The IIA’s New 2025 Internal Audit Standards

As of January 2025, the Institute of Internal Auditors (IIA) has implemented its new Global Internal Audit Standards, replacing the previous International Standards for the Professional Practice of Internal Auditing. These updated standards bring a modernized framework to the profession—introducing a principles-based approach that emphasizes flexibility, strategic alignment, and risk responsiveness. For community banks, understanding and adapting to these changes is essential to maintaining effective oversight and regulatory readiness.

The updated standards are built around five core domains and 15 principles designed to strengthen the structure and delivery of internal audit activities. They focus on elevating independence and objectivity, reinforcing continuous risk monitoring, enhancing alignment with business strategy, and emphasizing cultural and ethical considerations.

Unlike previous versions, the 2025 standards shift away from checklist-based compliance and instead encourage professional judgment and organizational relevance. For community banks, this change offers an opportunity to create a more agile and strategic internal audit function—if implemented with care.

Many community banks operate with lean internal audit teams or outsource the function altogether. The new standards prompt a careful reassessment of existing audit charters, methodologies, documentation, and quality assurance practices.

Key updates that banks should address include:

Annual audit plans are no longer sufficient on their own. Audits must now reflect real-time risk assessments and business conditions, requiring more fluid and ongoing risk evaluation.

Boards and audit committees must be more deeply involved, with clear lines of accountability and frequent reporting on audit performance and risk posture.

Auditors are now expected to evaluate aspects such as tone-at-the-top, ethical behavior, and organizational culture as part of their broader risk assessments.

The standards include detailed expectations around quality assurance, including external quality assessments (EQA) and ongoing performance monitoring.

Now that the new standards are in place, community banks should be actively validating whether their current internal audit operations meet the updated requirements. This includes engaging with third-party internal audit providers to ensure their approaches have been updated, and taking steps internally to adjust documentation, governance frameworks, and training programs.

To prepare, community banks should begin by reviewing their internal audit charter and confirming it aligns with the new principles. It’s important to engage the audit committee in conversations around governance expectations under the updated framework. Banks should also speak with their internal audit providers or teams to ensure they are updating their methodologies and documentation in accordance with the new standards. A gap assessment may be beneficial to identify areas where current practices fall short, and institutions should plan to document quality assurance and improvement activities as required.

For community banks, internal audit is more than a compliance function—it’s a vital tool for building trust, managing risk, and supporting sound decision-making. The IIA’s 2025 standards raise the bar, and transitioning effectively requires both strategic insight and practical execution.

Our CSH team specializes in internal audit and advisory services tailored to financial institutions, and we’re here to help you assess your readiness, close any compliance gaps, and implement a forward-looking audit function that aligns with your goals. Whether you need a full internal audit program or supplemental support, now is the time to act—and CSH is ready to support your next steps.