Should internal audit outsource

On the other hand, the internal auditor has a much broader focus that includes, but is not limited to financial information, operational objectives, risk management concerns, and compliance. The internal auditor is focused not only on past information, but also the current operational objectives as well as future risk mitigation and organizational success.

The internal auditor may have a much more diverse background that includes expertise in information technology, business administration, finance, data analytics, and accounting to name a few. For this reason, it is critical that an organization maintain a separate internal audit function comprised of employees of their organization or outsourced internal audit consultants, or a combination of both. Browse articles, set up your interests , or Learn more. You've been a member since. KPMG Personalisation.

Get the latest KPMG thought leadership directly to your individual personalised dashboard. Register now Login. Close Notice of updates! Since the last time you logged in our privacy statement has been updated. We want to ensure that you are kept up to date with any changes and as such would ask that you take a moment to review the changes.

You will not continue to receive KPMG subscriptions until you accept the changes. Close Hi! Our privacy policy has been updated since the last time you logged in. We want to make sure you're kept up to date. Please take a moment to review these changes. You will not receive KPMG subscription messages until you agree to the new policy.

Ignore and log out. This includes reviewing the process by which a decision was taken to seek a service externally. It is important to assess how well risk is being jointly considered between the customer organisation and the provider. Ensure that the level of audit coverage is commensurate with the scale, nature and number of contracts. An audit team working on contract audits should ideally be multidisciplinary and some should have a contract management background if necessary.

Right to audit clauses are quite common in contracts. It is important not to rely on a purely systems-based approach, but to complement this with an element of substantive testing to test the consequences of any control failure. Where there are several layers of assurance on a large-scale project with many contractors with complex interfaces it is important to ensure that assurance is coordinated properly so that audit does not hamper the progress of the project.

Content reviewed: 20 April This would create challenges as organizations would use a firm for internal audit services and then hire the same firm as a tax advisor, external auditor, or consultant to the company. Even if organizations find a qualified supplier or group of suppliers, legal and regulatory requirements govern the outsourcing of internal audit in certain sectors or locations, and non-compete and privacy clauses are critical.

Contracts must also specify the contractual triggers for terminations and the explicit processes for transferring audit work back in-house or to an alternative provider — and must define ownership of audit working papers and reports so the organization can still access them if the contract is terminated.

As external audit firms take over risk assessment and audit planning, organizations will also have to revamp their budgeting and planning process to make it more seamless.

Read more: Top Risks for Audit Leaders. The primary rationale for outsourcing is that it offers audit teams access to a wealth of technical skills. One criteria organizations use to choose the external vendor is knowledge of local factors i. However, this may require compromises in other areas.

This is crucial as different vendors may specialize in different areas. For example, external auditors who deliver financial audits may not have the skills, business acumen, or knowledge to deliver audits of strategic or operational activities.

There are two areas where outsourced providers often fall short while internal audit teams provide a valuable service to their business partners. Despite the challenges, there are legitimate reasons that organizations decide to outsource internal audit — especially if the in-house team fails to meet cost or quality expectations.

Senior managers may question the extra value provided by an internal audit team and may choose an external vendor for standard audits.

While these are justifiable issues, organizations can solve them.