Audit Co-Sourcing Gains Momentum
Internal audit functions are increasingly turning to co-sourcing to gain specialized expertise and adopt more agile planning methods, according to recent industry podcast discussions. Experts on shows like Audit & Beyond argue that the trend is driven by a need for deep domain knowledge to address volatile risks in manufacturing rather than just cost savings.
- The "reshoring" trend is shifting from a reactive measure against pandemic-era disruptions to a long-term financial strategy based on Total Cost of Ownership (TCO) and geopolitical risk mitigation. However, a significant domestic skills gap in trades like precision machining and mechatronics presents a major hurdle. A 2025 survey noted that even without a surge in reshoring, 2.1 million manufacturing jobs are projected to be unfilled by 2030. - Escalating US-China trade tensions are forcing manufacturers to accelerate their "China+1" supply chain diversification strategies, moving parts of production to countries like Vietnam, India, and Mexico. In a 2025 survey by the US-China Business Council, only 48% of U.S. companies planned to invest in China, a steep drop from 80% in 2024. - The SEC's climate disclosure rule, adopted in March 2024, mandates that publicly traded companies report on climate-related risks that materially impact their business. While Scope 3 (supply chain) emissions disclosure is not required, companies must disclose material supply chain risks. Large Accelerated Filers (LAFs) must begin providing these disclosures with their annual reports for the fiscal year ending December 31, 2025. - Internal audit methodologies are evolving to be more agile and risk-responsive, moving away from static annual plans. This includes using predictive analytics for risk foresight and leveraging AI and automation for continuous monitoring and analysis of large datasets to detect fraud and identify anomalies. - A change in the White House administration in 2025 has led to a "Regulatory Freeze Pending Review," pausing several pending OSHA regulations, including a proposed standard for Heat Injury and Illness Prevention. Similarly, the EPA has postponed the effective dates for rules concerning chemicals like trichloroethylene (TCE) and has extended comment periods for proposals on emissions. - Heightened geopolitical risks and supply chain vulnerabilities are driving new legislation around critical materials. The EU's Critical Raw Materials Act, which took effect in May 2024, sets 2030 targets for local extraction (10%), processing (40%), and recycling (25%) to reduce reliance on single-country sources. This follows China's export restrictions on materials like gallium, germanium, and graphite. - According to a 2025 KPMG survey of 400 manufacturing leaders, 63% of CEOs reported that global supply chain disruptions are impeding their ability to innovate. In response, 68% of these executives named AI as their top investment priority to enhance resilience and mitigate costs. - OSHA's 2025 priorities are shifting towards data-driven enforcement, targeting inspections based on injury and illness rates. There is a heightened focus on emerging risks such as heat-related illnesses in manufacturing environments and exposure to chemicals like PFAS, the so-called "forever chemicals."
