Internal Audit Teams Face Staff and Budget Cuts in 2025, Strategic Alignment Key to Funding

Internal Audit Faces Significant Cuts in 2025

The 2026 North American Pulse of Internal Audit report highlights a concerning trend for internal audit functions in 2025. The survey found that 18% of internal audit teams experienced staff reductions, a notable increase from 11% in 2024, and a figure comparable to the 19% recorded during the 2009 financial crisis. Similarly, 19% of organizations reported decreased budgets for internal audit, up from 11% in 2024, with only the 2020 pandemic surpassing this rate at 36%. These figures are particularly striking given the increasing integration of artificial intelligence (AI) in the workplace, suggesting that internal audit's value proposition may be under scrutiny.

Strategic Alignment: A Lifeline for Funding

Despite the widespread cuts, the report identifies a critical factor in maintaining support for internal audit: strategic alignment with organizational objectives. The survey revealed a strong correlation between strategic alignment and funding sufficiency. Among audit leaders who perceived their function as fully or almost fully aligned with organizational strategy, 59% reported mostly or completely sufficient department funding. In stark contrast, only 29% of those who considered their function only somewhat aligned reported similar funding levels. This suggests that internal audit teams that effectively demonstrate their contribution to the broader organizational strategy are more likely to secure the resources they need.

Sectoral Differences and Opportunities for Improvement

The report also uncovered significant variations across different sectors. Financial services organizations fared better, with only 9% experiencing budget decreases, less than half the rate of the overall survey population. This sector also showed the highest rate of strategic alignment, with 69% of audit leaders reporting full or almost full alignment. Conversely, privately held companies outside of financial services faced more severe cuts, with 28% reporting budget decreases. While 59% of audit leaders overall considered their function fully or almost fully aligned, a substantial 37% felt only somewhat aligned, indicating a significant opportunity for internal audit functions to enhance their strategic integration and communication of value to secure better support and resources.