Drones Help Internal Audit Soar to New Heights
By Paul Maplesden
Most of the technology that internal auditors use is decidedly ground-based—the laptop, the smartphone, the warehouse safety ladder. But one particular type of gadget is leaving the Earth behind and transforming inventory audits—the aerial drone, also known as an “Unmanned Aerial Vehicle” (UAV).
It’s not that surprising. Auditing inventories has long been one of the most onerous tasks an auditor can face. Anything that can speed up the internal audit process and make it more accurate is a big win. And that’s where drones can excel.
Let’s take to the skies and see how they can help you.
Auditing Drones Provide Huge Benefits for Inventory Management
According to the aptly named research paper, “Prepare for Takeoff: Improving Asset Measurement and Audit Quality with Drone Enabled Inventory Audit Procedures,” drones create enormous productivity savings. One study the authors quote shows that:
- Count times were reduced from 681 hours to 19 hours
- Error rates dropped from 0.15 percent to 0.03 percent
- The use of drones created higher quality audit documentation
While this is just one drone auditing study conducted in an ideal environment, its findings are echoed elsewhere.
“Drones can get to hard-to-reach places and capture huge volumes of data in very short periods of time which, compared with manual methods, it’s hoped drone usage is driving real efficiencies in the way we’re delivering our audits.”—Joanne Murray, Drones Assurance Lead, PwC UK
How Drones Help Internal Auditors
So how do drones drive up productivity and help auditors capture more accurate inventory numbers? It comes down to a few factors:
- Due to their unique perspective, drones can photograph, sense and survey large amounts of inventory at once, from multiple angles, and over the entire storage area.
- Powerful image processing software analyzes photographs and videos and converts the data into fast and accurate inventory counts.
- Drone inventory data can be combined with sensor information, manual counts and other approaches to enhance sensitivity, count quality and speed.
This all results in faster and more accurate inventory audits.
Drone Internal Audit Technologies and Approaches
Drones use various internal audit technologies to support accurate counting and analysis:
Type of Drone
Auditors have plenty of options for choosing the right drones and can take advantage of many different features. These will largely depend on the use case for the drone, for example:
- High maneuverability if the drone needs to fly in narrow spaces
- Extended battery life if the drone is operated for long periods
- Greater payload capacity for carrying sensors and cameras
Drone Flight Training
Piloting a drone does require a little practice, and courses are widely available. With training, auditors don’t need any particular special talents to fly and use a drone. In the U.S., for example, you will need a remote pilot certificate and a Transportation Security Administration (TSA) background check.
Drone Camera Loadouts
Video and still cameras can be swapped out for different use cases, for example:
- Close-up cameras for inspecting assets for quality and defects
- Wide-angle cameras for counting large amounts of inventory at a time
- Zoomable cameras for long-range counting
- Thermographic cameras to identify heat sources
In addition to cameras, drones can have other sensors to measure the environment. These may detect humidity, temperatures, light levels, chemicals, odors and other factors.
Drone Photogrammetry and Video Content Analysis
Drones are integrated with image processing software, including photogrammetry and video content analysis, that can algorithmically scan, process and output inventory amounts. This software will need to be “trained” for new use cases to help it make sense of the data. This will require some manual checking and configuration, but the accuracy of the system improves rapidly over time.
Going Beyond the Inventory Audit
Drones aren’t limited to just counting stuff. They can be adapted to several audit-related use cases, including:
- Broad inspection of assets over large areas like supply pipelines, power lines or road networks
- Close identification of potential hazards like encroaching vegetable growth, damages to assets, leaks and structural integrity, and similar areas
- Access to hard-to-reach places that require auditing
- Safety inspections, especially for civil infrastructure, buildings, potentially hazardous environments or factors that can impact health and wellbeing
- Other inspections for areas like regulatory compliance, transportation and supply chain
- Theft identification and other unexpected inventory changes
- Appraising the value of assets for areas like financial statements, depreciation or asset management
Common Industries Making Use of Drone Auditing
Auditors are now using drones across more and more sectors including:
- Mining, quarries and mineral extraction
- Energy production, including fossil fuels, renewables and power transmission
- Agriculture, including farming yields, soil quality and crop management
- Civil infrastructure, roads and building management
- Land surveying and real estate
- Construction, development and major building and engineering projects
- Communications networks, like cellular service towers
- Operations, repairs and maintenance planning
Legal Requirements for Auditors Using Drones
Auditing firms in the U.S. have been using drones from around 2016, when new FAA rules on commercial drone use came into effect. Here’s how those legal requirements are being interpreted.
“A new FAA rule broadly authorizes commercial drone operations in the United States, giving CPA firms of all sizes an easier path to incorporating drones into their operations. The new rule allows the commercial operation of drones under 35 pounds.
“While there are still many restrictions, such as a maximum air speed of 100 mph and a maximum altitude of 400 feet above ground level, the new rule greatly opens up the potential for drone operations. Instead of the special FAA license, commercial drone operators can now use a remote pilot certificate and a TSA background check.”—AICPA, Drones on the Horizon for CPA Firms in 2017
Legal requirements for commercial drone use do vary by country:
- FAA regulations for commercial drone use in the U.S.
- Drone laws in Canada
- For other countries, we recommend the excellent “Drone Laws” website which breaks down rules for drone use by countries, states and cities.
The Future of Drones in Internal Audit
Drones are buzzing ahead, fast. With leading CPA and audit firms already using drones to save time, reduce costs and enhance accuracy, what does the future hold?
It’s still a little early to tell—we’re still in the “innovators” and “early adopters” phases of the technology hype cycle. The drone services market size is expected to grow from US$4.4 billion in 2018 to US$63.6 billion by 2025. Although internal audit will only be a small fraction of that, it’s still a promising sign of things to come.
Drones Are Part of the Growing Audit Analysis Marketplace
Drones are helping internal auditors obtain useful, accurate data in volumes that were previously unimaginable. CaseWare IDEA provides industry leading software solutions to help make sense of that information, as well as that collected in more traditional ways. IDEA provides the type of insights that can add standout value to an internal audit team’s efforts.
Learn how IDEA can help expand your audit analytics landscape today.
Paul Maplesden is a professional writer who creates extensively researched, expert, in-depth guides across business, finance, and technology. He loves the challenge of taking complex subjects and breaking them down so they are easy to understand. He can quote ‘The Princess Bride’ and believes the secret to good writing is Earl Grey tea.