- 5 Marks
Question
Traditionally, internal audit work is undertaken mainly by in-house teams. However, in recent times many organizations outsource either completely or partially their internal audit function. Kofi Krakye, the Financial Controller of BHB Ltd, has advised management to consider outsourcing their internal audit function to FPP Ltd.
Required:
Explain TWO (2) advantages and THREE (3) disadvantages of outsourcing the internal audit function to FPP Ltd.
(5 marks)
Answer
Advantages of Outsourcing Internal Audit:
- Staff recruitment – There is no need for the company to recruit and train its staff.
- Auditor Skills – The auditor is likely to have specialist staff available, such as IT experts.
Disadvantages of Outsourcing Internal Audit:
- Changing personnel – The Internal Auditors provided by an external firm may change continually, and there may be a lack of continuity.
- Cost – An Accountancy firm will charge high fees for Internal Audit Services.
- Conflict of Interest – If the external auditors also perform the internal audit work, there may be a conflict of interest affecting independence and objectivity.
- Tags: Advantages, Conflict of Interest, Continuity, Cost, Disadvantages, External audit, Internal Audit, Outsourcing
- Level: Level 2
- Topic: Internal Audit and Its Relationship with External Audit
- Series: NOV 2021
- Uploader: Theophilus