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Internal audits play a crucial role in assessing a company's internal controls, corporate governance, and accounting processes. Automating internal audits can address many challenges of the traditional process.

These audits are essential for ensuring compliance with laws and regulations and maintaining accurate and timely financial reporting and data collection. However, it is often time-consuming, redundant, and prone to reporting inaccuracies and errors.

Let’s take a look at how automating internal audits can streamline the process for your business.

How can you adopt automation for internal audits?

Automation in internal audit could be done through a wide range of digital technologies, from foundational data integration and analytics to advanced cognitive elements mimicking human behavior.

Commonly used tools include audit management software, data analytics tools, robotic process automation (RPA), artificial intelligence (AI), blockchain technology, and cloud-based solutions.

Here are some specific examples of how these technologies can be used in internal audit:

  • Audit management software can be used to:
    • Automate the scheduling and tracking of audits
    • Manage audit budgets and resources
    • Collect and store audit data
    • Generate audit reports
  • Data analytics tools can be used to:
    • Identify patterns and trends in data
    • Detect anomalies in data
    • Assess risks
  • RPA can be used to:
  • AI can be used to:
    • Identify risks
    • Detect fraud
    • Assess the effectiveness of controls
  • Blockchain technology can be used to:
    • Create an immutable audit trail
    • Securely store audit data
    • Cloud-based solutions can be used to:
    • Share audit data securely
    • Collaborate on audits remotely

The use of automation in internal audits is still evolving. Notably, Deloitte's survey highlights a growing trend, with 43% of surveyed auditors already leveraging advanced analytics and automation in their internal audit functions. However, it is clear that these technologies have the potential to significantly improve the efficiency, effectiveness, and risk-based approach of internal audit.

What are the benefits of automation for internal audits?

Automation in internal audit brings myriad benefits, enhancing efficiency and effectiveness in various aspects of the audit life cycle.

Here are a few of the benefits:

  • Increased efficiency: Automation can help to streamline repetitive and time-consuming tasks, such as data entry, report generation, and compliance checks. This can free up auditors' time so that they can focus on more value-added activities, such as risk assessment and fraud detection.
  • Improved accuracy: Automation can help improve audit results' accuracy by reducing the risk of human error. This is because automation can be programmed to follow specific rules and procedures, which can help to ensure that data is entered and processed correctly.
  • Enhanced risk identification and assessment: Automation can help to identify and assess risks more effectively by analyzing large amounts of data more quickly and efficiently than manual methods. This can help auditors to focus their attention on areas where there is a higher risk of fraud or error.
  • Increased transparency and auditability: Automation can help to improve the transparency and auditability of internal audit processes by generating audit trails that can be used to track the progress of an audit and verify the results. This can help to build trust with stakeholders and improve the overall effectiveness of the internal audit function.
  • Reduced costs: Automation can help reduce the costs of internal audits by automating repetitive tasks and improving the audit process's efficiency and accuracy.

Overall, automation can be a valuable tool for internal audit, helping to improve the efficiency, effectiveness, and risk-based approach of the function.

Challenges of Automating Internal Audits

While automating internal audits can be a largely beneficial process, there can be a few challenges:

  • Data quality: The quality of the data used for automation is critical. If the data is inaccurate or incomplete, the results of the automation will be unreliable. This means it is important to have a good data quality management process before automating any internal audit processes.
  • Technical expertise: Automation requires technical expertise to design, develop, and implement. This can be a challenge for internal audit teams that do not have the necessary skills and resources. It is important to have a team of skilled professionals who can develop and implement automation solutions that meet the organization's specific needs.
  • Change management: Automation can disrupt the way that internal audit is conducted. This can be a challenge to overcome, requiring all stakeholders' buy-in. It is important to communicate the benefits of automation to all stakeholders and work with them to develop a plan for implementing automation to minimize disruption.
  • Cost: Automation can be a significant investment, both in terms of the cost of the software and the cost of implementing and maintaining the solution. It is important to carefully consider the costs and benefits of automation before making a decision to implement it.

Getting started with internal audit automation

Implementing automation in your internal audits may seem daunting at first, but there are a few steps you can follow to make it easier:

  1. Identify automation opportunities. Look for repetitive, rule-based, and time-consuming tasks that can be automated.
  2. Define the vision and strategy. What do you want to achieve with automation? Improve efficiency, accuracy, risk assessment, or provide more valuable insights?
  3. Build the necessary infrastructure. This includes technology, tools, resources, skills, and training.
  4. Choose the right automation tools. RPA, data analytics, NLP, and AI are all options.
  5. Pilot and test automation. Test in a controlled environment before full implementation.
  6. Monitor and optimize. Gather feedback and make adjustments as needed.
  7. Expand automation gradually. Start with a few processes and tasks, then expand as confidence grows.

With the use of tools like Nanonets, which has AI-powered OCR technology, you can tackle the challenges of automating your internal audit process.

Nanonets uses machine learning algorithms to search for specific entries, such as dates, purchase order numbers, and reference IDs across various financial documents.

Nanonets is a no-code intelligent automation platform. This means that it can be easily customized to meet the specific needs of each organization. Nanonets can also be integrated with most CRM, ERP, or RPA software, ensuring a hassle-free implementation process.


Can internal audits be automated?

Internal audits can be automated to a significant extent. Automation technologies such as robotic process automation, data analytics, artificial intelligence, and natural language processing (NLP) can streamline repetitive and rule-based audit tasks, enhance data analysis, and identify anomalies or potential risks. By automating these processes, internal audit teams can improve efficiency, accuracy, and audit coverage, allowing auditors to focus on higher-value activities and strategic decision-making. While complete automation may not be feasible for all aspects of internal audit, adopting automation technologies can significantly enhance the effectiveness and value of the audit function.

How is automation used in auditing?

Robotic Process Automation (RPA) can automate repetitive tasks like data entry and report generation, improving efficiency and accuracy. Data analytics tools utilize automation to analyze large datasets, identifying patterns and anomalies for risk assessment and fraud detection. Natural Language Processing (NLP) enables auditors to process unstructured data, like text, for easier querying and analysis. Additionally, Artificial Intelligence (AI) is employed for predictive modeling and anomaly detection, providing valuable insights. By leveraging automation technologies, auditors can optimize audit procedures, increase coverage, and focus on higher-value activities to deliver more strategic and valuable outcomes.

What are the 3 types of internal audits?

The three predominant types of internal audits are compliance audit, operational audit, and financial audit. A compliance audit entails inspecting and ensuring adherence to policies, laws, and regulations governing a specific area, process, or system under review. An operational audit primarily centers on evaluating internal controls in key processes to enhance productivity and efficiency. A financial audit is an unbiased assessment of an organization's financial statements to verify their accuracy and fairness in representing the claimed transactions. The increasing prevalence of digital tools in business has led to the emergence of information technology audits. These audits involve examining management controls in IT applications, operating systems, databases, and infrastructure. They can be conducted independently for IT or in conjunction with compliance, operational, or financial audits. The aim is to ensure the integrity and efficiency of IT systems and processes, safeguarding data and optimizing IT resources in alignment with organizational objectives.