Question

Many companies are now outsourcing their internal audit function. What are your thoughts on this and does this have an impact on accounting for payroll? What are the advantages and disadvantages of this?

Answer 1

Outsourcing the internal audit is done by many large companies in order to cut down the costs and also have professional quality audit done through accounting firms. This certainly helps in improving the quality of the audit done, plus helps the management concentrate on the core business activities and can prevent of instances of fraud. It may not directly impact the accounting for payroll unless the company has outsourced the payroll function as well although the process may cut down payroll costs. The advantages of outsourcing the audit function include independence of the auditor from the management bias, gaining professional expertise in the audit, helps in having the audit having more impact on the operational and other activities and also assist the statutory auditors. The disadvantages include the external party may not be aware of the company's core operations and other activities in depth which may not serve the purpose of the internal audit function. Also, the audit function may not be responsible as much as the in house team and there can be lack of accountability. It can result in lack of coordination between the external auditors and the departments of the business. It may cause loss of confidential data and the management may not have control over the internal audit function.