ComplianceJune 04, 2025

The psychology of internal audit: Navigating bias, behavior, and decision-making

Like many of today’s youth, my nephew loves soccer. He plays on a team with red jerseys, and they recently faced an opposing team wearing green jerseys. Most players can differentiate between the teams based on the different colors. For my nephew, who is color-blind to red and green, all the jerseys blend into a murky green tone. Now add in the green turf, and things become even more complicated. Therefore, he must rely on different cues, like movement and positioning, or a small logo on the other team’s jersey, to make sure he knows who is on his team.

Similar to my nephew’s color-blindness, today’s world has many blurred colors resulting from data overload, incomplete information, contradictory narratives, and an increase in artificial intelligence (AI)-generated outputs. Just as my nephew has learned to excel at soccer despite his color blindness, internal audit needs to develop and maintain skills and strategies to overcome the challenges brought by today’s complex world. Understanding the nuances behind bias, behavior, and decision-making, we can continue to provide meaningful insights and be a more trusted partner to the business, even when the lines often remain blurred.

What is bias, and why it matters to internal audit?

According to dictionary.com, bias distorts thinking, clouds judgment, and leads to flawed decision-making. For internal audit, bias is important because it can impact objectivity, skew risk assessments, and even the effectiveness of audit recommendations.

Bias can occur in different ways during an audit. For instance:

  • Information overload bias: When an auditor is working with a large amount of data, it can lead to decision fatigue and reduced focus, causing the auditor to sift through irrelevant information, unconsciously filter out key details, or rely on only the most readily available information.
  • Authority bias: This is when an auditor places trust in individuals in positions of power, sacrificing critical thinking and undervaluing insights and data from frontline employees.
  • Framing bias: Information delivery (risk or opportunity) can heavily influence how the auditor and stakeholder perceive it.

Between emails, messaging apps, and social media, even the screen you’re currently reading has become a source of attention disruption. According to Maryanne Wolfe, a UCLA Literacy Director, in a recent interview with NPR, we have so much information that we have a built-in defense mechanism to skim, which is the enemy of deep reading. As individuals consume information in short bursts for efficiency, bias can arise, like when stakeholders skim audit reports or auditors rely on summary reports, overlooking key details.

We can start addressing bias by acknowledging that it exists and understanding its impact. If internal audit really wants to be a trusted strategic advisor, then we must be proactive in minimizing bias and make sure our work remains complete, objective, and impactful.

Modern drivers of bias in internal audit

  1. The AI paradox: According to a recent Wolters Kluwer survey, AI adoption by internal audit is set to double to 80% in the next 12 months. While AI is beginning to evolve and reshape audit methods and processes, it is still not perfect. AI evolves as it learns, much like an auditor’s progress through experience. As such, AI inherits biases from the data provided (what we teach it), which will increase errors and assumptions that the auditor is relying on. Internal audit must critically analyze AI findings and remain aware of blind spots in the data. Putting overreliance and blind faith into what AI is telling us will result in automation bias, which the auditor uses to produce inaccurate conclusions.
  2. Conflicting narratives and stakeholder influence: Internal audit often rely on information provided by stakeholders, but these perspectives can be incomplete or simply their own opinion, without fact. How many of us have spoken to a stakeholder about risks impacting their function, only to determine that they are simply trying to shift blame to others to minimize their roles in control gaps? If you can’t distinguish between fact and opinion, then stakeholders can inadvertently influence the auditors’ judgment.
  3. Time pressures and decision fatigue: Tight deadlines and resource constraints are a growing challenge for internal audit teams. During an engagement, the audit team often finds itself compelled to make quick decisions, which leaves them susceptible to reasoning shortcuts. Such behavior is known as heuristic biases, and these shortcuts may place efficiency over accuracy, leading to oversights in complex engagements.

Before moving on, let’s pause for a moment to briefly discuss AI, both as a transformative for internal audit, as well as how it can hinder and help reduce bias in this field.

How AI can reduce bias

  • Data-driven decision-making: AI technology uses algorithms to identify trends and anomalies objectively, reducing reliance on human judgment.
  • Behavioral insights: AI systems can analyze data to detect behavioral patterns of non-compliance or inefficiencies, giving audit more insight into the “why” behind the data.

How AI can amplify bias

  • Algorithmic bias: AI systems are only as objective as the data used to train them. If the data contains historical biases, the AI may reinforce them.
  • Over-reliance on technology: An overdependence on AI results, along with insufficient professional skepticism and critical thinking, compromises the foundation of internal audit, as these skills remain essential.

Cognitive bias: Strategies for mitigation

Cognitive bias is a systematic error in thinking that can cloud our judgment based on one’s perception of reality — like assuming only tall people can play basketball. According to the IIA’s Internal Auditor blog, Building a Better Auditor, cognitive bias can influence how auditors interpret data, assess risks, and communicate findings. Here are some common biases:

  1. Confirmation bias occurs when audit focuses only on evidence that supports their assumption or hypothesis.
    • How to Address It: Adopt a structured framework in your audit process that requires the auditor to evaluate alternative perspectives and consider outliers.
  2. Anchoring bias is when an auditor places over-reliance on the first piece of information they review, such as a prior year’s risk assessment or initial stakeholder input.
    • How to Address It: Incorporate diverse viewpoints across the audit team during planning and reporting to challenge initial assumptions.
  3. Availability bias is when the auditor gives importance to readily available data.
    • How to Address It: Utilize data analytics to review all relevant data, not just the most accessible ones.
  4. Overconfidence bias involves the auditor overestimating their ability to detect risks or interpret findings.
    • How to Address It: Incorporate peer reviews into the audit process to provide additional scrutiny and ensure that conclusions are well-supported.

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Behavior matters: The role of emotional intelligence in internal audit

While cognitive biases shape how we interpret information, emotional intelligence (EI) — the ability to understand and manage emotions — influences how we interact with stakeholders and manage our audit work.

Why emotional intelligence matters: In an era of increasing reliance on AI and data-driven insights, the human side of audit remains as critical as ever. Emotional intelligence allows audit to:

  • Build trust: Our stakeholders are more likely to accept and trust the findings from auditors who demonstrate empathy and an understanding of their work.
  • Navigate resistance: High EI helps auditors anticipate and address defensive reactions, fostering collaboration instead of confrontation.
  • Communicate effectively: Auditors with strong EI can tailor their communication to resonate with a diverse audience, ensuring their messages are impactful.

Developing emotional intelligence: Auditors can enhance their EI through:

  • Self-awareness exercises: Regular reflection on how emotions influence our decision-making. One of the best ways to do this is to stop and ask yourself, “Why am I feeling this way?” This simple exercise can help you uncover the underlying reasons that are influencing your decisions.
  • Active listening training: Practicing listening techniques so we can truly hear and understand what our stakeholders are saying. Try pausing for 3 seconds, then recap their message to confirm understanding before responding. For example, “If I understand correctly, your main concern is…”
  • Feedback and mentorship: Seeking constructive input from peers and supervisors to improve interpersonal skills. During interactions with peers and mentors, simply ask for feedback, record it in a journal, and then take action to improve or double down on your strengths.

Charting a clear course: Practical steps for internal auditors

In our complex world full of resource constraints, ever-evolving risks, information overload, and AI advancements, internal audit needs to adopt practical strategies that address the biases we face every day. Below are actionable steps for navigating today’s dynamic audit landscape:

1. Validate AI outputs with professional skepticism: Never has it been more critical for internal audit to double down and continue its training on applying professional judgment and skepticism. Audit should:

  • Cross-check outputs: Compare AI results with independent data sources or manual testing.
  • Understand algorithms: Collaborate with your organization’s data scientists or AI teams to identify biases in AI training data.
  • Maintain oversight: Treat AI as a tool to support decisions, not the sole source of conclusions.
2. Strengthen stakeholder engagement: Establishing and maintaining a solid foundation of collaboration with stakeholders is essential for addressing conflicting narratives and ensuring that audit findings are actionable. Internal audit can:
  • Facilitate communication: Establish regular touchpoints to clarify expectations and address discrepancies.
  • Leverage expertise: Engage with diverse teams across the organization to gain multiple perspectives on complex issues.
  • Frame recommendations constructively: Highlight opportunities for improvement rather than focusing solely on deficiencies.
3. Harness technology to reduce bias and enhance decision-making: Use proven technologies to address cognitive biases and improve audit accuracy. Key technologies include:
  • Data analytics platforms: Leverage tools like TeamMate Analytics for Audit to quickly analyze large datasets to identify patterns and anomalies.
  • Real-time auditing: Utilize auditing capabilities like TeamMate+ Agile Audit to be more responsive to change, based on the most current data.
  • Visualization tools: Use dashboards to simplify complex insights, reducing the risk of miscommunication with stakeholders.

The future of internal audit: A blend of psychology and technology

Like my nephew learning to excel at soccer despite his color blindness, internal audit must excel in a world of blurred lines caused by incomplete information, data overload, contradictory narratives, and AI influence. By understanding bias, behavior, and decision-making, and combining human insights with advanced technology, internal audit can adapt, maintain objectivity, and provide meaningful guidance. With professional skepticism, continuous learning, and collaboration, internal audit can help organizations thrive, even when the lines remain unclear.

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Scott Madenburg Headshot
Founder at ARC∙Hybrid
Scott Madenburg is a leading market advisor and subject matter expert in audit, risk, and compliance with over 20 years of experience.
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