Internal auditors had a rough 2025

Internal auditors are more vital than ever, as boards increasingly want them to assess cybersecurity and AI risks atop their traditional duties of evaluating controls, ensuring compliance, and helping prevent fraud. But the internal audit function struggled with budget and staffing cuts in 2025, a survey of North American chief audit executives (CAEs) by the Internal Audit Foundation shows.

Less than half (45%) of the 373 CAEs surveyed said their departments had “mostly or completely sufficient funding,” down from 53% in 2024. Nearly a third (30%) said their funding was “not sufficient.”

Budget cuts intensified in 2025. Nearly one in five CAEs (19%) said their funding decreased last year, up from 11% in 2024. Almost a quarter (23%) said budgets increased in 2025, down from 34% the prior year.

Nearly every sector and industry the survey examined saw cuts. Particularly hard-hit were internal audit departments in nonprofits (33% had smaller budgets), healthcare (33%), and educational services (31%), sectors that suffered from federal and state funding cuts in 2025, among other financial issues. In contrast, in 2024 these sectors’ budgets dropped by only 9%, 6%, and 9%, respectively.

Staff cuts in internal audit reached levels last seen during the height of the pandemic. Nearly one in five CAEs (18%) said their internal audit headcount decreased last year—the same percentage as in 2020. Roughly a quarter (23%) said staffing levels increased during 2025, down slightly from 25% in 2024.

Financial services was an exception to both trends. In that industry, 32% of internal audit departments increased headcount and only 10% lost staff, while 40% said that budgets increased and just 9% said they shrank.

Macroeconomic trends likely drove changes in internal audit resources last year, but there’s another factor CFOs should be aware of: strategic alignment.

Internal audit departments that were aligned with company strategy were more likely to be adequately funded than those that weren’t. About six in 10 (59%) CAEs whose functions were “highly aligned” with strategy reported sufficient funding levels, compared with 29% of those that were “somewhat aligned.” That finding held true “regardless of sector, industry, function size, or SOX implementation status,” the IAF found.