We often picture Internal Audit as the group that checks boxes, keeps things running smoothly, and makes sure we all follow the rules.
That is certainly part of the job description, but the Internal Audit function has an incredible, untapped potential to become a catalyst for innovation across the entire organization.
The key to unlocking this opportunity is shifting the mindset from being seen as a judge of past adherence to rules to a strategic partner that helps spot future opportunities.
In fact, a recent survey found that only 14% of Internal Audit functions were considered to be “advanced” in their adoption of technology, a clear indication that many audit teams still have a long way to go in truly embracing an innovative approach.
Below are five practical tips for transforming your Internal Audit function into a driver of organizational innovation.
1. Shift the Audit Focus to Strategic Risk
Instead of dedicating all your resources to traditional, routine financial audits, start looking at the bigger strategic risks and opportunities the business is facing. This means the audit plan should align directly with the company’s long-term goals.
For example, if your company is aiming to launch a new product line or enter a new market, the Internal Audit team should be involved early on. Their involvement is useful because they can offer an objective assessment of the project’s risks. They will not simply point out flaws; they can identify control gaps and process inefficiencies before they cause a major setback. This proactive engagement does more than just prevent failure; it ensures that the innovative project has a solid foundation for success, which increases the likelihood of achieving those ambitious, game-changing results.
Sometimes, internal teams need extra bandwidth or specialized skills for these complex engagements. They may call in the big guns by seeking assistance from providers like Paragon Consulting Partners, who provide co-sourced or outsourced internal audit partners to supplement the team’s capabilities. When auditors get their feet wet in these strategic areas, they understand the business better and can contribute more.
2. Audit the Innovation Process Itself
Many organizations have a formal process for generating and testing new ideas, but how often is that process itself audited? Internal Audit can apply its structure and methodology to evaluate the effectiveness and efficiency of your innovation pipeline.
The audit team can examine questions like: Do we have the right metrics to gauge the success of a pilot program? Are there bottlenecks that slow down the transition from a successful prototype to a scaled-up deployment? It is through the auditing of the innovation process that auditors ensure the resources poured into R&D and new initiatives actually yield meaningful outcomes. This helps prevent money from being wasted on projects that are not properly set up for scaling. It also improves accountability for the teams driving change, which helps everyone stay on the same page.
3. Encourage and Embrace Cross-Functional Collaboration
Internal Audit has a unique vantage point: they see how every single department works, from finance and operations to sales and customer service. This holistic view is a goldmine for innovation. You should intentionally use auditors as conduits of information and best practices between different parts of the business.
For instance, an auditor might see a highly efficient, automated process used by the Finance team for expense reporting. They may then realize that a similar process could be applied to streamline inventory tracking in the Operations department. There is a benefit to fostering this cross-pollination of ideas: Internal Audit stops operating in a silo. It is particularly relevant during the consideration of major operational shifts.
If your organization is looking to optimize its customer support, for example, an Internal Audit review of the current back office processes could pinpoint areas where a specialized provider could offer a better solution. They might also suggest that the company turn over a new leaf in its service approach. Doing this provides not only cost savings but also advanced technology and superior service levels that the in-house team might struggle to achieve on its own.
4. Leverage Advanced Data Analytics and Technology
The future of auditing is firmly rooted in technology. Auditors who continue to rely solely on manual sampling are missing massive opportunities to drive innovation in their own function and provide deeper insights to the rest of the business. Utilizing data analytics tools allows the audit team to analyze 100% of transaction data, not just a small sample.
This comprehensive analysis does much more than just check for conformance; it identifies subtle patterns, emerging risks, and unusual activity that could be symptomatic of a larger process problem, or even a nascent opportunity. A direct consequence of continuous auditing and advanced analytics is that the team can give real-time insights rather than waiting until the end of a long, drawn-out audit cycle.
Data from a PwC study indicates this need for change and notes that only 8% of internal audit functions are classified as ‘Pioneers’ who are very effective at raising significant risks the organization has not yet considered. Embracing technology is the quickest way for the remaining 92% to catch up and take the bull by the horns when it comes to risk and opportunity identification.
5. Cultivate a Consultative Mindset in the Team
Finally, the most powerful change is a cultural one. You need to encourage the audit team to see themselves less as police officers and more as internal consultants. This means focusing on the root cause of an issue rather than simply documenting the finding.
When an auditor discovers a control weakness, their response should not be “Here is the problem”. It should be, “Here is the problem, here is why it happened, and here are three different ways the business could redesign the process to prevent recurrence and even improve efficiency.” This consultative approach requires auditors to develop strong soft skills, including communication, critical thinking, and a creative, solution-oriented perspective.
Final Thoughts
Internal Audit is uniquely positioned to bridge the gap between risk management and entrepreneurial spirit. Follow these tips to transform your audit function from a necessary overhead into a strategic asset that actively drives value and instills a culture of smart, sustainable innovation.
Better yet, partner with a firm like Paragon Consulting Partners to bring in specialized expertise and different perspectives through co-sourced or outsourced internal audit partners.
