Paul Sobel knows a thing or two about budgets. As vice president for internal audit at Mirant Corp. in Atlanta, he has spent his time poring over the minutiae of the $3 billion merchant energy company's books. Now, however, he has to think about his own budget as well. With the economy in crisis, the budget for his 14-person department is "flat," he says, which means he has had to "be smart about allocation of resources." For Sobel, that has meant shifting away from the past few years' concentration on Sarbanes-Oxley testing to focus more on technology risk and strategic risk.

It's a story being repeated all across the corporate landscape, according to PricewaterhouseCoopers, which just conducted a survey of more than 700 internal auditors. "This was the first survey we've conducted in which internal auditors said their budgets had been reduced or that they expected [them] to be reduced," reports Gary Chamblee, internal audit services partner and co-author of the report. "Even in Fortune 500 companies, we had auditors saying they expected reductions."

Chamblee says this year's report shows that internal auditors need to focus on emerging risks and also be prepared to step outside of the usual annual audit plan. "With things changing so fast, you need to be checking your GPS along the way," he says.