IN today's fast-paced business environment, organizations across industries are continuously seeking ways to improve their operational efficiencies and manage risks in a dynamic manner.
Agile auditing, derived from the principles of Agile methodology, is a contemporary approach that aligns auditing processes with flexibility, adaptability, and collaboration.
Agile auditing stands in contrast to traditional auditing, which is often seen as linear, rigid, and time-consuming. This approach integrates iterative processes, real-time feedback, and cross-functional teamwork, ultimately fostering a culture of continuous improvement.
Understanding Agile Auditing
Agile auditing borrows its core principles from Agile software development, which is known for its iterative approach, regular feedback loops, and collaboration among various stakeholders.
The key components of Agile methodology - sprints, daily standups, and retrospectives - are applied to auditing to make the process more dynamic, responsive, and adaptable to change.
Traditional auditing often involves a predefined, sequential set of steps, such as planning, fieldwork, reporting and follow-up.
Each phase can take months to complete, and by the time an audit report is finalised, the information may be outdated. Agile auditing, on the other hand, breaks down the audit process into shorter, more manageable cycles or "sprints" - a practice commonly used in Agile software development.
Auditors work in these short, time-bound cycles to assess risks, identify areas of concern, and provide real-time insights.
Key Features of Agile Auditing
Iterative Approach: Unlike traditional audits, which are typically conducted annually or semi-annually, agile audits are performed continuously or more frequently. Auditors conduct multiple short sprints focusing on specific areas, which allows them to address emerging risks and changes in business processes.
Collaboration: Agile auditing encourages continuous collaboration between auditors and various stakeholders, including management and process owners. The audit team works closely with other departments, promoting an open exchange of information and more effective communication.
Flexibility and Adaptability: Agile auditing allows auditors to be more adaptable. If new risks emerge or business priorities change, the audit plan can be adjusted mid-sprint. This flexibility helps ensure that audits remain relevant and aligned with the organization's current risk profile.
Real-time Feedback: A hallmark of Agile is the use of frequent feedback loops. In agile auditing, auditors provide real-time feedback to the auditee, addressing issues as they arise. This minimizes the lag between identifying risks and implementing corrective actions.
Use of Technology: Agile auditing heavily leverages technology to enhance efficiency. Automated data analytics, continuous auditing tools, and dashboards allow auditors to gain real-time insights into risk and performance, enabling faster decision-making.
Focus on Value Addition: Agile auditing shifts from simply ensuring compliance to delivering greater value to the organization. By focusing on risk areas that truly impact the business, the audit function can drive actionable insights that lead to meaningful improvements.
The shift to agile auditing brings numerous benefits to an organization, improving not just the audit function but also the overall risk management framework and operational efficiency.
Faster Response to Risks
One of the key advantages of agile auditing is its ability to respond quickly to emerging risks. Traditional audits can take months to complete, often rendering their findings outdated by the time they are reported. In contrast, agile auditing allows organizations to address risks in real-time.
The iterative, sprint-based approach ensures that auditors can quickly adjust focus based on new information or changing business conditions. This enables a more proactive approach to risk management, which is particularly valuable in today's fast-changing regulatory and operational environments.
Improved Collaboration and Communication
Agile auditing fosters greater collaboration between auditors and stakeholders. Traditional audits are often seen as isolated activities, with limited engagement between the audit team and other departments until the final report is issued. In an agile audit environment, auditors work closely with business units throughout the process.
This continuous interaction promotes transparency, builds trust, and helps align the audit objectives with business priorities. When departments are more involved, they are more likely to implement recommendations and view the audit as a partnership rather than a compliance exercise.
Higher Audit Quality and Relevance
Because agile auditing is iterative and flexible, it enhances the quality of audit results. The frequent reviews and feedback loops ensure that audit findings are relevant and up-to-date, which increases the overall impact of the audit. Furthermore, the use of data analytics and other technology tools allows auditors to focus on areas with the highest risk, ensuring that the audit delivers actionable insights that align with business objectives.
Increased Efficiency
Agile auditing can significantly improve the efficiency of the audit process. By breaking audits into smaller, more manageable sprints, auditors can focus on specific issues without getting bogged down in an exhaustive, months-long audit cycle.
Additionally, the use of continuous auditing technology can automate routine tasks, freeing up auditors to focus on higher-value activities. This increased efficiency not only reduces audit fatigue for both auditors and stakeholders but also allows the organization to allocate resources more effectively.
Enhanced Organisational Agility
Beyond the audit function itself, agile auditing can contribute to an organization's overall agility. By promoting a mindset of continuous improvement and responsiveness to change, agile auditing helps embed these principles into the broader organizational culture.
As auditors provide real-time feedback and collaborate closely with management, they contribute to a more agile approach to business operations. This agility is crucial for organisations that need to navigate uncertainty and adapt quickly to new challenges, such as regulatory changes, technological disruptions, or evolving market conditions.
Better Stakeholder Engagement and Buy-in
The collaborative nature of agile auditing fosters stronger relationships between the audit team and business units. When stakeholders are involved in the audit process from the beginning, they are more likely to understand the rationale behind audit findings and support the implementation of recommendations.
This not only improves the effectiveness of the audit but also enhances the overall risk management framework by ensuring that all parts of the organisation are aligned in their efforts to mitigate risks.
Agile auditing is a modern approach that brings substantial benefits to organizations by enhancing flexibility, collaboration, and real-time responsiveness in the audit process.
By breaking away from the rigid structure of traditional audits, agile auditing enables organisations to manage risks more effectively, improve operational efficiencies, and foster a culture of continuous improvement.
In a world where change is constant, adopting agile auditing can provide a competitive edge, helping organisations stay ahead of risks and drive sustainable value in the long term.
*The writer is a former chief executive officer of Minority Shareholders Watch Group and has over two decades of experience in the Malaysian capital market.