Internal auditors are reporting more cuts in their staffing and budgets, according to a new survey by the Institute of Internal Auditors' Internal Audit Foundation.
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When internal audit functions closely align with the organization's strategy, they seem to be more likely to be well funded. Funding sufficiency was found to be 30 percentage points higher for internal audit functions that identified as being fully or almost fully aligned with organizational strategy (59%) compared to those that were only somewhat aligned with strategy (29%).
"Our research confirms a direct link between strategic alignment and audit function resourcing," said IIA president and CEO Anthony Pugliese in a statement. "Organizations across industries are operating in an environment of constrained budgets and limited staffing. Internal audit is no exception. In this context, alignment with enterprise priorities is not optional — it is essential. Audit functions that anticipate risk, align to strategy, and demonstrate clear value are better positioned to secure the resources needed to deliver high-quality assurance and advisory services."
Nearly 60% of the chief audit executives surveyed report their functions as fully or almost fully aligned with organizational strategy, with financial services reporting the highest level of alignment (69%) and public administration and manufacturing reporting the lower alignment (50% and 47%, respectively).
Financial services was the only sector analyzed in which internal audit budgets stayed stable year over year, with 40% reporting budget growth and just 9% reporting cuts.
In contrast, privately held organizations outside of the financial services industry reported budget cuts rising and budget growth falling by 16% each, while publicly traded companies and manufacturing experienced more moderate shifts, with cuts increasing from 13% to 20% and budget growth declining by only 5%. Nonprofit organizations, the health care industry, educational services and the public sector also reported notable budget cuts and lower budget growth last year.
Staffing trends mostly reflected budget changes. Financial services bucked the trend with staff growth rebounding after a drop in the prior year — rising from 25% in 2024 to 32% in 2025 - while those with staff cuts remained low at 10%. In contrast, privately held organizations experienced a steep rise in functions reporting staff cuts (from 11% to 28%) and a drop in functions reporting staff growth (from 30% to 17%). In publicly traded organizations, which are larger and usually more stable, the number of functions reporting staff cuts nearly doubled compared to 2024; however, their staff growth has remained relatively steady since 2021.
Despite budgets and staffing mostly trending lower across sectors, the internal audit scope is often broad, with approximately 86% of chief audit execs overseeing at least one area beyond internal audit.
Responsibilities differ widely by sector, with fraud investigation being the most common additional responsibility (47%) followed by ethics or whistleblower programs and enterprise risk management, reported by more than one third of respondents.
