Auditors Put People on the Risk Map: IIA Issues Organizational Behavior Requirement

What changed and why it matters right now

The Institute of Internal Auditors (IIA) has published a new topical requirement that elevates organizational behavior as a formal area for internal audit attention. In simple terms: auditors are being asked to look beyond systems and numbers and to assess how the way people act, communicate and make decisions can create or hide risks.

This is not a small tweak. By naming organizational behavior in its guidance, the IIA is signalling that things like tone from the top, incentive structures, informal decision networks and cultural norms are now part of a modern audit agenda. For firms that have treated those topics as soft or anecdotal, the announcement makes them harder to ignore.

What the new requirement covers and how the IIA defines organizational behavior

The IIA’s requirement frames organizational behavior as the patterns and norms that shape how employees and leaders behave at work. That includes formal elements such as policies, reporting lines and pay plans, and informal ones such as peer pressure, unwritten rules, and the everyday way decisions get made.

Core elements called out in the guidance include: identifying behavior-related risks, evaluating whether controls and governance address those risks, and reporting findings to senior management and the board. The document stresses that assessing behavior is not a one-off activity; auditors should consider it when planning audits, testing controls, and following up on prior issues.

The requirement also clarifies scope: it applies across functions and levels of an organization and is meant to be flexible enough for different industries and sizes. That means internal audit teams should be ready to link behavior concerns to financial, operational, compliance and reputational risk — wherever those links exist.

Why now: organizational behavior moves into mainstream risk thinking

This change reflects a broader trend. Over the past few years regulators, investors and boards have paid more attention to failures that trace back to culture and conduct — from misreported results to compliance lapses and high-profile collapses. The IIA’s move signals that organizational behavior is now part of the risk taxonomy internal auditors are expected to work from.

Making this explicit helps bridge a gap between traditional audit work, which focuses on systems and numbers, and the softer, often harder-to-measure drivers of performance and risk. It also aligns internal audit practice with the rising demand from stakeholders for clearer assurance on culture and conduct.

What this will change in practice for audit, compliance and boards

For internal audit teams, the requirement means broadening evidence-gathering beyond documents and transaction testing. Expect more interviews, climate surveys, observations and testing of behavioral controls such as incentive design and escalation mechanisms. Audit plans may include new, behavior-focused reviews or add behavioral lenses to existing engagements.

Compliance and HR functions will likely see closer collaboration with audit. Where previously HR-led efforts on culture were largely internal, audit involvement can add an independent lens — which can be helpful but may also require new data-sharing arrangements and sensitivity around personnel matters.

Boards and audit committees should also notice a shift: audit reports may start to include more narrative about culture, leadership signals and conduct risks, and recommendations may involve changes to rewards, reporting lines, or performance assessments.

Practical next steps organizations should consider

Organizations don’t need to reinvent audit overnight, but a few clear steps will help align with the requirement. First, map where behavior links to material risks and fold those links into audit planning. Second, build methods for assessing behavior — such as targeted surveys, structured interviews, and testing of control points tied to incentives and reporting channels. Third, strengthen coordination between audit, HR and compliance so findings can be addressed in a way that respects confidentiality and personnel rules.

Investing in auditor skills is also important: evaluating behavior requires interviewing techniques, qualitative analysis and comfort with non-financial evidence. Smaller teams may prefer to partner with specialists for early reviews rather than trying to cover everything internally at once.

Timing and how the IIA described the change

The IIA set out an effective timeline in its announcement: the topical requirement is published now and organizations are encouraged to begin aligning their audit programs in the coming audit cycles. The IIA framed the change as recognition that ‘‘behavioral drivers of risk deserve structured and repeatable audit attention,’’ and it urged internal audit to include behavior in planning, testing and reporting processes.

That message is straightforward: organizational behavior is not optional background context anymore. For internal auditors, compliance teams and boards, the practical work of translating that message into methods and reports starts now.

Sources

• prnewswire.com