Auditing Forward: How the Auditor’s Role is Changing and Why

Having just completed the end of our fiscal year at Workday, the year-end audit is top of mind for our finance and internal audit teams. So I thought it would be interesting to share a bit about how we think about financial auditing at Workday and how we’ve prepared for the year end.

While compliance is always a priority for the auditing team, many of the conversations I have with Kendall Tieck, Workday’s VP of internal audit, are about how auditing can serve a greater purpose by also contributing to business planning and strategy. I thought it might be valuable to interview Kendall about his perspective on auditing and share the dialogue with you.

You’ve talked about this idea of “auditing forward.” What exactly is that?

Auditing is mostly focused on evaluating the past and ensuring compliance. While that will always be important, auditing must evolve over time to “auditing forward.” It’s no longer enough to just make sure businesses are compliant—internal auditors have an opportunity to help organizations look forward and address issues that could impact business performance.

Imagine this: You build a house and realize the stairway is six inches narrower than local building codes allow, forcing you to start over. That’s what often happens when businesses come up with a great idea, and auditors come in six months later and find some things were not done correctly. Auditing forward means addressing compliance and internal controls from the beginning of a project or new strategy, in order to identify potential holes and weaknesses where mistakes, omissions, or even fraud could be perpetuated.

For example, suppose a company is experiencing strong growth and needs to revamp its vendor management processes to accommodate more complex global requirements. If the company is auditing forward, its internal auditors would partner with business managers to design the internal controls needed for the project.

“People don’t usually talk about internal auditing and innovation in the same breath. But, if we are going to continue to be an important function we need to think innovatively about how we adapt given the pace of change.”

Why haven’t companies always focused on auditing forward?

I think the biggest reason is they haven’t had the time or resources, and the main culprit of that is legacy finance systems. They weren’t designed with built-in workflows, so it takes significant time working outside the system to gather information and verify processes, such as an approval process for a purchase or hire, leaving little time for internal audit teams to audit forward.

For financials we use our own product, Workday Financial Management. We’ve found it helps us be more efficient and effective at auditing the past, freeing up time for us to collaborate with others across the business to focus on the future. In Workday everything is in one system—finance and HR data—with workflows built-in, so I can pull up a diagram of a hiring process with every step, every user, and approval included and know what happened. That task could take an auditor weeks in a legacy system.

You’ve used legacy systems in the past. How is preparing for the year-end audit different with Workday?

I’ve seen a big improvement in how my team accesses information and creates reports to analyze data compared with how it’s done with legacy systems. We have the ability to create reports based on real-time data directly in Workday, which saves us a ton of time and gives us greater confidence in the information. With legacy systems, you have to extract data from different systems and load it into a business intelligence or reporting system to do analysis. By that point, the information is outdated and there is a risk to the integrity of the data and the conclusions drawn from it.

What is the impact to external auditors who are used to auditing in legacy systems?

One major difference is testing. It’s a big part of the year-end audit to ensure that business processes are happening as they should. In legacy systems, if you have 10,000 transactions of a similar type, you have to test a statistical sample, like 50, to validate that a process is happening like it’s supposed to. Because workflows and automated controls are built into Workday, you can test just one transaction and if that one works right, you can be assured all of them worked.

These kinds of efficiencies have the potential to really save auditors time and enable them to help businesses with more strategic activities.

What has it been like to work for a company that creates a product impacting your profession?

One of the biggest reasons I joined Workday was the opportunity to influence the evolution of a product that can transform the work I do. People don’t usually talk about internal auditing and innovation in the same breath. But, if we are going to continue to be an important function we need to think innovatively about how we adapt given the pace of change. By expanding our views and embracing modern technologies, auditors have an opportunity to create more value for the business and impact the bottom line.