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‘ECA audit goes digital’ with the Digital Steering Committee

Digitalisation in the audit sector is not stopping at the ECA’s door. The College of the ECA has decided to set up a Digital Steering Committee to guide the digital transformation of the ECA’s audits. This committee is chaired by Eva Lindström, ECA Member. Below she explains the “whys” and “whats” of the Digital Steering Committee and the related project team, by looking at its mandate, composition and key activities.

By Eva Lindström, ECA Member

Digital transformation: key for our audit work

Supporting digital transformation is a priority for unlocking future growth in Europe. According to the European Parliament Research Service, existing research suggests that a deeper and more complete single market in the digital field could raise the long-term level of EU28 GDP by between €415 and 500 billion per year (3 to 3.6 % of EU GDP). Digitalisation, including the opportunity of open and big data and the potential of new findings using data and artificial intelligence, was a key part of the speech given by Ursula von der Leyen, the European Commission President, at the European Parliament on 27 November 2019.

Digitalisation is having a fundamental impact on all professions and audit is not an exception. At the ECA, I think we have already been making progress for some time with different initiatives and pilots, and this journal shows you some of what we has been happening. I am convinced that it is strategically of utmost importance to undertake a digital transformation of our audit work in full. In February 2019, the College of the ECA adopted its conclusion on ‘Foresight for ECA,’ in which we committed to move forward on foresight — establishing a Strategic Foresight and Advisory Panel — and we identified an urgent need for the ECA to undertake a digital transformation of its audit work . This is where the Digital Steering Committee (DSC) comes into play.

The ECA’s Digital Steering Committee and project team

The DSC was set up in May 2019. Its mandate is to drive the digital transformation of the ECA’s audit work in the coming years, in line with its current 2018–2020 strategy. In turn, its work on the digital transformation of the ECA will provide valuable input for the ECA’s next strategy.

January meeting of the Digital Steering Committee. Not on the photo Ivana Maletić, Member. From left to right: First row: Leo Brincat, Phil Wynn Owen, Iliana Ivanova, ECA Members. Second row: Geoffrey Simpson, Director, Mariusz Pomienski, Director, Project owner; Ioanna Metaxopoulou Director, Magdalena Cordero Valdavida, Director, Eduardo Ruiz García, Secretary-General; Eva Lindström, ECA Member; Alex Brenninkmeijer, ECA Member; Katharina Bryan, Head of Private Office; João Figueiredo, ECA Member; Julia Pilarczyk, Project Manager

The Members of the DSC are Alex Brenninkmeijer, Leo Brincat, Iliana Ivanova, Phil Wynn Owen, Ivana Maletić. My colleague João Figueiredo, as Chair of the Strategy and Foresight Advisory Panel, is also joining our meetings to ensure that the development of the ECA’s strategy goes hand-in-hand with our work on digitalisation. As head of administration, the Secretary-General, Eduardo Ruiz García, naturally plays an important role in any change process and takes an active part in our work.

Director Mariusz Pomienski, from the Financing and Administering the Union audit chamber, is the project owner. Magdalena Cordero, as the director responsible for Information, Workplace and Innovation, has been driving the ECA’s digitalisation and I see her as an important engine for the transformation. For me it was important to fully involve audit methodology, and Geoffrey Simpson, the director responsible for quality control, also supports the Committee’s work. The project manager is Julia Pilarczyk, an experienced financial and compliance auditor who will be supported by a multidisciplinary team.

What does the digital transformation of the ECA’s audits entail?

Digitalisation of our audit work is about using the potential of technology to deliver better and more information for the accountability process to our stakeholders. This transformation is about the way we audit. The project will not include digitalisation as an audit topic or the digital transformation of internal management processes (see Figure 1 below). However, these parts are interrelated. For example the competences we will gain will also be useful for future audits.

Figure 1 — Scope of the Digital Steering Committee

Source: ECA

What could a digital transformation mean in practice?

From my perspective, digital audit is about doing audit differently, not only digitalising how we work today. For example, transformation could imply examining a whole set of transactions and payments rather than a small selected sample. It is about being more efficient and, in the long run, this should reduce cost and thereby enable us to focus more on results and the impact of the EU budget and policies. Also in this respect, digitalisation is about getting more value for money.

Time is moving fast. In 2015, when I was not an ECA Member yet, the vision was that, in 2040, the ECA could use a high degree of automation in its audit procedures. For instance, algorithms would spot irregularities and artificial intelligence could detect performance patterns in large data sets. In this scenario, auditors would be able to focus their work on asking the right audit questions rather than on verification of documentation. Today, this vision is no longer for 2040 but much closer. I think we will see this happen at the ECA already in the next three to five years.

To start with, we are digitalising how we work now, but the next step will be to change how we give assurance on information reported by others. This requires the commitment of the auditees to becoming digital, including the development of more embedded controls in their systems — known as ‘control by design’.

As this ECA Journal shows, quite a lot is already going on at the ECA. We have started to use more and different technologies in different areas, for example, by providing more quantitative analysis or interactive graphs in our performance audits. We are also doing a pilot audit on some of the stages of the checks we carry out when auditing selected EU agencies.

Time schedule

The Digital Steering Committee should be in place for as long as the digital transformation project lasts. Being such an innovative project, its total duration will depend on the complexity and breadth of the actions the ECA will undertake. We have started with a status quo analysis, which we will be working on in the next months. This first stage of the project will involve taking stock of the current state of digitalisation of audit, both internally and externally.

First, we will map where we are as an institution in our financial, compliance and performance audits, as well as for the Statement of Assurance work, both in terms of IT audit tools at our disposal and skills and competences.

Second, we will collaborate with supreme audit institutions (SAIs) particularly advanced in digitalisation to learn and collaborate. Our team has already been to the French Cour des comptes and we will visit the UK National Audit Office and the Finnish SAI in early 2020. We are also envisaging exchanges with the Estonian SAI. We will also analyse the state of the art on digitalisation of audit in the private sector. Big private audit firms are investing significantly in new technologies and new competences.

Third, we will stay in close contact with our auditees, and in particular with the European Commission. Much of our work will depend on accessing the data in our auditees’ (both the Commission’s and the Member States’) databases and IT applications.

Combining efforts within the ECA and collaboration with the European Commission

Collaboration within our organisation and between its different services will be important. We need to bring IT, quality assurance and audit together. The digital transformation will need to be driven and implemented by the audit directorates. The IT department will also be a key actor in this change. We need to be very agile, as digitalisation is a fast-moving target.

The ECALab initiative was, in my opinion, an excellent starter to help our first practical examples on the way. However, to scale up and transform we will need to think of how we can mainstream this type of collaboration. Digitalisation is about innovation and we should consider how we best foster innovation within our organisation.

In our Statement of Assurance work, we will continue our approach on relying on others in accordance with the strategy. Close cooperation with the European Commission is therefore essential and we envisage both high-level contact with the new Commission as well as contacts at different operational levels. It is also necessary to strengthen our cooperation in this area with the SAIs of Member States. The recent conference on big and open data that was organised by the ECA saw the establishment of cooperation on exchanges at a very practical level.

Change requires leadership

I think it is clear that digitalisation will be a disruptive change requiring leadership. It will also require good communication, both internally and externally. It will also inevitably entail some risks. In this regard, we must be prepared to accept failures along the way. We will also have to undertake this change step-by-step and with appropriate resources. The payback will probably take some years. In the meantime, we will need investment both in software and in human resources. Support and commitment to the project at all levels of the administration will be crucial to the endeavour. However, digitalisation is necessary if we as auditors want to continue to deliver added-value and to keep abreast of developments in the audit sector and society. It is a challenging but very exciting project to be involved in. In my view, as the EU’s external auditor, the ECA cannot afford not to take the lead in transforming audit and fully harnessing the potential digitalisation offers.

This article was first published on the 1/2020 issue of the ECA Journal. The contents of the interviews and the articles are the sole responsibility of the interviewees and authors and do not necessarily reflect the opinion of the European Court of Auditors.

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