2026 North American Pulse Report: What Internal Audit Leaders Need to Know

00:00:02 The IIA

The Institute of Internal Auditors presents All Things Internal Audit.

00:00:06 The IIA

In this episode, Deborah Poelian and Andy Cook break down key findings from the 2026 North American Pulse of Internal Audit Report.

00:00:14 The IIA

They discuss tightening budgets, staffing pressures, the growing importance of strategic alignment, and how audit teams are balancing assurance work with increasing technology and compliance demands.

00:00:26 The IIA

The conversation also highlights industry trends and what audit leaders should prioritize moving forward.

00:00:34 Deborah Poulalion

Andy, hello.

00:00:35 Deborah Poulalion

It is wonderful to see you today.

00:00:37 Deborah Poulalion

And I am excited to talk about what we learned in the 2026 North American Pulse of Internal Audit report, especially after such an interesting year.

00:00:49 Andy Cook

Absolutely.

00:00:49 Andy Cook

It's great to be back.

00:00:50 Andy Cook

It's great to talk to you again, Deborah.

00:00:52 Andy Cook

I really enjoy the Pulse report.

00:00:54 Andy Cook

Each year comes out.

00:00:55 Andy Cook

We've been doing this since 2008.

00:00:57 Andy Cook

Part of the beauty of this is that you ask the same questions year after year after year, and you really get a good sense of kind of the trends that are developing and that sort of thing.

00:01:07 Andy Cook

It's great for audit leaders, and I'm thrilled to be back with you and talking to you again about Pulse.

00:01:12 Deborah Poulalion

So just as a reminder, the survey was conducted at the end of 2025, mainly in November, and it's answered by CAEs and heads of internal audit throughout United States, Canada, and our friends in the Caribbean.

00:01:27 Deborah Poulalion

And I also want to point out this year, we asked people what would make Pulse better, and they said they would like to see more industry views.

00:01:36 Deborah Poulalion

So we've added some industry views to the report for public sector,

00:01:41 Deborah Poulalion

financial services, manufacturing, education, and healthcare.

00:01:46 Andy Cook

Yeah, so the podcast will take a look at some of the more interesting and relevant findings this year and figure out directionally where we think we might be going from an internal audit perspective.

00:01:55 Andy Cook

So yeah, looking forward to that discussion.

00:01:58 Andy Cook

Please download your free copy of the Pulse report at theia.org slash Pulse.

00:02:04 Andy Cook

You'll be able to get a hold of that and follow along with our discussion as well.

00:02:08 Andy Cook

So thanks for joining.

00:02:09 Deborah Poulalion

So to get started, we're going to talk about what's on every audit leader's mind, which is their budget.

00:02:16 Deborah Poulalion

So if you have the report and can turn to page 8, you're going to see a beautiful line graph that I made because I do the analysis on the data.

00:02:26 Deborah Poulalion

So we ask the same question about budget every year.

00:02:31 Deborah Poulalion

We've been doing it for nearly 20 years.

00:02:33 Deborah Poulalion

And the question is, looking back over the past 12 months,

00:02:38 Deborah Poulalion

Did your internal audit budget increase, decrease, or stay the same?

00:02:43 Deborah Poulalion

And so what we're seeing is a significant drop in the percentage of respondents who said they had budget growth last year.

00:02:51 Deborah Poulalion

So it went from 34%, so nearly a third having budget growth, down to 23%.

00:02:58 Deborah Poulalion

At the same time, we're also seeing higher percentage of functions saying they've had budget cuts.

00:03:05 Deborah Poulalion

So that went from 11% with budget cuts up to 19%.

00:03:10 Deborah Poulalion

And what you can see in the graph is that both these measures are now similar to what we were seeing after the first year of COVID in 2021.

00:03:20 Andy Cook

Yeah, so not great news here.

00:03:22 Andy Cook

I think the initial take on this is that organizations are showing a conservative approach to budgeting as they work through market uncertainty and cuts to expenses overall.

00:03:34 Andy Cook

As a cost center,

00:03:35 Andy Cook

that sometimes we are viewed as an internal audit rather than a revenue generator or a revenue enhancer, we tend to be affected by these cuts.

00:03:44 Andy Cook

So inflation, increases in variable costs on products and services, all these things can create some concern around everybody's budget and kind of give us a squeeze.

00:03:55 Andy Cook

The critical thing that we could kind of take away from this is

00:03:59 Andy Cook

that we should be making sure that we are having open and regular communications with the board and with senior management to continue to sell the value of internal audit to organizations to counteract some of this.

00:04:12 Andy Cook

Because I really feel like if people understand kind of we're able to contribute to our organizations, I think that these cuts hopefully will be limited as we start thinking about the path forward.

00:04:24 Deborah Poulalion

That's a good perspective.

00:04:26 Deborah Poulalion

And also talking about the industry differences, if you turn over to page 9, you'll start seeing the industry breakouts.

00:04:33 Deborah Poulalion

And the most important thing we discovered from looking at industry is that financial services was an exception.

00:04:42 Deborah Poulalion

So that was the only sector where the budget growth stayed relatively strong from 2024 to 2025.

00:04:49 Andy Cook

Yeah, so this is kind of my wheelhouse.

00:04:51 Andy Cook

This is where I do a lot of my work in the financial services space.

00:04:55 Andy Cook

Budgets in this space, I feel like are a little more less inclined to have a lot of fluctuations because of regulatory expectations and expectations of audit committees in these organizations.

00:05:08 Andy Cook

coverage is more set, more defined, potentially more inflexible, allowing audit strategies to cause financial services audit shops to limit these big budget swings.

00:05:20 Andy Cook

You're not going to see that as much in the financial services space just because of these key requirements, I guess, in these organizations.

00:05:26 Andy Cook

So I would anticipate less of these types of swings in this space.

00:05:31 Deborah Poulalion

So when you think about budgets, you also think about your staffing.

00:05:36 Deborah Poulalion

We have that data too in Pulse.

00:05:39 Deborah Poulalion

So it's a little bit different than the budget trend.

00:05:42 Deborah Poulalion

Again, we ask a very similar question.

00:05:44 Deborah Poulalion

Did your staff increase, decrease or stay the same?

00:05:48 Deborah Poulalion

What we're seeing is, however, that we have more functions who said they had staff cuts.

00:05:54 Deborah Poulalion

last year than the prior year.

00:05:56 Deborah Poulalion

So it went from 11% to 18%, which is the same metric that we had in 2020 during COVID for that point.

00:06:06 Deborah Poulalion

However, more people are experiencing staff cuts, staff growth is staying about the same.

00:06:13 Deborah Poulalion

This potentially could be we have a net loss.

00:06:16 Andy Cook

Yeah, my interpretation of this is that when we start thinking about headcount, there may be a hesitation out there to backfill

00:06:23 Andy Cook

within the organization.

00:06:25 Andy Cook

Turnover will occur in internal audit.

00:06:27 Andy Cook

That's a prolific thing.

00:06:29 Andy Cook

I think a 10% turnover rate is not unheard of on a regular basis.

00:06:34 Andy Cook

The way we address some of these budget constraints is not to backfill those positions a lot of times.

00:06:40 Andy Cook

So I think organizations may say, you know, we got a freeze on hiring going forward.

00:06:45 Andy Cook

Auditors are leaving and we're just not backfilling those positions.

00:06:49 Andy Cook

There's also a lot of sensitivity around

00:06:52 Andy Cook

external pressures that are happening, as I mentioned, inflation, tariffs, geopolitical concerns, market uncertainty.

00:06:58 Andy Cook

Everybody's a little gun shy when it comes to a lot of these things.

00:07:01 Andy Cook

And I think there's a tendency to kind of scale back and bury our heads and try to survive all this upheaval that's happening within the industries or within our organizations overall.

00:07:13 Andy Cook

So I think there's some concern along those lines and I think people are kind of locking in at this point in this space.

00:07:20 Andy Cook

So

00:07:20 Andy Cook

That's going to be the effect of the staff piece as well as the overall budget piece that we were just talking about.

00:07:29 Deborah Poulalion

Thank you.

00:07:29 Deborah Poulalion

That makes sense.

00:07:31 Deborah Poulalion

And also looking at the industry differences, we again see financial services with less impact.

00:07:38 Deborah Poulalion

It was the only industry where they did not have an increase in staff cuts.

00:07:42 Andy Cook

Yeah, same explanation there as well.

00:07:45 Andy Cook

You know, I think there is some

00:07:47 Andy Cook

some level of expectation when it comes to internal audit deliverables and from a regulatory standpoint as well as an audit committee or a senior management standpoint.

00:07:55 Andy Cook

So there's a little less flexibility when it comes to that.

00:07:59 Deborah Poulalion

So we learned some very interesting things about what can impact or actually has a relationship to your budget and staffing trends.

00:08:11 Deborah Poulalion

And that is how well internal audit is aligned with organizational strategy.

00:08:16 Deborah Poulalion

So first of all, let's talk about what question we asked in the survey and also what page you can see this on.

00:08:24 Deborah Poulalion

So that's page 30.

00:08:26 Deborah Poulalion

And we asked, to what extent do you believe your internal audit function is aligned

00:08:32 Deborah Poulalion

with the strategic plan of your organization.

00:08:36 Deborah Poulalion

So we have about 60% saying they are fully or almost fully aligned.

00:08:43 Deborah Poulalion

About 37% said moderately aligned.

00:08:45 Deborah Poulalion

And very few said that they were not aligned with strategy.

00:08:49 Deborah Poulalion

That's good.

00:08:50 Deborah Poulalion

We want alignment with strategy.

00:08:52 Deborah Poulalion

But what was really interesting is that there is a difference between being moderately aligned and being more fully aligned, especially when it comes to budget.

00:09:02 Deborah Poulalion

So if you turn to page 7, what you're going to see is those that were aligned with strategy, were well aligned with strategy, were more likely to have sufficient funding compared to those who were only moderately aligned.

00:09:18 Deborah Poulalion

So if you were well aligned, 59% said they also had strong funding.

00:09:23 Deborah Poulalion

If you were only moderately aligned, only 29% said they had strong funding.

00:09:29 Deborah Poulalion

That is a 30 percentage point gap.

00:09:32 Deborah Poulalion

This makes the data analyst just nearly faint with excitement because it's really a big difference and it's just something to explore.

00:09:41 Deborah Poulalion

Now, we don't know, we cannot say for sure what causes the difference, but we can say the difference is there.

00:09:48 Andy Cook

Yeah, and you know, the idea, we came out with this finding last year and I'm glad to see it's a consistent trend.

00:09:56 Andy Cook

The idea of aligning your audit

00:09:59 Andy Cook

work with the organizational objectives is a critical point.

00:10:03 Andy Cook

And I think the other thing that we were just talking about was kind of the value add that internal audit can offer to an organization.

00:10:10 Andy Cook

And this is a good way of doing it.

00:10:12 Andy Cook

So if we say the organization is focused on X, Y, and Z, showing that internal audit is focused on X, Y, and Z as well provides that value to the organization and allows for

00:10:24 Andy Cook

an independent and objective view of those key initiatives and key things that are going on in the organization.

00:10:29 Andy Cook

Therefore, management, the board, all the committees, they will see a lot of value in that and they will make sure that alignment is maintained.

00:10:40 Andy Cook

And we need to make sure that we're constantly communicating our alignment with the strategy of the organization.

00:10:46 Deborah Poulalion

That's a very good observation.

00:10:48 Deborah Poulalion

And so looking at industry differences, the big news is

00:10:54 Deborah Poulalion

There were none.

00:10:56 Deborah Poulalion

So regardless of your sector, your industry, how big or small your function is, whether or not you have SOX implemented, those who were more aligned with organizational strategy had stronger funding.

00:11:10 Andy Cook

Yeah, absolutely.

00:11:11 Andy Cook

And I was glad to see that, there was not an industry

00:11:15 Andy Cook

specific shifts or anything like that.

00:11:17 Andy Cook

It just shows the value, regardless of your industry, the value that alignment can provide to the internal audit shop as well as the organizations that we're working for.

00:11:26 Deborah Poulalion

Exactly.

00:11:27 Deborah Poulalion

So the last and final section that we're looking at in the Pulse report this year is about the audit plan.

00:11:34 Deborah Poulalion

And so this flows right into adding value.

00:11:38 Deborah Poulalion

And so the question we ask in the survey is,

00:11:42 Deborah Poulalion

Looking ahead over the next 12 months, please indicate what percentage of your audit plan you anticipate will be allocated to each of the audit areas listed.

00:11:53 Deborah Poulalion

We have a nice long list.

00:11:55 Deborah Poulalion

What we're going to talk about today are the three areas that are always on the top.

00:12:00 Deborah Poulalion

So the first is operational auditing.

00:12:03 Deborah Poulalion

This is essential for internal auditors.

00:12:05 Deborah Poulalion

Auditors say that about 17% of their audit plan is allocated to this area.

00:12:11 Andy Cook

This is bread and butter for the organization.

00:12:13 Andy Cook

This is operational audits is where we spend a lot of our time.

00:12:17 Andy Cook

It's been that way for years.

00:12:19 Andy Cook

It continues to be that way.

00:12:20 Andy Cook

It makes perfect sense.

00:12:23 Deborah Poulalion

Exactly.

00:12:24 Deborah Poulalion

And the next area is compliance.

00:12:27 Deborah Poulalion

And we're going to talk about two different ways we look at compliance in this survey.

00:12:31 Deborah Poulalion

One is compliance in general.

00:12:34 Deborah Poulalion

And on average, 15% of the audit plan is allocated to compliance.

00:12:39 Deborah Poulalion

And then if you want to look more specifically at organizations where SOX has been implemented in those, about 30% of the audit plan goes toward the areas related to SOX.

00:12:52 Deborah Poulalion

So it's a large chunk of the audit plan to compliance in those areas.

00:12:56 Andy Cook

Yeah, and our exposure to this, generally speaking, when it comes to compliance is there's really

00:13:03 Andy Cook

Speaking of inflexible, there's very little flexibility that you can do with compliance work.

00:13:07 Andy Cook

You need to make sure that you're auditing that space for sure.

00:13:10 Andy Cook

So spending time in that space, making sure that we're adhering to critical regulations and everything that we need to be doing for our organization, that is locked in and we need to make sure that we're addressing those points for sure.

00:13:23 Deborah Poulalion

Exactly.

00:13:24 Deborah Poulalion

And then the last area, it really highlights how important technology is, technology skills,

00:13:32 Deborah Poulalion

and ability for the internal audit function.

00:13:35 Deborah Poulalion

Because when you look at the audit plan allocation for cybersecurity and IT combined, it's 17%.

00:13:43 Deborah Poulalion

So it's just as high as compliance and operational auditing and it's all about technology.

00:13:50 Andy Cook

Yeah, there's very little that we can do here to avoid the technology audit and the work that we need to do in this space because it does cross all lines.

00:13:59 Andy Cook

everything that we're doing as an organization has an IT component to it.

00:14:03 Andy Cook

So you have to make sure that you're addressing those key controls.

00:14:08 Andy Cook

They can also be some of the higher risk controls that you want to make sure that you're addressing in your audits.

00:14:14 Andy Cook

So cybersecurity for sure.

00:14:16 Andy Cook

We've seen all the articles.

00:14:18 Andy Cook

We've seen all the write-ups on issues with cybersecurity and things that can happen to organizations across the board.

00:14:24 Andy Cook

So you do want to make sure that you are addressing these

00:14:27 Andy Cook

And it is crossing all lines.

00:14:29 Andy Cook

So you do want to make sure that you're addressing these critical risks in each of your audits based on your risk assessment.

00:14:36 Deborah Poulalion

And so tying this all together, we've looked at budget, we've looked at staff, how there's pressures, and we've looked at what we need to do with the audit plan.

00:14:47 Deborah Poulalion

So just kind of tell us how these things are working together and some best practices and ideas for that.

00:14:56 Andy Cook

When you start looking at the overall mix, when we start talking about assurance versus advisory, looking at this, how you're budgeting your time and where you're spending your time as an audit group, we're looking at the consistency from year to year.

00:15:09 Andy Cook

So this 75-25 split, we've seen in the past, we're seeing it now, limited movement.

00:15:16 Andy Cook

When we did vision, vision 2035,

00:15:19 Andy Cook

and you can go out and reference that report as well, you'll see that there was a thought that we would be moving to more of a 60-40 split when it comes to assurance versus advisory work.

00:15:31 Andy Cook

And we are not seeing that happen yet.

00:15:33 Andy Cook

So when we start thinking about budgets and the information that we're getting on staffing and that sort of thing, assurance continues to be our bread and butter.

00:15:43 Andy Cook

It continues to be what we're here to do.

00:15:46 Andy Cook

So you want to make sure that you're addressing your assurance work first.

00:15:49 Andy Cook

and make sure that you're getting all that attention to your assurance side of it.

00:15:54 Andy Cook

And if there is more flexibility, it allows us to do more advisory type work.

00:15:59 Andy Cook

So the idea that this percentage has not necessarily moved year over year makes sense to me, particularly with a lot of the budget concerns that we were talking about earlier.

00:16:10 Andy Cook

I can't speak enough about the report.

00:16:12 Andy Cook

I love it.

00:16:12 Andy Cook

I think there's a lot of great information in it.

00:16:15 Andy Cook

We've hit the high points, a lot of the high points that we've identified in our review.

00:16:19 Andy Cook

But make sure you go out there and download your free copy of the Pulse report at theia.org slash pulse.

00:16:27 Andy Cook

You can get this information, spend some time on this report.

00:16:29 Andy Cook

There's some great information in there if you're interested.

00:16:32 Deborah Poulalion

It's been a pleasure, Andy.

00:16:34 Deborah Poulalion

Thank you.

00:16:35 Andy Cook

Same here, Deborah.

00:16:36 Andy Cook

Looking forward to next year.

00:16:38 The IIA

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00:16:41 The IIA

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00:16:44 The IIA

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00:16:48 The IIA

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