Report: Companies Increasing Internal Audit Budgets, Staff

A new survey finds that internal audit departments are generally increasing their budgets and adding more staff.

According to the survey, conducted by the Institute of Internal Audit’s Internal Audit Foundation, 36 percent of internal audit departments said they had increased their budget last year, compared to 13 percent who said the budget had declined and 51 percent where they stayed the same.

The IIA’s 2024 “North American Pulse of Internal Audit” survey also looked at trends in hiring, remote work, the use of artificial intelligence, audit planning, and more. The IIA surveyed 375 chief audit executives (CAEs) and 73 directors located in North America late last year for the survey.

The increases were even more evident at the staffing level. A full 43 percent of survey respondents said they had increased the size of the internal audit staff in 2023, compared to 9 percent who said staffing levels had declined and 47 percent who said they remained unchanged.

The changes continue a reversal of a trend toward declining staff levels and internal audit budgets during the COVID-19 pandemic. Still, about half of the CAEs surveyed said their budgets and staffing levels are either insufficient (26 percent), or only somewhat sufficient (24 percent). Survey respondents said that if they had access to greater budgets, about half (49 percent) said they would use the funds on increasing in-house staff, while 21 percent said they would use it on purchasing technology, 12 percent on increasing internal audit compensation, and 9 percent on professional development.

“In today’s evolving risk environment, it’s crucial for organizations to allocate more resources to their internal audit functions,” said Anthony Pugliese, president and CEO of the IIA. “Internal audit teams need adequate support to provide objective assurance and help manage risks effectively. As businesses embrace advanced technology for competitive advantage, internal audit leaders play a vital role in ensuring companies understand and address risks through robust internal controls.”

Internal Audit Use of Artificial Intelligence

More than 40 percent of internal audit leaders are actively researching the future use of AI, with 15 percent actively using AI in their internal audit activities. As businesses begin to adopt AI into their operations, 11 percent of respondents are auditing the use of AI in their organizations. The report notes that these statistics may increase over the course of the next year as AI use rapidly evolves.

“The IIA’s Pulse survey serves as an annual snapshot of what the profession is focused on at a given moment in time,” said Harold Silverman, a senior director at the IIA. “In addition to providing historical benchmarks that allow CAEs to identify trends over the course of years, each report explores prominent topics impacting organizations and how internal audit teams are approaching them.”

Additional Findings

• Internal audit functions led by Millennials are more likely to perform some or all of their work outside of the office. Only 17 percent of Millennial-led functions do most or all of their work in person, compared to 28 percent of functions led by Gen X and 34 percent of functions led by Baby Boomers.
• This year’s report revealed more gender parity for CAEs and directors in younger generations. Among Baby Boomer respondents, 33 percent were female and 67 percent were male; among Gen Xers, 48 percent were female and 52 percent were male; among Millennials, 50 percent were female and 50 percent were male.
• When asked across all respondents what topics they consider during audits in general, 89 percent cited fraud as a part of their considerations, followed by 80 percent who considered IT and 66 percent noting cybersecurity as a part of their audit considerations. Governance or culture were considered by 65 percent, with 61 percent citing third party relationships. Expense reduction was reported as a part of audit considerations for roughly half of all respondents.
• Nearly one-third of respondents report having hired a recent college graduate in the past year. Internal audit functions with more than 25 full time employees are more likely to hire recent college graduates than smaller functions.

What’s on the Internal Audit Plan

Operational auditing is the largest portion of the audit plan on average for all respondents, occupying 17 percent of the audit plan. In those organizations where Sarbanes-Oxley is implemented, financial reporting (including ICFR) usually takes the No. 1 position, and operational auditing follows in second place.

Internal audit consistently invests a large amount of effort toward cybersecurity and IT audits – with a combined average of 19 percent of the audit plan devoted to these areas. Compliance and regulatory (excluding ICFR) is a top component of audit plans on average and across organization types, with internal audit teams devoting percent 14 percent of the audit plan to these areas.

Some audit areas with lower allocations in audit plans (4 percent or less) may be integrated as considerations for audits in general. These areas include fraud (4 percent), third-party relationships (4 percent), cost and expense reduction (3 percent), governance and culture (3 percent), and sustainability (2 percent).  

Joseph McCafferty is editor & publisher of Internal Audit 360°