Internal Audit Functions Pivot to Supply Chain and AI Risks
A recent analysis of audit trends highlights three key shifts for 2026: integrated supply chain risk management, the use of AI for continuous auditing, and the expansion of co-sourcing to handle specialized areas. The report suggests that leading internal audit functions are moving beyond financial controls to embed themselves in supply chain mapping and third-party due diligence, driven by regulatory, cyber, and geopolitical pressures.
- A resurgence of forced labor enforcement is anticipated in 2026, targeting industries such as automotive, electronics, critical minerals, steel, and aluminum, with new focuses on EV battery supply chains, pharmaceuticals, and medical devices. - By 2026, 74% of manufacturers are projected to be reshoring or nearshoring operations to mitigate geopolitical risks, with a significant push for domestically-produced components in defense, energy, and infrastructure sectors. - The SEC's climate disclosure rules, while facing an uncertain future at the federal level, are being mirrored by state-level regulations; California's SB 253, for instance, will require large companies doing business in the state to report Scope 1 and 2 emissions in 2026 and Scope 3 emissions in 2027. - While U.S. imports from China dropped 29% in 2025, China's overall exports grew over 5%, fueled by increased sales to the EU and ASEAN nations, maintaining pressure on global supply chains despite tariff disputes. - New EPA and OSHA regulations taking effect will tighten compliance for manufacturers, including a rule requiring automatic leak detection for large refrigeration systems by January 1, 2026, and a potential October 13, 2026, deadline for reporting PFAS usage. - A key trend for 2026 is "predictive orchestration," where AI-powered control towers integrate data from procurement, manufacturing, and logistics to anticipate disruptions using external signals like weather patterns and port congestion data. - A survey of supply chain professionals revealed that 94% plan to use AI for decision support, with other top applications including customer service (over 90%) and inventory management (85%). - Co-sourcing in internal audit is gaining traction as a way to access specialized skills in areas like cybersecurity and data analytics without fully outsourcing the function, allowing internal leaders to retain strategic control.
