An annual survey of North American internal audit leaders reveals a lack of alignment between top risks facing businesses and the level of resources internal auditors are able to put toward these vulnerabilities.
The survey, conducted by AuditBoard recently released its 2023 Focus on the Future report.
As with the 2022 Focus on the Future survey, the top 2023 risk cited by internal audit leaders is cyber and data security, with 83% of respondents ranking it as a primary concern. Rounding out the remainder of the top five risks are: their organization’s ability to attract and retain quality talent (77%); macroeconomic conditions and geopolitical uncertainty (69%); supply chain, outsourcing, and reliance on third parties (65%); and regulatory changes (58%).
However, the report reveals three key areas where substantial gaps exist between anticipated risk levels and planned audit effort: the ability to attract and retain top talent, with only 16% planning to dedicate substantial resources to address this risk; macroeconomic factors and geopolitical uncertainty (13% plan to dedicate substantial resources); and business model disruptions due to an evolving digital risk landscape (50% rate it a critical risk, while 20% plan to dedicate substantial resources).
Other key findings of the report include:
The increasing prevalence of advanced technologies like AI and machine learning was the fastest-growing risk factor cited by internal audit leaders, up 22% from last year’s report. With these technologies becoming more central to business operations, audit leaders clearly see digital risk as an urgent concern.
ESG, which is now top of mind for a growing number of investors and regulators, is also one of the fastest-growing risks cited, with a 20% year-over-year increase in the number of survey respondents ranking an aspect of environmental, social, and governance risks as a top concern.
While a slight majority (53%) of internal audit leaders anticipate increased budgets for the business year ahead, they are also facing mounting challenges created by continued global uncertainty and the increasingly likely prospect of a dramatic economic slowdown.
As risks continue to increase in scope, complexity, and velocity — along with the ever-present possibility of unanticipated and disruptive risk events on the horizon — a potential resource shortage could heavily impact teams in 2023.
“Internal auditors are projecting an almost best-case scenario for resources in 2023 despite increasingly turbulent times,” said Richard Chambers, AuditBoard senior internal audit advisor, who authored the report. “There are clear hints of greater demand on the internal audit function, and it will be critical for audit leaders to maximize resources, seek innovative ways to fulfill their objectives, and proactively monitor risks.”
AuditBoard collected data from 188 respondents to an online survey conducted in September and October 2022. Respondents were CAEs and internal audit directors in organizations based primarily in North America, representing a diverse group of industries and internal audit department sizes.