Embracing Agility: Part 2 - Agile in Practice - Reporting, Action Management, and Annual Planning.

Welcome back to our exploration of Agile Internal Audit. In Part 1, we introduced the core concepts of Agile and discussed how this modern approach can help Internal Audit functions remain relevant and provide timely assurance in today's fast-paced business world. We explored what Agile Internal Audit is, when it's most effective, and how to approach audit scope with an Agile mindset, moving towards flexible backlogs and iterative planning.

Now, let's delve into the practical application of Agile principles beyond the initial scoping – specifically, how Agile influences reporting, action management, and even the annual internal audit planning process.

Agile Reporting: Delivering Timely Insights: Perhaps one of the most significant shifts with Agile Internal Audit is in the approach to reporting. Moving away from the traditional model of a single, comprehensive report issued at the very end of an engagement, Agile emphasises continuous and iterative communication. The goal is to deliver timely, actionable insights to stakeholders throughout the audit lifecycle, not just at the conclusion.

This means:

• More Frequent Updates: Instead of formal weekly or monthly status meetings, think about short, regular check-ins (like daily stand-ups, even if brief) within the audit team and with key auditee contacts.

• Iterative Sharing of Findings: As audit work is completed within a 'sprint' or iteration, findings and observations are shared promptly with the relevant stakeholders. This could be through quick emails, informal discussions, or focused reports covering just the scope of that specific iteration.

• Using Various Channels: Reporting isn't limited to formal written documents. Consider visual aids like Kanban boards to show progress, or brief presentations highlighting key takeaways from a sprint.

• Focus on Actionability: Reports and communications are geared towards providing insights that stakeholders can act on immediately to address risks or improve processes.

This continuous feedback loop ensures there are no surprises at the end of the audit and allows management to begin remediation efforts much sooner, ultimately enhancing the value and impact of the audit.

Agile Action Management: Driving Progress Incrementally: Agile principles can also revolutionise how internal audit findings and recommendations are managed and tracked. Instead of presenting a long list of findings at the end of an audit and expecting remediation within a fixed, often distant, timeframe, Agile encourages a more iterative approach to action management.

Consider:

• Breaking Down Actions: Larger, complex remediation efforts can be broken down into smaller, more manageable tasks or user stories. This makes them less daunting and easier to track.

• Collaborative Action Planning: Work closely with management to define these smaller action steps and agree on realistic timeframes for their completion, incorporating these into their own work backlogs where appropriate.

• Regular Follow-up: Instead of waiting for a formal follow-up audit months later, incorporate more frequent, perhaps lighter-touch, check-ins on the progress of key actions. This could be part of the regular stakeholder interactions.

• Focus on Progress, Not Just Completion: Celebrate incremental progress on action plans. This can help maintain momentum and keep remediation efforts a priority for the business.

This approach fosters a more collaborative environment where Internal Audit and management work together to iteratively improve the control environment and address risks.

Building on Agility in the Annual Planning Process: Integrating Agile principles can transform the annual internal audit planning process from a static, once-a-year exercise into a more dynamic and responsive function. While an annual risk assessment and high-level plan remain crucial, an Agile-inspired approach introduces flexibility:

• Dynamic Audit Universe/Backlog: View the audit universe and potential audit topics as a continuously prioritised backlog. This backlog is regularly reviewed and updated based on changes in the business, emerging risks, and stakeholder feedback.

• Flexible Audit Plan: The "annual plan" becomes more of a rolling 12-month (or shorter) outlook, with the ability to adjust priorities and slot in new audits from the backlog as needed. This allows Internal Audit to quickly respond to unexpected events or newly identified risks.

• Shorter Planning Cycles (within the year): While the overall plan is longer-term, detailed planning and resourcing can happen in shorter cycles (e.g., quarterly or even sprint-by-sprint for specific audits), allowing for greater agility in resource allocation.

• Continuous Risk Monitoring: Agile planning is supported by continuous risk monitoring, ensuring that the audit plan remains aligned with the most significant threats facing the organisation.

This dynamic approach ensures that Internal Audit resources are consistently focused on the areas of highest risk and greatest value to the organisation throughout the year.

Challenges and Considerations when Adopting Agile Internal Audit: While the benefits of Agile Internal Audit are clear, adopting this approach is not without its challenges:

• Resistance to Change: Moving away from established methodologies can be met with resistance from both audit teams and stakeholders accustomed to traditional processes.

• Need for New Skills and Mindsets: Agile requires a shift in mindset towards flexibility, collaboration, and iterative delivery. Audit teams may need training in Agile methodologies and tools.

• Adapting Existing Tools and Methodologies: Current audit software and methodologies may need to be adapted to support an Agile workflow.

• Maintaining Documentation and Standards: Ensuring that sufficient documentation is maintained throughout iterative sprints to meet professional standards requires careful planning.

Overcoming these challenges often starts with starting small. Pilot Agile on a few well-suited audits to demonstrate its value and learn what works best for your organisation. Providing training and clear communication about the "why" behind the shift are also crucial.

The Future is Agile: Adopting an Agile mindset and implementing Agile practices can significantly enhance the effectiveness, relevance, and value of the Internal Audit function. By embracing flexibility, fostering collaboration, and focusing on delivering timely, actionable insights, Internal Audit can become a more dynamic partner in helping the organisation navigate complexity and achieve its objectives.

The journey to becoming a truly Agile Internal Audit function is one of continuous improvement and adaptation. As the business world continues to evolve, so too must Internal Audit, and embracing agility is a critical step in that ongoing evolution.