Embracing Digital Technology in Internal Audit - Takehiko Nakao | Asian Development Bank

Embracing Digital Technology in Internal Audit - Takehiko Nakao

Speech | 22 November 2018

Opening Remarks by ADB President Takehiko Nakao at the iaTech 2018 Conference on 22 November 2018 at ADB Headquarters in Manila, Philippines

Introduction

Good morning. On behalf of the Asian Development Bank, I wish to extend a warm welcome to all the participants and members of the AuditWithoutWalls! community who made their way across the globe, coming from 29 countries, to be with us these next two days. 

We are excited to be hosting iaTech 2018, the very first conference for the AuditWithoutWalls! community since its launch in April 2017. In a span of less than two years, this online community of internal auditors in the public sector has grown to 800 members across 93 countries. 

The internal audit function is a key element of good governance and accountability in both public and private sector organizations. As internal auditors, you play a critical role in protecting your organizations and promoting governance, risk management, and controls.

The theme of our conference is "Embracing Digital Technology in Internal Audit." Digital technology is rapidly growing across diverse fields, including mobile communications, robotics, artificial intelligence, the internet of things, and 3-D printing. We are now entering a 4th Industrial Revolution, and technology is drastically changing the way we live, work, interact, and do business.

Digital technology and the internal audit profession

With my remarks today, I would like to talk about your role as internal auditors in this age of digital transformation. In particular, I would like to highlight three ways in which digital technology is impacting the internal audit profession.

First, it is critical that the internal audit function keeps pace with changes in digital technology. An organization’s technology-based processes and activities must result in decisions and actions that are in line with its ethical, social, and legal responsibilities. Internal audit is intended to provide assurances that proper governance structures are in place and followed, including oversight and accountability surrounding an organization’s use of digital technology.

Through ADB’s Digital Agenda 2030 roadmap, we are actively harnessing the use of digital technology in our loan and grant operations in areas such as health, education, finance, and infrastructure in our developing member countries. ADB is also investing in new technologies for more efficient and effective management of ADB’s internal functions and processes. This includes better IT mobility, enhanced cloud platforms, and improved technology infrastructure. 

ADB’s Office of the Auditor General (OAG), which is our internal audit function, is actively involved in our IT initiatives and digital transformation. This includes reviewing and providing comments on Digital Agenda 2030 and actively participating in working groups on the topic of technology. In 2019, OAG will provide advisory services for ADB’s Digital Agenda by assisting and monitoring the implementation of our digital reforms and projects at various stages.

Second, new digital technologies can strengthen the internal audit function. By leveraging new technologies, internal auditors can better evaluate and improve an organization’s processes and systems. The optimal use of audit management systems and collaboration tools can also improve the internal audit function’s own processes.

In the case of ADB, OAG is using data analytics software to automate test procedures and assist other departments in implementing a continuous monitoring approach. This replaces the need to conduct repetitive audits and instead enables OAG to provide a higher value advisory role in which it ensures the automated tests are running properly. 

OAG is also leveraging technology to strengthen its audit of ADB country portfolios. In determining which country portfolios OAG should prioritize in its annual work program, one of the risk indicators includes a sentiment analysis using artificial intelligence that reviews thousands of news articles from publicly available sources. In addition, a machine-based clustering is used to group the countries and help identify which to audit.

Third, internal auditors must continue to develop their own skills in this age of digital transformation so that they possess the knowledge and expertise necessary to provide high-quality technology advisory and assurance services. In addition, they must have sufficient knowledge of key IT risks and controls as well as available technology-based audit techniques to perform their assigned work.

There is a deficit of audit professionals with expertise in digital technology. Organizations who want to leverage and benefit from emerging technologies must support the skills development of their internal auditors in such areas as data analytics, programming language, machine learning, algorithms and advance modeling, and robotics. 

The internal audit profession cannot be left behind in the ongoing digital transformation. At ADB, OAG has put in place a staff competency framework that supports professional growth which is aligned with both the needs of ADB and best practices prescribed by the Institute of Internal Auditors.

It is important that we share knowledge and collaborate to help one another keep pace with advances in digital technology. Knowledge partnerships should be pursued among your agencies, and with fellow public sector internal auditors, private sector internal auditors, technology experts, and the academic world. By proactively sharing knowledge and continuing to explore and exploit new technologies you will improve as internal audit professionals. 

The AuditWithoutWalls! online community is a great example of how technology can also be used to cut across borders and bring together internal auditors to share knowledge and learn from each other’s experiences.

Conclusion

In conclusion, I hope that through this iaTech 2018 conference you gain a greater understanding of digital technology in the internal audit profession. By keeping pace with the changes in digital technology, leveraging new technologies, and continuing to develop your own skills, you will greatly contribute to strengthening the internal audit function in your respective public sector organizations.

Thank you.