Internal and Forensic Audit · Emerging Issues and Challenges

Challenges in Internal Audit Practice and How to Overcome Them

Updated 11 October 2026 · Fact-checked

Challenges in internal audit practice are the practical obstacles that weaken an internal audit function: threats to independence, limited staff and skills, remote auditing difficulties, unrealistic stakeholder expectations and frequent regulatory change. To answer in the exam, name each challenge, explain its effect on audit quality, then give a matching remedy.

Understand Challenges in Internal Audit Practice

Internal audit gives management and the board independent assurance on risk management, control and governance. The function works inside the organisation it audits. This creates most of its practical problems.

The first and biggest challenge is independence and objectivity. The internal auditor is paid by the entity and reports to people whose areas are audited. Pressure from management, reporting to the CFO, auditing a function you once worked in, or being given operating duties can all weaken objectivity. Independence is protected by organisational structure, such as functional reporting to the audit committee, and by personal conduct, such as avoiding conflicts of interest.

The second group is resources and skills. Many functions are small, with limited budgets and high staff turnover. The scope has grown to cover IT, cyber security, data analytics, ESG and fraud risk, and auditors often lack these skills. Remedies include training, co-sourcing or outsourcing specialist work, and using technology.

The third group is remote auditing, stakeholder expectations and regulatory change. Remote work reduces physical verification, makes evidence harder to authenticate and creates data security and communication issues. Stakeholders may expect the auditor to detect all fraud or to act as a consultant, which creates an expectation gap. Laws, standards and reporting requirements keep changing, so the plan and programme must be updated regularly.

For each challenge, think in pairs: the problem and its effect on audit quality, then the practical remedy. That is the shape of a good answer.

How to solve Challenges in Internal Audit Practice questions

Use this method for any question that asks you to discuss, explain or suggest solutions to challenges in internal audit practice.

1Read the question and note the facts given: size of entity, reporting line, staff position, mode of audit, recent legal change.
2Identify which challenge group the facts point to: independence, resources and skills, remote auditing, stakeholder expectations, or regulatory change.
3Define the challenge in one line, in plain words.
4Explain its effect on audit quality, such as bias, incomplete coverage, weak evidence or missed risks.
5Give a specific remedy for each challenge. Link the remedy to the facts in the question.
6Add a governance angle where relevant: audit committee oversight, charter, quality review.
7Close with a one-line conclusion on what the entity should do first.

Quickest way: Challenge, Effect, Remedy (CER) table in prose

When to use it: Use when time is short or the question asks for a list of challenges with solutions.

Write the headings in order: independence, resources and skills, remote audit, stakeholder expectations, regulatory change.
Under each, write one line each for challenge, effect and remedy.
Pick only the headings the facts support if the question is case-based, and go deeper on those.
Finish with a short conclusion naming audit committee oversight and continuous training.

Common mistakes in Challenges in Internal Audit Practice

Listing challenges without remedies.
Students recall the problems easily but forget the question also asks how to overcome them.
Fix: Pair every challenge with at least one remedy. Use the CER pattern.
Treating independence as only a reporting-line issue.
Students remember the audit committee point and stop there.
Fix: Cover both organisational independence (functional reporting, charter, budget) and individual objectivity (no conflicts, rotation, no operating duties).
Writing generic points that ignore the case facts.
Students prepare a fixed list and reproduce it.
Fix: Quote the facts in your answer and tie each remedy to them.
Presenting remote auditing as only a technology problem.
Remote work is linked in the mind to software and connectivity.
Fix: Also cover evidence reliability, data security, weaker observation of controls and communication with auditees.
Saying the internal auditor must detect every fraud.
Students confuse internal audit with forensic audit.
Fix: State that management is responsible for fraud prevention. Internal audit provides assurance and reasonable awareness of fraud risk, and this is why the expectation gap must be managed.

Worked examples

Example 1

The internal audit head of Sundaram Foods Ltd reports to the Chief Financial Officer, who also decides her budget. She has been asked to audit the finance function. Identify the challenge and suggest how it can be overcome.

Show the solution

Challenge: the facts point to a threat to independence and objectivity.
Effect: the head reports to and is funded by the person whose function she audits. She may soften findings or avoid sensitive areas, which reduces the credibility of the audit.
Remedy 1: change the reporting so the head reports functionally to the audit committee, with administrative reporting to a senior executive.
Remedy 2: let the audit committee approve the audit charter, plan, budget and the head's appointment and removal.
Remedy 3: where a conflict remains, assign the finance audit to another team member or an external professional.
Conclusion: independence is protected by structure first and by individual conduct second.

Answer: The challenge is impaired independence caused by reporting to and being funded by the CFO. It can be overcome by functional reporting to the audit committee, committee approval of charter, plan and budget, and reassigning or outsourcing audits where a conflict exists.

Example 2

Discuss the challenges of conducting an internal audit remotely and suggest measures to overcome them.

Show the solution

Introduce: remote auditing means performing audit work without being physically present at the auditee location, using documents and systems accessed electronically.
Challenge 1: limited physical verification of inventory, assets and the control environment. Measure: use live video walkthroughs, third-party confirmations and short on-site visits for high-risk areas.
Challenge 2: reliability and authenticity of evidence supplied electronically. Measure: obtain data directly from the system, use read-only access, and cross-check with independent sources.
Challenge 3: data security and confidentiality. Measure: use secure portals, encrypted transfer and access controls, and follow the entity's information security policy.
Challenge 4: weaker communication and relationship with auditees. Measure: hold regular virtual meetings, set clear timelines for document requests and document discussions.
Challenge 5: auditor skills in digital tools. Measure: train staff and use data analytics for full-population testing.
Conclude: a hybrid model, with remote work for routine testing and on-site work for high-risk areas, balances efficiency and assurance.

Answer: Remote auditing faces limited physical verification, doubtful evidence reliability, data security risks, communication gaps and skill gaps. These are addressed through video walkthroughs, direct system extraction, secure channels, regular virtual meetings, training and a hybrid on-site and remote model.

Exam tips

Answer in a challenge, effect, remedy pattern. Examiners reward the link between the problem and the fix.
In case-based questions, name the challenge the facts point to before giving the general list.
Always include independence. It is the most commonly tested challenge and is both structural and personal.
Mention skills of the future auditor: data analytics, IT and cyber knowledge, ESG awareness, communication and professional scepticism.
Where a law or standard is not certain to you, describe the principle in plain words rather than quoting a section number.

Practice questions from Emerging Issues and Challenges

Challenges in Internal Audit Practice in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Challenges in Internal Audit Practice: frequently asked questions

What are the main challenges faced by internal auditors?

The main ones are threats to independence, limited resources and skill gaps, difficulty in remote auditing, high or mismatched stakeholder expectations and constant regulatory change. In the exam, add a remedy for each.

How can an internal auditor maintain independence?

Through functional reporting to the audit committee, an approved audit charter, adequate budget, no operating responsibilities and avoiding auditing areas where there is a conflict. The auditor should also disclose any impairment to the audit committee.

What skills do future internal auditors need?

Apart from accounting and control knowledge, they need data analytics, IT and cyber risk understanding, knowledge of ESG and fraud risk, and strong communication. Professional scepticism and adaptability remain essential.

What is the best way to overcome remote auditing challenges?

Use a hybrid approach. Rely on secure data access, video walkthroughs and analytics for routine work, and visit the site for high-risk areas. Protect data and document all evidence properly.