For a few years now there has been a growing discussion around digital transformation, aka

digitization, digital business transformation, or business transformation. A lot of people see the word
"digital" and immediately tune out, assuming it's an IT thing. Critical to understand, however, is that digital
transformation centers on the realization that technology underlies almost everything organizations do
and that business strategies must evolve to leverage the opportunities presented by the pace of
technological advances. Consider that 20 years ago the internet was an "IT" thing, not well understood
beyond the technology mystics of the time. Today, the operating models of many of the most valuable
businesses in the world rely on the internet and all employees must have expert knowledge to thrive.

The imperative to transform arises because we are experiencing three significant changes at the
same time: changes to demand, changes to the competitive landscape, and changes to technology.
Breaking these three factors down from internal audit's perspective illustrates the transformation
imperative:

- Changes to stakeholder/client demand. Given the amount of responsibility and liability being
placed on boards and audit committees, plus boards' growing interest in transparency,
involvement in strategy, and oversight of risk management, it is easy to begin to see the
opportunity internal audit has to fill in the gaps. However, boards, audit committees, and C-suites
do not necessarily understand how internal audit can help given the confusion around internal
audit's role (traditional accounting/finance vs. risk-based).

Changes to the competitive landscape. This is where internal audit leaders need to be very nervous.
There are a lot of people knocking on the doors of boards and audit committees. Internal audit is just
one of many, including chief risk officers, chief compliance officers, chief information security officers,
general counsel, and others, all with expertise and a lot to say to an audience with very limited
availability. The role of chief audit executive (CAE) is sometimes being blurred with second line of
defense functions like risk and compliance. Combined