Internal Audit on a Budget: What You Can (and Can’t) Skip
Key Takeaways:
- Prioritize Based on Risk: Limited budgets may require internal audit teams to focus resources on high-risk areas while scaling back routine audits of lower-risk processes.
- Don’t Skip the Essentials: Risk assessments, clear audit planning, high-risk activities, auditor independence, and follow-up on findings remain critical regardless of budget constraints.
- Leverage Existing Resources: Organizations can improve efficiency by using work from other assurance providers, existing technology, data analytics, and standardized audit methods rather than investing in unnecessary tools or duplicating work.
- Continuously Reevaluate the Audit Plan: Internal audit plans should be periodically reviewed and adjusted to address emerging risks and ensure limited resources are directed where they provide the greatest value.
In an ideal world, every internal audit department would have infinite resources, expansive annual audit plans, complex analytics tools, and the ability to assess every high-risk area across the entire organization. Unfortunately, this is not reality for many internal audit functions. Many organizations have restrictive audit budgets and resources. As a result, internal auditors are tasked with doing more with less and are still expected to provide meaningful assurance and value to stakeholders.
Constrained budgets do not eliminate risk. They require internal audit departments to be more deliberate, specifically when allocating resources. The difficulty lies in identifying those activities that are crucial and those that can be condensed without negatively affecting the quality and effectiveness of the internal audit department.
What Organizations Can Skip (or Scale Back)
1. Auditing Each Process Every Year
While some organizations are required to perform regular reviews of certain areas due to regulatory requirements, most business processes do not require annual audits. Those areas with less risk, solid controls, rare organizational changes, and consistently strong historical audit results can be reviewed less often.
2. Excessive Documentation
Many internal audit departments spend too much time creating highly detailed workpapers that do not add value beyond fulfilling internal preferences. Documentation must be satisfactory to support audit conclusions, outline the work performed, and allow a seasoned reviewer to follow the work completed. Beyond this, further documentation offers limited value.
3. Large Sample Sizes
When budgets are tight, internal auditors must exercise professional judgment and consider risks to determine proper sample sizes. Testing less samples in low-risk areas can still provide sufficient audit evidence, and as a result, audit resources can be reallocated to areas where additional testing is more likely to uncover meaningful insights.
4. Areas with Strong Recent Coverage
For processes that were recently audited by other assurance providers (e.g., external auditors, regulators, compliance or quality teams), internal audit should contemplate leveraging that work where appropriate. The 2025 Global Internal Audit Standards highlight the coordination between internal audit and other assurance providers to reduce duplicative work and enhance efficiency.
5. Complex Auditing Tools
Sophisticated tools can help improve efficiency, but internal audit functions can often succeed using existing systems, spreadsheet-based analytics, and simple reporting tools. Prior to purchasing new and complex technologies, organizations must consider whether they are using existing tools to their fullest potential.
What Organizations Cannot Skip
1. Risk Assessment
Internal audit cannot work effectively without insight into where the organization’s greatest risks exist. Having a documented risk assessment helps organizations appropriately assign resources where they are needed most. Skipping the risk assessment often results in ineffective audit plans, inadequate resource allocation, and weakened stakeholder confidence.
2. Audit Planning and Defining the Scope
Insufficient planning frequently leads to unproductive fieldwork hours during the audit. Clearly outlined audit objectives, scope, risks, stakeholders, and expected outcomes assists in keeping audits concentrated and efficient. Solid audit planning helps internal audit functions prevent scope creep, needless testing, and duplicative work.
3. High-Risk Activities
Critical operations, such as cybersecurity, fraud risk, third-party risk management, critical financial reporting processes, and regulatory compliance, usually necessitate attention regardless of resource constraints. White reducing audit coverage in high-risk areas can save organizations money in the short term, it does create exposure to possibly damaging financial, operational, and reputational consequences.
4. Maintaining Independence and Objectivity
When organizational resources are limited, internal auditors may be asked to take on operational duties, in addition to their assurance work. While this may appear to be a good solution, it does jeopardize independence and objectivity. Internal audit functions must maintain appropriate independence in order to provide meaningful assurance. When internal audit loses its independence, it loses its value, and efficiency should never come at the expense of integrity.
5. Follow-Up on Audit Findings
Finding issues over the course of an audit provides very little value if they are never addressed by management. Follow-up actions typically use a small number of resources while simultaneously creating value. Organizations should track corrective actions, monitor management commitments, and validate remediation plans and efforts.
Useful Strategies for Optimizing Audit Resources
Organizations working within budget limitations can often enhance their internal audit value through the following methods:
- Prioritizing internal audits based on risk
- Utilizing audit work completed by other assurance providers
- Leveraging data analytics
- Performing pointed reviews
- Standardizing audit methods
- Reporting primarily on significant findings
- Engaging co-sourced services
- Periodically reevaluating the audit plan to address emerging and changing risks
Final Thoughts
Budget constraints are a reality for many internal audit departments, but this does not justify excluding vital audit activities. Internal audit functions can sustain effectiveness with fewer resources by applying a well-organized, risk-based approach and making thorough judgments about where efforts will result in the greatest value.
To learn more about McKonly & Asbury’s Internal Audit services, contact Partner Dave Hammarberg or Senior Manager Victor Kong, who have been providing internal audit and forensic accounting services for over twenty years. We would love to discuss how we can assist you with your challenges.
About the Author
Cecily Carl joined McKonly & Asbury in December of 2023 and is an Advisory Supervisor with the firm. She is a member of the firm’s Advisory and Business Consulting
Segment, serving clients as an internal auditor and consultant on Sarbanes-Oxley (SOX) engagements, QAR engagements, and Governmental audits. She is also a member of the firm’s System and Organization Controls (SOC) practice. Cecily serves a wide range of industries in both public and private sectors.
