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Internal audit is a vital function for any organization. It assures management and stakeholders that the organization’s operations comply with laws and regulations and that financial statements[1] are accurate and reliable. However, many organizations need help finding a suitable internal audit model that meets their needs. Co-sourcing and outsourcing are popular models organizations can consider when strengthening their internal audit function. This blog will explore the disadvantages and advantages of co-sourcing and outsourcing and provide guidance on which model may be best for the organization.
Outsourcing is a model where an organization engages an external firm to perform all or a significant portion of its internal audit function. The external firm takes over the day-to-day activities of the internal audit function, and the in-house team is disbanded or significantly reduced.
Co-sourcing is a model where an organization engages an external firm to work with its in-house internal audit team. The external firm provides specialized knowledge, skills, and expertise to supplement the organization’s internal audit function. The in-house team controls the internal audit function and manages the day-to-day activities, while the external firm provides support as needed.
In conclusion, choosing between co-sourcing and outsourcing for your internal audit function depends on several factors, including your organization’s size, complexity, and internal audit needs. Co-sourcing provides flexibility, access to specialized skills, and cost-effectiveness but may create integration challenges and limited knowledge transfer. Outsourcing can provide cost savings, access to expertise, and consistency but may lead to a lack of control and loss of institutional knowledge. It is essential to carefully evaluate the advantages and disadvantages of each model and select the one that best fits your organization’s unique needs. A practical internal audit function is critical for ensuring that your organization complies with laws and regulations and that financial statements are accurate and reliable.
Also Read:Ten Steps to Effective Co-Sourcing of Internal AuditImportant Checklist for Internal Audit of Private LimitedEffective Steps of Performing an Internal Audit Successfully
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