Internal audit outsourcing has been a contentious topic in the past years. Some believe that the internal audit process should be kept in-house, partly because outsourcing the audit planning process could be both costly and complicated.
Preparing for an internal financial audit can be a challenging endeavor, one that should be considered thoroughly. As businesses expand and evolve, so should the scope and competencies of your internal audit team.
The decision of whether to partially or fully outsource the internal audit process can determine how much value you want to get from the activity. In a survey conducted by the Institute of Internal Auditors in 2016, more than 50% of the responding companies hire third-party service providers to supplement their in-house staff.
In this article, we examine the benefits and the disadvantages of hiring external contractors to conduct your regular financial audit.
Disadvantages of Outsourcing Your Internal Audit Process
- Security Concerns – Just as with any service provided by a third party, there are inherent risks when you outsource any business process. Look for an outsourcing partner that understands the importance of keeping your proprietary information, as well as your client’s, secure.
- Cost – Depending on your service provider, the hourly rate of an external resource can cost about three to five times that of an in-house staff.
- Continuity – As with any outsourcing engagement, continuity can be an issue if there are frequent changes in your team. Challenges may arise during the internal audit if your sourcing team does not have a thorough understanding of your work processes.
- Confusion – In the case of co-sourcing, confusion about your responsibilities may arise if you’re not aligned with your internal auditors.
Advantages of Internal Audit Outsourcing
- Flexibility – If your company does not have the means to form a full-time staff to handle internal audits, you can opt for co-sourcing or hiring consultant auditors to augment your audit function.
- Scalability – With an outsourcing partner, you can easily scale your audit team to meet the needs of your organization. In the case of co-sourcing, having an external resource can add value to your internal audit team by bringing in industry expertise.
- Fresh Perspectives – Third-party providers offer their services to businesses from different verticals. With their expertise and familiarity with companies in your industry, they can bring fresh perspectives to the table. As a result, your organization can benefit from new ideas that can improve your operations, internal risk, and risk control.
Regardless of which option your corporation goes for, your internal audit should, as an independent assurance activity, add value to your organization and enhance your financial, control, and operational processes.
Find out how we can help you with your audit planning process today!