Internal audit leaders are navigating an increasingly complex risk landscape, with cybersecurity emerging as the paramount concern heading into 2026. A new survey by accounting and advisory firm Sikich reveals that 64% of internal audit departments anticipate budget increases and 43% plan to expand their headcount. However, these investments are reportedly lagging behind the expanding responsibilities of the internal audit function, a sentiment echoed across various sectors as highlighted by recent reports from the National Association of Corporate Directors (NACD) and law firm Dykema, alongside a survey by financial planning software provider Vena.
Cybersecurity Dominates Emerging Risk Agenda for Internal Audit
Cybersecurity has solidified its position as the top emerging risk for internal audit leaders, cited by 43% of respondents in the Sikich survey. This marks a slight increase from 41% in the previous year, underscoring the persistent and evolving nature of digital threats. Artificial intelligence (AI) and automation, while holding steady at 35%, remain significant areas of focus. Regulatory compliance also saw a notable rise, climbing to 25% from 23%, reflecting the dynamic and often challenging regulatory environment that organizations are increasingly facing.
Chief Audit Executives (CAEs) and audit committees generally concur on the most significant risks, yet a divergence emerges when it comes to strategic risk. While 29% of audit committees identify strategic risk as a top priority, a considerably smaller proportion of CAEs (13%) share this view. This disparity could indicate differing perspectives on the immediacy and impact of strategic uncertainties. Furthermore, the survey indicates a broad integration of specific risk areas into audit plans. Over four-fifths (82%) of audit plans now encompass business resilience and third-party risk assessments, and a substantial 77% include AI-related evaluations. This comprehensive approach highlights the growing awareness of interconnected risks that can impact an organization’s ability to operate effectively and withstand disruptions.
The resource allocation picture presents a more nuanced challenge than budget figures alone suggest. A significant hurdle identified by 64% of respondents is the widening gap in technical skills, particularly in cybersecurity and AI. This figure represents an increase from 59% in the prior year, pointing to a deepening crisis in talent acquisition and retention. The scarcity of specialized expertise is compounded by the fact that 43% of respondents consider time, budget, and overall resources as the primary barriers to implementing necessary audit functions and strategies.
To bridge these capacity and expertise gaps, the vast majority of audit functions—over 82%—are now leveraging external partners. These collaborations are primarily driven by the need to access specialized skills that are not readily available in-house, rather than simply augmenting existing headcount. This trend suggests a strategic reliance on external expertise to navigate complex and rapidly evolving risk domains, allowing internal teams to focus on core competencies and strategic oversight.
Directors Identify Strategy Execution as a Critical Oversight Gap
Beyond the internal audit function, corporate directors are also signaling a critical need for improvement in oversight, with strategy execution identified as the most pressing area requiring attention. A joint report from the National Association of Corporate Directors (NACD) 2026 blue ribbon commission reveals that approximately three in five (60%) public company directors and 61% of private company directors believe strategy execution is the oversight area most in need of enhancement over the next 12 months.
The NACD report, which synthesizes insights from a survey of over 260 directors and interviews with blue ribbon commissioners, indicates that 55% of public directors feel that strategic assumptions and scenario testing require greater board attention. This is followed closely by concerns regarding external risks and developments (46%) and organizational capabilities and talent (41%). The commission argues that traditional "review and concur" approaches to board oversight are becoming insufficient in today’s business environment, which is being reshaped by rapid technological advancements like AI, escalating geopolitical volatility, and compressed strategy cycles. This calls for a more proactive and dynamic approach to governance.
Structural impediments to effective execution oversight were also highlighted by directors. These include an over-reliance on purely financial metrics, insufficient rigor in testing strategic assumptions, and a lack of forward-looking performance indicators. The data further suggests a potential deficit in board composition and preparedness. Only 32% of public directors and 28% of private directors are confident that their board possesses the requisite collective skill set and experience to effectively support their organization’s growth strategy. This indicates a need for many boards to reassess their current composition and potentially seek directors with more diverse and relevant expertise.
Dealmakers Anticipate Tariff and Regulatory Headwinds Despite Robust Pipeline
In the mergers and acquisitions (M&A) landscape, dealmakers are projecting continued strong activity into 2027, yet they are increasingly concerned about the impact of tariffs and evolving trade policies. A new report from law firm Dykema indicates that these factors have surpassed interest rates as the most significant perceived threat to transactions.
The Dykema report, based on a survey of senior executives, investment bankers, private equity sponsors, and advisors, found that nearly half of respondents identified tariff and trade policy uncertainty as the primary external risk to deal activity over the next year. This represents a significant shift, as interest rate concerns had dominated this position for the preceding three years. Regulatory uncertainty, specifically concerning antitrust regulations and foreign investment reviews, was identified as the second most significant concern.
Despite these headwinds, a general sense of optimism regarding deal volume prevails. A majority of respondents anticipate an increase in their own deal activity in 2027. Key drivers for this optimism include substantial private equity "dry powder"—uninvested capital—and the robust balance sheets of strategic buyers. The report also notes a continuing trend of the private credit market playing an increasingly prominent role in financing mid-market deals, often displacing traditional bank financing. This suggests a maturing and diversifying financing landscape within the M&A ecosystem, even as external policy uncertainties loom.
Finance Teams Continue to Struggle with Month-End Close Errors
The efficiency of financial reporting processes remains a persistent challenge, with a significant portion of finance teams still grappling with errors during the month-end close. A survey by financial planning software provider Vena found that nearly four in five (78%) finance teams identify errors requiring manual correction during this critical period.
The survey, which polled finance and accounting professionals across North America, indicates that close cycles continue to be protracted, despite substantial investments in automation tools. Reconciliation issues, data entry mistakes, and manual journal entries were cited as the most common sources of error. Approximately one-third of finance teams reported spending more than a week each month resolving these discrepancies before financial books could be officially closed.
These findings highlight a persistent gap between the adoption of financial technology and the realization of tangible efficiencies. Many organizations appear to be layering automation solutions onto fragmented legacy systems rather than addressing fundamental data quality issues at their source. While nearly two-thirds of respondents are actively evaluating or implementing AI tools within the close process, confidence in the accuracy and reliability of these tools’ outputs remains varied. This suggests that while AI holds promise for streamlining financial operations, its effective integration and the cultivation of trust in its outputs are still works in progress for many organizations.
Broader Implications and Future Outlook
The confluence of these survey results paints a picture of organizations operating in an environment characterized by increasing complexity and interconnected risks. The heightened focus on cybersecurity, coupled with the widening technical skills gap, necessitates a strategic reassessment of talent acquisition, retention, and training initiatives. Organizations that can effectively build and maintain a skilled workforce in critical areas like cybersecurity and AI will likely gain a competitive advantage.
The divergence in perspectives on strategic risk between CAEs and audit committees underscores the importance of robust communication and alignment at the highest levels of governance. Boards and management must ensure a shared understanding of the organization’s strategic priorities and the risks that could impede their achievement. The call for more dynamic and forward-looking board oversight, as highlighted by the NACD report, suggests a shift away from traditional governance models towards more adaptive and proactive approaches.
In the M&A arena, the rising concerns about trade policy and regulatory uncertainty pose significant challenges for dealmakers. While the underlying drivers of deal activity remain strong, the geopolitical and regulatory landscape demands increased diligence and strategic foresight. Companies will need to navigate these complexities with agility, potentially through enhanced due diligence and more sophisticated risk mitigation strategies.
Finally, the persistent issues within the month-end close process highlight the ongoing need for finance functions to prioritize data integrity and invest in foundational improvements. While automation and AI offer significant potential, their effectiveness is contingent upon the quality of the underlying data and the strategic integration of these technologies into well-defined processes. Finance teams must move beyond simply layering technology to address systemic issues for true efficiency gains to be realized.
Collectively, these insights from various sectors underscore a common theme: organizations are facing a dynamic and demanding operational environment. Success in the coming years will hinge on the ability to proactively manage evolving risks, foster critical technical skills, ensure robust governance, adapt to global policy shifts, and optimize core financial processes through strategic technology adoption and a commitment to data quality. The data suggests a clear imperative for continued investment and strategic focus across these vital areas of business operations and oversight.
