Skip to content

Insights

Outsourcing Internal Audit

Outsourcing the Internal Audit function is common, especially for organizations that may not have the resources, expertise, or capacity to maintain a full-time internal audit department. Outsourcing has varying models which can offer strategic and operational advantages for organizations.

Common Models for Outsourcing Internal Audit are:
  • Full Outsourcing: The entire internal audit function is outsourced to an external service provider.
  • Co-Sourcing: The company retains internal audit staff but outsources specific tasks or areas requiring specialized expertise.
  • Staff Augmentation: External auditors provide additional personnel to support the in-house team during periods of high demand, such as during peak audit cycles.

Benefits of Outsourcing Internal Audit

Outsourcing the internal audit function can provide advantages, from cost savings and access to specialized expertise to enhanced objectivity and flexibility. By leveraging the skills and resources of external auditors, organizations can improve their internal audit processes, ensure compliance, and focus more on their core business activities. However, it is crucial to carefully select a reputable audit firm and establish clear contractual terms to fully realize the following benefits.

1. Cost Savings

Maintaining an internal audit department requires hiring full-time staff, which involves paying salaries, benefits, and other overhead costs. Outsourcing converts these fixed costs into variable costs, where the company only pays for the services it needs. Moreover, costs related to employee benefits, office space, training, and other administrative expenses can be minimized or eliminated by outsourcing.

2. Access to Expertise

In-house internal audit teams may need to hire additional specialists or train staff to address complex areas like IT audits, cybersecurity, regulatory compliance, or to improve audit practices. Choosing the full outsourcing option provides access to a team with diverse skill sets and experience, reducing the need to develop those capabilities internally. Audit firms often have specialists with deep knowledge and experience in various industries and regulatory environments. External auditors are typically up to date with the latest audit practices, standards, and technologies, which they bring to the organization.

The need for specialized expertise or improvement in audit practices can also be accomplished by co-sourcing to audit firms with the required expertise. Using the co-sourcing option with the right firm provides opportunities for training and building internal expertise while improving audit practices and meeting audit plan requirements.

3. Objectivity and Independence

Outsourcing the internal audit function can significantly enhance objectivity and independence by allowing organizations to benefit from a neutral, external viewpoint that is not influenced by internal politics, conflicts of interest, or organizational pressures.

4. Scalability and Flexibility

Outsourcing allows a company to scale its internal audit function up or down as needed, avoiding the costs associated with maintaining a full team when demand for internal audit services fluctuates. In addition, companies can draw on a broad pool of auditors with various skills and backgrounds to address specific audit requirements without the risks from staff turnover resulting in not meeting audit plan expectations. External firms can quickly deploy experienced auditors to meet urgent audit needs or deadlines. Professional audit firms are accustomed to delivering timely reports, which can be crucial for regulatory or stakeholder requirements.

To learn more about McKonly & Asbury’s SOX and Internal Audit services, contact Elaine Nissley, Director, or Victor Kong, Senior Manager, who have been providing SOX 404 and internal audit services for over twenty years. We would love to discuss how we can assist you with your challenges.

About the Author

Victor Kong

Victor joined McKonly & Asbury in 2023 and is currently a Senior Manager with the firm. He is a member of the firm’s Audit & Assurance Segment. Victor is a Certified Internal Auditor (CIA) and Certified Fraud Examiner (CFE), and hol… Read more

Subscribe to Our Newsletter