A recent survey by the Institute of Internal Auditors suggests internal audit budgets are stabilizing, but chief audit executives still have work ahead of them to align their audit plans with corporate strategic objectives and build the right skills into their departments.

The 2012 Pulse of the Profession Survey polled 461 internal audit professionals in North America. It found that 46 percent of the respondents' internal audit budgets are flat from the prior year, while 37 percent expected increases in budget and 17 percent expected decreases in budget. After three years of volatility in internal audit budgets, those statistics suggest budgets are settling in, says IIA President and CEO Richard Chambers. “There's even a slight tilt toward increasing, but overall we see some stabilization,” he says.

At the same time, audit plans have become more balanced between financial and operational coverage in recent years, compared with the years when auditors were heavily focused on financial controls to implement Sarbanes-Oxley, the surveys suggests. Internal auditors said 27 percent of their audit plan is dedicated to operational risks while general financial risk is covered by 16 percent of the audit plan, compliance risk is covered by 15 percent, and Sarbanes-Oxley testing only 12 percent.

While the rebalancing is encouraging, says Chambers, he was disappointed to see that audit coverage for strategic risk and the effectiveness of risk management is less than 10 percent combined. “I would think it should be higher,” he says. “I would think it should be twice what it is. It seems somewhat low as the profession is embracing this new role.”

Survey results suggest internal auditors do not have their audit plans well aligned with the top five risks that are being addressed by boards, audit committees, and senior management, Chambers says. That potentially drives a wedge between internal auditors and the stakeholders they are meant to serve, he says, and should serve as a red flag to internal auditors to more carefully align their audit plans with corporate strategy. Chief audit executives should see it as an opportunity to explore how they can establish better relationships with their stakeholders to assure better alignment.

The survey also suggests chief audit executives continue to build in talent from areas outside of traditional auditing. When assessing prospective candidates, the skills most sought include analytical and critical thinking, communication, data mining and analytics, and general information technology, the survey says.

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