Internal audit plays a major role in many organizations. It helps to identify deficiencies in internal controls and helps streamline processes to best meet the organization’s objectives. Many organizations tend to outsource internal audit services as opposed to using internal resources for the same. Most CPA firms tend to offer their services with regard to internal and external audits.
There are pros and cons in outsourcing internal audit in a Company. Following identifies the advantages and disadvantages of outsourcing internal audit services.
Advantages of Outsourcing Internal Audit
- Expertise – Outsourcing internal audit services will ensure that your organization is under the safety of the experts well versed in their area of knowledge. CPA firms will hire and train their best employees and use them to provide quality professional services to their clients. Hence, their knowledge will add a lot of value to the output of the internal audit.
- Independent – Since the output of the internal audit will be from an external team independent of the Organization, the reports will not be biased.
- Planning – The professional CPA firms device a proper internal audit plan before starting the work. The outcomes are of high quality.
Disadvantages of Outsourcing Internal Audit
- Cost – Outsourcing internal audit services will always add more of a cost as you are hiring experts from outside your organization. Whereas using internal resources will not have the added cost to bear.
- Limitation – Organization will mostly hire one of the big four audit firms for their external audit, consulting and advisory services. So this leaves the organization left with only one or two CPA firms to obtain internal audit services from.
- Clarity – Clarity should be ensured and borderlines should be given in order to clearly defined the owner of the audit and other related report resulting from the services of the external team.
- Termination – The termination of the contract between the external party and the organization could also be vague and can lead to misunderstanding and as a result, will cost additional for the organization. Modifications or processes to be handled after releasing the reports and finalizing audit procedures should be clearly defined in the agreement between both parties initially.
So the above are some of the clear advantages and disadvantages of hiring an external party for internal audits. It can be a big risk from the view of the organization. An organization should strive to achieve the same from an internal team thereby eliminating some of the above minus points. Hence, we believe that outsourcing internal audit is a big risk for any organization in concern. In other cases, an in-house team of professionals might not have the right experience and may mess up the things resulting in a legal and financial loss. So, its recommended to hire a professional CPA firm to complete the internal audit in a proper way.