abandoning professional standards or skipping crucial steps. Instead, it's about adopting a more flexible, iterative, and people-centric approach.

Think about the core Agile principles:

• Individuals and interactions over processes and tools: Prioritising effective communication and collaboration within the audit team and with stakeholders.

• Working software over comprehensive documentation: Delivering value incrementally through timely insights rather than waiting for a single, exhaustive final report.

• Customer collaboration over contract negotiation: Engaging frequently with auditees and stakeholders to ensure the audit remains focused on the most critical risks and provides the most value.

• Responding to change over following a plan: Being adaptable and able to adjust the audit scope and approach as new information emerges or risks shift.

Compared to a traditional audit's often linear, phase-driven approach (planning, fieldwork, reporting, follow-up), Agile Internal Audit is more cyclical and adaptive. It involves working in shorter bursts, often called 'sprints', with continuous feedback and reprioritisation.

Why Should Internal Audit Consider Adopting Agile?

The benefits of adopting an Agile approach in Internal Audit are compelling, particularly in dynamic environments:

• Increased Speed and Responsiveness: Agile allows audit teams to quickly pivot and focus on emerging risks or hot topics, providing assurance when it's needed most.

• Enhanced Stakeholder Engagement: Regular interaction and incremental delivery mean stakeholders are more involved throughout the process, leading to better collaboration and more readily accepted findings.

• Improved Team Collaboration: Agile methods encourage daily communication and shared ownership within the audit team.

• Delivering Value Incrementally: Instead of waiting months for a final report, stakeholders receive valuable insights and recommendations throughout the audit lifecycle, allowing for faster remediation. For example, an audit of a new online system could deliver findings on user access controls within weeks, rather than waiting for the full system implementation review to conclude.

When is Agile Internal Audit Most Effective?

While Agile principles can bring benefits to almost any audit, they are particularly well-suited to certain situations and environments:

• Audits in Rapidly Changing Areas: Technology implementations, significant business transformation projects, or areas subject to frequent regulatory changes are prime candidates for an Agile approach, where the risk landscape is constantly evolving.

• Areas of High Uncertainty: When the risks are not fully understood at the outset, Agile allows the audit to explore and refine its focus iteratively.

• Need for Continuous Assurance: For critical, high-risk processes, Agile can facilitate more frequent check-ins and ongoing assurance.

• Close Collaboration with Stakeholders Required: When an audit requires significant input and buy-in from the business, the collaborative nature of Agile can be highly effective.

However, it's worth noting that a traditional approach might still be more appropriate for highly standardised, compliance-driven audits with stable processes and clear, unchanging requirements. Agile is a tool, and like any tool, it's most effective when used in the right context.

Setting the Scope: How to Think Agile from the Start: One of the most significant shifts in Agile Internal Audit is in how we approach scoping. Instead of defining a rigid, comprehensive scope upfront that is fixed for the duration of the audit, Agile encourages a more flexible and iterative approach.

This often involves creating a flexible backlog of auditable areas or specific risks within a broader audit topic. At the beginning of an audit 'sprint' (a short, focused period of work, typically 1-4 weeks), the team pulls the highest priority items from the backlog to focus on.

The key is to define "minimum viable audit" objectives for each sprint. What is the most important aspect we can review and provide assurance on in this short period? This allows for early testing and feedback. The scope isn't set in stone; it can evolve based on findings from initial sprints, changes in risk priority, or new information gathered through continuous stakeholder feedback. This dynamic scoping ensures the audit remains relevant and focused on the most critical areas throughout its lifecycle.

Looking Ahead: Embracing Agile in Internal Audit is not just about adopting new methodologies; it's about cultivating a more responsive, collaborative, and value-driven function. By thinking and acting with agility, internal audit can truly partner with the business to navigate uncertainty and drive improvement in real-time.

In Part 2 of this series, we'll delve deeper into the practicalities of Agile Internal Audit, exploring how to apply Agile principles to reporting and action management, and how this dynamic approach can influence the annual internal audit planning process. Stay tuned!