In common with other areas of a company’s operations, the directors may consider that outsourcing the internal audit function represents better value than an inhouse provision. Local government authorities are under particular pressure to ensure that all their services represent ‘best value’ and this may prompt them to decide to adopt a competitive tender approach.
Advantages
• Greater focus on cost and efficiency of the internal audit function.
• Staff may be drawn from a broader range of expertise.
• Risk of staff turnover is passed to the outsourcing firm.
• Specialist skills may be more readily available.
• Costs of employing permanent staff are avoided.
• May improve independence.
• Access to new market place technologies, e.g. audit methodology software without associated costs.
• Reduced management time in administering an in-house department.
Disadvantages
• Possible conflict of interest if provided by the external auditors
• Pressure on the independence of the outsourced function due to, e.g. threat by management not to renew contract.
• Risk of lack of knowledge and understanding of the organization's objectives, culture or business.
• The decision may be based on cost with the effectiveness of the function being reduced.
• Flexibility and availability may not be as high as with an in house function.
• Risk of lack of knowledge and understanding of the organization's objectives, culture or business.
• The decision may be based on cost with the effectiveness of the function being reduced.
• Flexibility and availability may not be as high as with an in house function.