KPMG Identifies Key Risk Areas for Internal Audit in 2027 Amidst Evolving Global Landscape

The Evolving Role of Internal Audit in a Complex World

KPMG's recent report underscores the increasing complexity and rapid pace of change in the risk environment, necessitating a significant evolution in the role of internal audit. As internal audit leaders develop their plans for 2027, they must contend with heightened regulatory expectations, geopolitical instability, new climate-related obligations, and the transformative impact of technology. The report advocates for internal audit to transition from a function focused on periodic assurance to one that is dynamic, forward-looking, and capable of anticipating emerging risks and adapting audit approaches at the speed of change.

Key External Pressures Shaping the Audit Landscape

Several external factors are identified as critical pressures for internal auditors. Geopolitical disruption, characterized by renewed trade protectionism, export controls, and sanctions, demands that auditors meticulously assess an organization's exposure across its value chain and conduct scenario analysis to understand financial and operational impacts. The introduction of mandatory ESG and climate disclosure reporting requires auditors to evaluate readiness, review governance and data quality, and provide assurance over ESG frameworks. Furthermore, the rapid evolution of technology, particularly artificial intelligence, introduces new risks related to governance, data quality, transparency, and control effectiveness, requiring auditors to assess AI governance and controls over data, models, and third-party providers.

Operational and Compliance Challenges

Beyond external pressures, the report also highlights significant operational and compliance challenges. The increasing sophistication of cyber threats necessitates that internal auditors assess incident detection, response, and recovery capabilities, and conduct robust testing of ransomware and cyber incident scenarios. Domestically, the criminalization of wage theft and the introduction of Payday Super (requiring real-time superannuation payments) in Australia will increase the need for proactive payroll compliance. Internal auditors are advised to shift from periodic reviews to continuous, risk-based payroll monitoring, leveraging analytics to detect anomalies and ensure adherence to evolving regulations.

Strategic Imperatives for Internal Audit

• Anticipate Emerging Risks: Move beyond static, retrospective assessments to predictive and agile risk management.
• Adapt Assurance Approaches: Align audit methodologies with the rapid pace of change in the risk landscape.
• Enhance Technological Acumen: Develop expertise in AI governance, data quality, and cyber resilience.
• Strengthen ESG Assurance: Provide robust assurance over ESG disclosures, governance, and data.
• Ensure Regulatory Compliance: Proactively monitor and address evolving compliance requirements, particularly in areas like payroll and trade.