Annual Survey Reveals COVID-19’s Impact on Internal Audit
LAKE MARY, Fla. (March 16, 2021) — COVID-19 continues to pose significant health and economic challenges despite new hopes for widespread vaccinations. The pandemic’s effect on organizations and internal audit have been varied. The 2021 North American Pulse of Internal Audit: Many Sides of Crisis shows this disparity in the opportunities the pandemic produced, as well in the costs it extracted. The pandemic’s effects on internal audit were noted across a broad spectrum of reliable Pulse survey metrics, including internal audit budgets, staffing, risk assessments, and audit plans.
While the pandemic’s impacts varied by industry, Pulse survey results consistently show the effects on internal audit were less severe than for the organization overall. Among the most dramatic was health care and social assistance, where 8 in 10 (80%) respondents from such organizations rated the pandemic’s impact as “extensive” for the overall organization, yet fewer than 4 in 10 (37%) rated it as such for the internal audit function. Fewer than 2 in 10 (18%) respondents from financial and insurance organizations rated COVID-19’s impact as minimal for the overall organization (18%), yet more than twice as many (41%) rated it as minimal for the internal audit function.
“The pandemic created an open audition for internal audit to showcase its value, particularly in response to the crisis management and business continuity risks at the onset of the pandemic,” according to the report. “Indeed, responses from CAEs who reported staffing increases support that, for some, pandemic responses expanded the profession’s scope of work. In aggregate, the pandemic’s impacts were less than initially anticipated by internal audit leaders.”
The IIA’s Audit Executive Center (AEC) has gathered insight from leaders in the profession through the annual Pulse of Internal Audit survey since 2009. Each survey collects information and perceptions from internal audit leadership, primarily chief audit executives (CAEs) and directors/senior managers of internal audit across the public, private, and nonprofit sectors.
Among notable findings:
- Internal Audit Budgets: For overall internal audit budgets in the past year, there were more functions with decreases than increases (36% vs. 20%). However, internal audit budget cuts were less than initially anticipated by CAEs. Although nearly half (45%) of those responding to a June IIA AEC survey expected to see cuts in their overall budgets, by November 2020 only 36% reported cuts.
- Internal Audit Staffing: The percentage of internal audit functions reporting cuts in staff doubled from 9% to 18% year-over-year. These cuts were similar to what happened the year after the 2008 global financial crisis.
- Risk Assessment: Risk levels increased in most audit areas for public sector and nonprofit organizations. However, fewer areas of increasing risk were reported for publicly traded, financial services, and privately held organizations.
- Audit Plan Allocation: Data reflected increases in audit plan allocations for cybersecurity and financial reporting and declines for operational risks.
Audit plan trends suggest stakeholders may place a priority on internal audit providing assurance on financial and compliance risk activities, which can be perceived as essential in times of crisis. As noted in the report, risks relating to economic uncertainty, regulatory changes, and safely emerging from the pandemic should alert internal audit leaders to weighty challenges ahead.
“The need for internal audit expertise in these areas may have provided a backstop against even more significant reductions of internal audit budget and staffing,” according to the report. “The clear message from this year’s Pulse data can be summed up in the maxim: We are all in the same storm, but not the same boat.”
For further details, download the 2021 North American Pulse of Internal Audit: Many Sides of Crisis.
The Institute of Internal Auditors
About The Institute of Internal Auditors
The Institute of Internal Auditors (IIA) is a nonprofit international professional association that serves more than 230,000 global members and has awarded more than 185,000 Certified Internal Auditor (CIA) certifications worldwide. Established in 1941, The IIA is recognized throughout the world as the internal audit profession's leader in standards, certifications, education, research, and technical guidance. For more information, visit theiia.org.