A recent post by RegTech firm Diligent has detailed how by automating your internal controls testing you can better reach your goals.
According to Diligent, your internal controls provide the confidence you need that your processes will ensure compliance with regulations, legislation and best practices – with controls testing the way these controls are audited.
Diligent said, “Controls testing is a procedure used in audit to determine whether your internal controls are sufficient to detect material errors as well as to detect potential fraud. As a result, controls testing aims to prevent misstatements in your financial reporting.
“Controls testing can be done as part of the audit or in preparation for an audit, providing confidence that all controls will be working as they should when audited. With internal audit recognized as the third line of defence in risk management, it’s vital that auditors verify the effectiveness of internal controls.”
Diligent noted that the purpose of controls testing is two-thronged – to make the audit process shorter and more efficient as well as to shore up a company’s compliance processes.
What is automated controls testing? The firm highlighted that many internal audit teams are ramping up the rigour of their controls testing and elevating their controls testing methodology by introducing an element of automation.
Automated controls testing also involves automating the processes you use for the testing of internal controls. It helps to ensure the consistency and reliability of a firm’s controls and therefore their operations.
How can automation help auditors with controls testing? Diligent remarked that automation helps to bring a degree of ‘consistency and rigour’ to the controls testing, “ Ensuring your controls testing uses empirical evidence can reduce and, best case, eliminate the use of unsound subjective validation mechanisms. It also ensures testing is scheduled regularly and can directly link real-time results on the operational effectiveness of controls to your corporate risks — as a result, driving real-time risk assessment.”
Diligent commented that some of the benefits of automated controls testing include aligned, efficient compliance processes, reduced cost of compliance, confidence in your controls, keeping pace with the compliance landscape and the ability to continuously improve.
The company said, “For auditors looking to elevate their role to that of a strategic business partner, automated controls testing can help to avoid nasty shocks, give comfort around the operating effectiveness of controls and help you to take a proactive approach to audit.
In the opinion of Diligent, organisations’ shift to automated controls testing is part of a wider trend to make more effective use of technology. In addition, the move also chimes with a change in the role of the audit function. Diligent explains, “Internal audit has evolved significantly over the last decade, moving from cyclical audits and internal controls testing done to a set timetable, to a more consultative role, where internal audit teams assess and report continuously on the organisation’s overall risk profile.
Diligent concluded, “Automating your controls testing will enable you to seamlessly manage the multiple policies and controls that make up your regulatory compliance strategy. It will increase the speed, rigour and efficiency of your testing while reducing costs. It will create a single source of truth for your controls reporting and accelerate the internal audit team’s journey towards a consultative partnership with your organisational leadership.”
Read the full post here.
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