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Internal audit needs to reboot through the pandemic crisis

Apr 02, 2020 10:37 AM

In 2015, Microsoft’s Bill Gates predicted a super-virus pandemic break out in China, which he said would kill 33 million people around the world in just six months.

While he was right about the super-virus, let’s hope he’s wrong about the outcome.

Many companies have had crisis management plans in place, but few would have factored in a scenario of a global pandemic that effectively shuts down the economy.

According to PWC’s Global Crisis Survey 2019, nearly seven out of 10 leaders (69 per cent) have experienced at least one corporate crisis in the last five years, and companies with over 5,000 employees are likely to have experienced more than five crises – an average of one a year.

But the COVID-19 crisis is unprecedented in its scope and the speed with which it has spread.

A health crisis now triggers an economic one – an ultimate risk management scenario.

With the previous internal audit plans now superseded, internal auditors must refocus their energies towards helping management tackle the most pressing issue, which is maintaining business continuity, as well as assisting with issues arising from the pandemic itself.

Business continuity is a key component of the crisis management plan.

But as businesses adapt to the crisis, internal auditors have a critical role to play in advising management on emerging risks and the implications on internal controls.

Organisations are assessing how an extended shutdown of the economy will affect their supply chains, cash flows, forecasts, and staffing.  Uncertainty about time frames of the pandemic makes planning extremely fluid and dynamic, and subject to multi-level and complex scenarios.

With emergency cash payments and funds being distributed by government to different groups in the economy, internal auditors in the public sector need to review their control processes to ensure funds are not being wasted.

Another challenge for internal auditors, as for many senior executives and staff, is how to function effectively in a team environment when required to work remotely.  Technology is the enabler and having workable secure VPN’s is critical.

The current focus is to reprioritize the audit plan focusing on the top risks the organisation now faces.

Internal auditors require agility, patience and creativity to ensure the survival of their organisation and its people. 

As the crisis stabilises, internal auditors will need to turn their minds to the business recovery phase. Coupled with this phase is to identify lessons learned and incorporate these into future continuity plans.

Reprioritising risks and reviewing audit plans will be central to that process.

Peter Jones, CEO Institute of Internal Auditors

See Factsheets: Internal Audit and Pandemics