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The Institute of Internal Auditors presents all things internal audit in this episode.
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Deborah Poulalian and Andy Cook breakdown the 2025 N American Pulse of Internal Audit report.
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They discuss emerging trends, challenges and opportunities for internal auditors covering issues like strategy funding and artificial intelligence.
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Andy, thank you so much for joining me to talk about the 2025 N American Pulse of Internal Audit report.
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It's my pleasure.
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Thank you for having me.
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So I wanted to talk about what is pulse of internal audit.
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This is my 10 year anniversary working on Pulse.
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So this was actually started by the IIA in 2008 as a snapshot of the profession, and at that time we were getting into the great financial crisis.
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There was a lot going on. The pulse of internal audit report is based on a survey of the highest ranking internal auditors throughout North America.
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So we have hundreds of responses from big functions, small functions, public sector, publicly traded.
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All kinds of industries and it gives us an amazing picture of what internal auditors are doing that year.
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Iia wanted to monitor what was happening with people's budgets and staffing levels.
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And risk levels and their audit plans and the IIA has been doing this survey and report ever since. So we're really proud of this because it lets us do some really long term trending that you won't see anywhere else.
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S.
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Yeah, it's definitely something that I love seeing every.
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I always check it out and see what the new trends are and what's going on. The consistency of the survey has been great and I love checking what's what, what's going on in the industry and what CAS are thinking out there.
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It's very good.
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The other thing that we've kind of incorporated this year suggestion from Deborah is to incorporate the standards and guidance that are new this year. The global internal audit standards came effective in January. So we thought providing some reference or some spotlights to the standards.
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Would be a good thing as well as vision 2035.
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Again, something that just recently came out very worthwhile to provide some insights into that and kind of attach it to a pulse which was a a great idea from from you, Deborah. Excellent.
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Thank.
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Yes, Vision 2035 is interesting to add in because it's forward-looking and so it helps us to think about the future as well as what's happening right now.
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So I'm very excited today to look at some of the most interesting and relevant findings this year and we've got 4 main areas we're looking at strategy, technology.
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Responsibilities and management.
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So let's get started by talking about strategy. One of the most interesting things that came out of our research this year was a very strong connection between.
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Between funding levels for the internal audit function and how well the function said they were aligned with organizational strategy.
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So I'm going to give you an example.
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People who said they were fully aligned with organizational strategy, about 70% of them also said they have sufficient funding, which is great.
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On the other side, among people who said they were only somewhat aligned with organizational strategy, only 40% said they had that sufficient level of funding.
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So, Andy, what do you think of this?
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Yeah, this was a a key.
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Very interesting that came out of this, this, this survey this year. The the idea of aligning the organizational strategy to funding or correlating those two was was a great find.
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I I really felt like it was supportive of a lot of the stuff that came out of the the standards this year when we talked about governing and managing the internal audit function. It had a lot to do with making sure we have open lines of communication with.
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The board.
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And with senior management making sure all that kind of.
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Aligns together in the idea of communicating to the board and senior management and working with them as you develop your internal audit strategy is showing that that pays dividends in the long run in on the funding side.
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I felt like that insight was very interesting.
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And something I guess you would expect because the more you communicate, the more you're talking to individuals.
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The more you're able to kind of see the value, and I really feel like that's part of what this is doing is it's providing the board and senior management with the idea of what sort of value were able to provide and if it's worth investing in and I.
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Mm.
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That's kind of where we're coming down. It seems like it definitely is.
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The great find on this one.
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And you know another piece of this information is that about a little over half said that they feel fully or almost fully aligned with organizational.
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Strategies.
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So on the flip side, a little less than half said they are only somewhat aligned or only minimally aligned with strategy.
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So again, it's an opportunity and it's some good information.
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Absolutely.
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So we want to look now at our second big point, which is looking to the future for the types of services that internal auditors.
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Uh.
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Form.
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So there's two big types of.
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Internal auditors perform assurance services and advisory services and we wanted to know the mix now and in the future.
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So currently internal auditors say about 75% of their time is assurance.
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And about 25% is advisory, but if you ask those same folks what they would like to do in the future, they'd rather do about 60% assurance in.
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Increase that advisory up to 40%.
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So, Andy, what do you think of that?
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Yeah, I think this.
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This is indicative of what you would expect for internal audit shops out.
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The idea of kind of a 7525 split right now made sense to me.
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I felt like that was what I would expect from a lot of organizations.
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And the movement, the idea of moving that 25% to 40% in the.
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Really. Again speaking to values, I think the value that we can provide in that space as well, I mean internal auditors are really risk control experts.
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That's really what we are and we're able to provide a lot of that advisory.
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Guidance to the organization as we move.
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So I really feel like that's it shows our starting point. I suppose that 7525 split shows our starting point and where we wanna go that 6040 split is really where we'd like to go.
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So.
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Not getting rid of the idea that we will continue to provide that key assurance piece, but doing a little more advisory definitely provides a benefit to the organization overall.
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I think it's a. It's a good indication of directionally where everybody's going.
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I agree.
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And just another facet of that is we also looked at the differences for this question between functions that had just one to three people versus functions, more than 50 people.
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And the answers are almost identical.
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So whether you're a large function or a small function, the idea of being able to increase your advisory services is really felt all across our survey respondents.
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And that was one of the things that kind of surprised me too, that those smaller shops would still be providing that level of advisory service. I mean that's that's a great thing that we're able to do that even with those those small organizations, I think that's that's great.
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That's showing that that we are concentrated on that value proposition.
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So now we want to go ahead and look at some of our technology findings.
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And we want to start with the risk area. So we always ask for risk assessment to risk levels for a large number of items and the top, every single year for a long time is cybersecurity.
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So right now 75% of our survey respondents say cyber.
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High or very high risk?
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And the next area that is even close to that is it risk at 54?
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So cyber security is the risk of concern and so how are Cae's dealing with this? And I want to throw out a couple more numbers and then Andy will give us perspective.
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Is we find that a lot of many organizations will outsource cyber security services because they they need the skill setter for a variety of reasons.
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So that's one way.
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But then almost half say they do want to upskill their staff to know more about cyber security.
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We've got the outsourcing and the upscaling to deal with this risk.
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So, Andy, what do you think?
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Yeah, a lot of this is I.
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Think it's what we would?
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This is a scary spot when you start talking about.
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The idea of having a significant breach in your organization or having a a particular problem with with it or or systems.
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They're far reaching. They're at times public.
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So from an internal audit perspective, I think they're they're very much top of mind and that's what.
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Indicates you know.
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Noting that these are high or very high risks that we want to address, the level of outsourcing that we'll do there, that tells you that we.
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Want to make sure we get the expertise in there in the organization to do the kind of work that we want to do to make sure that we're comfortable.
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Controls that are in place and the idea of of constantly upskilling this space in particular is, you know, it's what I would expect, but it definitely is something that requires a lot of attention for our, for our auditors out there and I think it's something that's that's been.
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Through the survey.
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Thank you.
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So we started talking a little bit about upskilling and we have asked.
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Several questions in the post of internal audit survey and also in the Vision 2035 survey about competencies and a very interesting thing we found was that when you ask someone.
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When we ask our survey respondents for the most important technology skill for the future.
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We said.
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Is the most important technology skill for the future.
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More than 90%, said data analytics.
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You don't get more than 90%. Hardly anything in this world.
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Maybe who?
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How many people like chocolate like this is high number, so more than 92% said it's one of the most important technology skills for the future.
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Alright.
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However, if you ask people, their use of technology right now for internal audit and you said, you know, looking specifically at data analytics, only 28% said their functions were had higher advanced usage of data.
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Analytics. So how do we reconcile this?
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Yeah. So a lot of things happen here in data analytics that you know has been evolving through the.
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I mean, when I started in industry here at Davy Analytics was was top of mind and it continues to be top of.
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Making sure that we're comfortable with that level of work and what's happening now is we have so much data.
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Now the data analytics work is very focused on identifying what the key data is that we need to maintain or we.
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To pull.
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And understanding what then, are we going to do with?
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So having that skill set of an internal auditor where they're able to identify the key data points that they need to grab, and then what sort of risks those are identifying and understanding.
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What the audit performance or the test step is going to be done and how it's going to be done to to be effect?
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And useful. And I think that that kind of twofold approach to data analytics is something that we continue to struggle with and it's definitely something that we continue to focus on as as we move forward.
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Again, this is another one of those no surprises.
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But continued level of concentration for for organizations out there to make sure that we get better and better at the data analytics piece.
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Agreed. And I think we talked earlier or at some point one of the best combinations you can have is someone who's good at data analytics and also someone who understands the business very well and makes a very valuable auditor.
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Right.
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Amen. Amen. Yes, absolutely.
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I think the idea of having that person who's able to understand the business and understand the data that that business is using and how they're using it along with that level of risk focus.
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The the lens on the world that the internal auditor is able to provide on top of that, that's a winning combination and that's something that has been the Unicorn that we're all seeking out there in in internal audit for sure.
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Yeah.
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So the last thing we want to talk about for technology and it's the hot topic right now is how internal auditors are using AI or specifically we wanna talk about Gen. AI.
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So we asked our survey respondents this year, which by the way.
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Our Ca's and directors in North America.
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So we asked our survey respondents this year if they're using Gen. AI for internal audit activities.
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And we had 41%.
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Yes, they are. And 65% say they are planning to do it in the future.
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So what do you think about that in the future of internal audit?
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Yeah, this is definitely an area that that all of us are trying to figure out as we go. And I think the internal auditors out there are trying to figure out kind of A2 fold understanding of it.
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Is the organization using it and then how can I use it in my organization in the internal audit group?
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To do internal audit work, and I think we're trying to address that as quickly as humanly possible, just because this technology is moving at such a fast pace.
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So really trying to jump into that pool as opposed to dipping our toes in it, I think is something that we're really trying to do more and more of and getting familiar with what the capabilities are out there and how we can utilize them effectively, I think is.
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Definitely something in this this survey kind of bears that is true that we really want to make sure.
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Playing in this space and learning as we go to effectively use AI on our on our audits as well as how the organization is using it and what sort of risks are out there on that front too.
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Yeah. Another interesting thing we saw in the data on this survey question was if we compared the answer, uh to the generation, we did find that millennials were 52% using Gen. AI for internal audit activities.
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X was 40% and the baby boomers were 31%.
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There was a difference by Gener.
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Even those baby boomers, I mean, from that percentage, I feel like they are really, you know, jumping in maybe more than I would anticipate.
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I think that's great. I think that's really directionally where we want to go for sure.
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Agree and I do want to point out that for the question for who wanted to increase Gen. AI involvement across all ages, it was over at 2/3.
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So everybody knows it has to be done.
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The future?
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And the one other thing we can go ahead and just mention while we're talking about janai is much fewer, fewer californiaes are saying that they're providing assurance in this area right now.
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Much fewer was 15% overall.
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So why might that?
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Yeah, I think they're they're just trying to get familiar with.
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With what sort of usage is in that or in the organization? I think that's really something that they're trying to to understand more and I think the larger organizations may be adopting it a little more quickly than some of the smaller ones and understanding the implications of that.
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And and how to go about testing?
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Building test work out of these things and and that sort of thing is definitely something that we need to work on and I think.
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That is a big.
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You know, this is a ever evolving landscape, this AI space and these AI systems are constantly learning as.
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The risks the risks may shift as the AI is learning and you need to shift with it when you go about testing that.
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I think it's definitely something that we need to keep in mind as.
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As we move forward, but it is something that's newer to most and I think that's why that adoption rate is might be a little lower than maybe we.
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Would like our next two topics, our responsibilities and then we're ending with.
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So let's get into the different responsibilities that CAES can have. So you know, Chief audit executives, of course.
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Their primary focus is internal audit, but a lot of them have areas of responsibilities in other areas.
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So almost 90% say they have at least one area of responsibility.
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Outside of internal.
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So those top areas overall are fraud almost 50%, almost half say that Sarbanes-Oxley almost a third, but it's much higher in publicly traded organizations, ERM about 1/3.
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Ethics whistleblower programs about 1/3.
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In.
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What is the impact for?
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So.
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Independence and objectivity in this situation.
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That's a great question.
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I think that's that's the the focal point. We need to make sure that that our guardrails and our safeguards are set up when we take on these additional responsibilities.
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Take a look at the standard 7.1 on organizational independence. I think is a critical 1 here.
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And understanding how when we take on these responsibilities, how the internal audit function has to shift so.
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The general idea is if you are responsible for an area, you shouldn't be auditing.
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I don't think that's any sort of revelation for anybody, but we need to make sure that we have those those appropriate safeguards in place and we need to make sure that we're communicating up the chain.
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Whether that be through senior management as well as the board to communicate with them, to let them know how we are structuring the.
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Outside of internal audit functions and how the risk assessment and audit process has to be effectively executed to maintain those safeguards, I think that's really the key point here.
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OK, to take on these additional responsibilities.
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Just need to.
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Be setting up those safeguards to do what they need to do to make sure that the audit process is maintained.
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Thank you.
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So also looking then at audit planning. This is one of the questions and pulse that has been asked probably since 2008, which is what proportion of time do you spend in each of your audit topic areas?
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So pretty consistently for a long time, operational auditing is the the most, the largest proportion of the audit plan and that's almost 20%.
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And one thing that sort of stands out about that is if you look at risk levels, operations is not that high.
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So how do we reconcile that?
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Yeah, a lot of that information is, you know, and I think this goes for most internal audit.
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Operational risk is definitely the thing that we are able to execute reasonably well. We've been doing it for years and years and it's always been operational focus on a lot of the work that we're doing.
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Auditing that space is kind of a known quantity, and we know how to do it and we know how to scope that work and execute that work.
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It's something that we've we've really embraced through the years and the idea here of such a large percentage of our time, 19% of our time is spent on operations, while when we're looking at the associated risk of these operations in.
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Our, in our estimation is is significantly lower than some of the other areas. I think there is a level of shifting that we may want to make.
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Organizationally, when we start executing our audits.
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That we.
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Should consider and and maybe shift that.
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I don't think that you're ever going to not do operational.
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That's a a key component and you can also think how did that risk go down? You know that risk level went down because we are doing these audits on a regular basis.
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You know and and and making sure that things are tight from a control standpoint.
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So the idea of abandoning operational risk will never happen.
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We'll probably always be doing a substantial percentage in that space.
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But you know, it was interesting to see those wrist levels that we determined was a little lower than maybe you might anticipate for sure.
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Yes. So for comparison, we had about 75% saying that cybersecurity was higher, very high risk compared only 30% for operations.
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Yeah.
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So I do think it's interesting the idea that because internal audit.
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Or perhaps because internal audit has been able to monitor the controls well in operations. You know that brings down that risk.
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Stop.
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Ensures a contributing factor, I would imagine.
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A contributing factor that that is the best way to say it.
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So moving on to our last section about management here.
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This is really just about the internal audit function itself and kind of running the function. So as you know, the pulse of internal audit survey is for the the highest ranking internal auditor in the function.
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Cae's and directors.
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So 1 interesting thing is we can look at that group and see the mix of men and women at the tops of internal audit.
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And so right now it is 47% female and 53% male, answered our survey this year.
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And that this has changed.
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Over the years, in many ways and one way we can see that is by asking people, their aides and comparing it to male and female.
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So for those over 60 it was.
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It was 2/3 male and one third female.
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Compared to those in their 30s where we have more females and and fewer males.
00:24:03 Speaker 2
So how's this trend?
00:24:05 Speaker 2
What help made this trend impact the internal audit function?
00:24:10 Speaker 3
Yeah, I.
00:24:11 Speaker 3
I think this is I I again, I don't know how much of a big surprise this is the the younger folks have more of a a female slant and the older folks have more of a male slant.
00:24:23 Speaker 3
The balance is kinda coming to a 5050 split.
00:24:27 Speaker 3
The idea that women and men both at these higher level within the organization for the CAESI think the mix and the ability to kind of provide unique perspectives.
00:24:40 Speaker 3
Into the organization and what's going on in the organization is critical and I think that having this kind of effective mix.
00:24:48 Speaker 3
Between the female, the female CAES, and the male, CES is a great trend, and I really feel like that movement that split is a great thing. If this generational breakdown is any indication, I think we'll continue to move further and further to that 5050 split, which is.
00:25:08 Speaker 3
Great. I think that's.
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Where we should go?
00:25:11 Speaker 2
It makes.
00:25:12 Speaker 2
Internal audit is a great career for anyone. Would you agree?
00:25:19 Speaker 3
I'm a little biased, but yes, absolutely.
00:25:22 Speaker 2
Well, so am I.
00:25:25 Speaker 2
So we have our final subject and this is about remote work. So as we all know, COVID-19 put us in new territory and we started asking.
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Our survey respondents, if they were more working remote, more working at home or evenly split.
00:25:48 Speaker 2
And so right now.
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About a little over 1/3.
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That's roughly half at home, half in person.
00:25:57 Speaker 2
32% say they're mostly in person and the same 32% say they are mostly remote.
00:26:05 Speaker 2
So we saw just the slightest trend toward having more in person, but it was just 4 percentage points, so 28% to 32%.
00:26:14 Speaker 2
So what do you think about these numbers?
00:26:18 Speaker 3
Yeah, that this one was a bit of a surprise to me because all I've been hearing from my peers and network and that sort of thing has been, hey, we're being instructed that we need to go back to in person or at least a hybrid this percentage, Indic.
00:26:33 Speaker 3
It isn't as as significant as maybe I've been feeling it from from.
00:26:39 Speaker 3
A lot of my peers, it just seems like I was expecting these percentages to go more and more to in person than maybe this is.
00:26:47 Speaker 3
Is indicating.
00:26:48 Speaker 3
I do feel.
00:26:48 Speaker 3
Like the.
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Trend will continue to move in this direction and it might be early. We might have caught depend you know based on when we provided the survey, we might be a little early in that and we might see this trend pick up in the coming year. I I do.
00:27:06 Speaker 3
The idea of doing more hybrid work, I think is is being adopted more and more.
00:27:11 Speaker 3
By organizations that I'm aware of.
00:27:13 Speaker 3
So I I think that this trend will continue to go in that direction.
00:27:17 Speaker 3
And next year's survey may may be indicative of a more substantial.
00:27:21 Speaker 3
Shift.
00:27:23 Speaker 2
Well, we will keep asking the question so we can monitor what's happening for the internal audit profession and it may be you know that there are some advantages to remote work or hybrid work specifically for internal audit activities.
00:27:41 Speaker 2
So perhaps other other industries or other professions may have a different amount of change in what we're.
00:27:50 Speaker 3
Yeah. The one thing that I will say is during the COVID period, I think that all of us at internal audit were able to prove that we were able to do our work on a remote basis and and maybe not, you know, 100% remote, but maybe.
00:28:04 Speaker 3
Know if we can do some level of hybrid that would make sense but.
00:28:07 Speaker 3
I think COVID kind of forced our hand to say, OK.
00:28:10 Speaker 3
Have to work remotely.
00:28:12 Speaker 3
And I think we came out the other side of that saying, well, we are very capable of doing this and working on a remote basis and and I think that that was that was some of the take away from from the COVID period when it comes to internal AUD.
00:28:25 Speaker 3
And I think the shift will continue to move kind of more to that hybrid level.
00:28:29 Speaker 3
Because of of what I just said, I think that we're still able to work on a remote basis, but maybe be back in person every now and then to make sure that we're effectively having good meetings. And again, as we started out this discussion.
00:28:41 Speaker 3
It's all about communication and communication in person provides a lot of value as well, so it's something that we need to make sure we balance.
00:28:49 Speaker 2
You know, I do also wanna encourage people to get their resources on the new global internal audit standards.
00:28:56 Speaker 2
Can you?
00:28:56 Speaker 2
Us a little bit more about what resources CAS have.
00:29:00 Speaker 3
Yeah. So there's a there's a location out there and it is in the pulse report.
00:29:04 Speaker 3
The Standards Knowledge Center go.
00:29:07 Speaker 3
There's a lot of information, lot of great information, guidance.
00:29:10 Speaker 3
As well as the standards, you can really reference all that information out there and it will hopefully assist you in adopting the new standards as you as you progress through your your audit process.
00:29:23 Speaker 3
Definitely take a look at that.
00:29:26 Speaker 3
The global internal audit standards were effective in January, so hopefully we're all executing according to those standards today.
00:29:33 Speaker 3
But if not, and if you have any questions, please reach out to guidance.
00:29:37 Speaker 3
Are happy to help out with anything that you might need.
00:29:40 Speaker 2
So Andy, I have so enjoyed talking about compulsive internal audit report with you today and I hope you have a great day.
00:29:48 Speaker 3
And you too, Debra.
00:29:49 Speaker 3
Great talking to you.
00:29:51 Speaker 1
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00:29:57 Speaker 1
Review the draft and share your feedback by April 20.
00:30:02 Speaker 1
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00:30:08 Speaker 1
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00:30:15 Speaker 1
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00:30:21 Speaker 1
That's THEIA dot.
00:30:25 Speaker 1
ORG.
