As the digital transformation of business accelerates, risk and internal audit leaders shift their focus to managing technology-driven risk, according to AuditBoard.
The report reveals a growing gap between risk and assurance teams’ capacity to manage risks effectively and the reality of today’s state of “permacrisis,” an extended period of instability and insecurity marked by one disruptive crisis following another.
Key risks
In a continuation of a trend identified by the 2023 survey, the top 2024 risk cited by internal audit leaders is cyber and data security, with more than 80% of respondents not only rating this risk highly but also giving it the top spot for expected audit efforts in 2024.
However, the survey also found risk and internal audit teams are still dedicating fewer resources to addressing some key risks, including two top-ranked risk areas — changing economic conditions (ranked #2), and the ability to attract and retain talent (ranked #3) — that received insufficient audit focus in 2023. This misalignment is expected to continue in 2024.
Some internal audit leaders are delaying critical technology investments in generative AI and automation: 75% have yet to implement generative AI in internal audit, only 40% have a clear understanding of how AI is used in their organizations, and as few as 25% have defined the risks of or created guidelines for the use of AI.
The use of internal audit strategic plans is lagging
While previously seen as urgent, ESG risks are now ranked 13th out of 14. This decreasing sense of immediate concern may put auditors in a precarious position if they fail to address increasing ESG risks and anticipated regulatory activities adequately.
Internal audit leaders are optimistic about receiving more resources in 2024, with over 60% of respondents forecasting increased internal audit budgets and 31% planning for more extensive staff.
The survey also reveals that internal audit strategic plans are lagging, with only one in five functions reporting comprehensive, well-documented strategic plans. Without a strategic view of the future, including a clear assessment of strengths, weaknesses, opportunities, threats, priorities, and areas of vulnerability, internal audit may struggle to recognize the necessary actions to ensure organizational success.
“The 2024 Focus on the Future report sounds a clear call to action for organizations confronted with the widening risk exposure gap,” said Richard F. Chambers, AuditBoard Senior Internal Audit Advisor, who authored the report. “Internal audit, with its capacity for foresight and understanding, is uniquely positioned to help organizations navigate these challenges. However, to do so effectively, internal audit leaders must embrace transformational opportunities — prioritizing strategic planning, AI technology adoption and governance, cross-functional collaboration, and high-impact communications.”