Enhancing 21st Century Internal Auditing Competencies through Artificial Intelligence

Abstract

The growing digitalisation of operations and processes at the organisational level has shifted internal audit towards a feedback-driven function where artificial intelligence (AI) technologies are increasingly harness to improve the efficiency, accuracy, and real-time monitoring of audits. Despite substantial capital commitments to AI solutions many audit units still grapple with recurring gaps in analytical capacity, slow decision quality, varied ethical judgmental pointing toward an incongruence between technological adoption and human competencies that limit performance outcomes. Based on Technology Acceptance Theory – Davis, 1989, Human Capital Theory – Becker, 1964 and Relational Contracting Theory – Macneil, 1980 the current study investigates how adoption of AI impacts internal audit competencies of significance and how these impact performance outcomes for audits with the presence of mediating effects. A cross-sectional mixed-methods secondary data analysis combines quantitative metrics with documentary evidence drawn from 51 peer-reviewed studies, corporate reports and archival audit performance datasets. Descriptive statistics, panel regression models and Structural Equation Modelling are employed to estimate both direct and indirect associations between the adoption of AI, enhancement of competencies and the effectiveness in audit as well as qualitative content analysis to frame behavioural and organisational transformation. Findings provide evidence of the statistically significant benefit of AI adoption on digital literacy, analytic reasoning, ethical decision-making and collaborative communication, with mediation analysis evidencing competency development mediates much of the improvement in error detection, audit quality and operational efficiency. The research concludes that AI creates sustainable value in the audit process when implemented as a capability-enhancing resource, with its effective deployment facilitated through training, governance frameworks and ethical oversight, therefore proposing a competency-based framework for technology application to assist organizations in synchronizing their technology investments with human capital development towards improved internal audit performance.