With the ongoing resource restraints in the audit and assurance profession and the fight for talent, we have started to see more organisations consider their options in relation to the delivery of their internal audit function. This may be with a view to providing more stability, reducing key man risk, providing access to additional expertise and resources, or simply helping improve their bottom line in these uncertain times.
We are regularly asked to provide insights to Audit Committees on where we see the benefits, from our experience, that could arise from a switch from inhouse to outsourced internal audit delivery. We have summarised these as follows:
- Skills and expertise – Using an outsourced internal audit partner brings a multitude of additional skillsets and deep expertise to the table. For example, at PKF we can provide access to a core banking audit team, comprising experts in governance, fraud, cyber security and workplace compliance. These specialists keep up to date with key risks and can help you see over the horizon to address emerging challenges.
- Value for money – There can be significant cost savings from transitioning from an inhouse to outsourced internal audit function – we believe often up to 50%, based on man days rather than permanent employment. Reduced overheads, particularly in relation to recruiting and training, can be substantial.
- Reliability – With a larger pool of audit resources available, compared to a small inhouse team, there is greater reliability that resources will be available to deliver on internal audit requirements, reducing key person risk. There is a very competitive market for audit experts, with demand exceeding availability, resulting in ongoing uncertainty around resource turnover.
- Fresh set of eyes – A fresh perspective can help to revitalise a long-established internal audit function, and identify blind spots in your risk management. Outsourcing can also improve an organisation’s ability to benchmark against peers, and to access best practice recommendations and industry-leading perspectives.
- Flexibility – There is the ability to phase internal audit modules over the year (say three to four visits) to fit around other business commitments and provide breathing space to different parts of the organisation. There is also the ability to ramp up or down in response to emerging issues or risks. There is flexibility to audit at the ‘speed of risk’.
- Independence – There can be clearer independence from management and external audit, mitigating any potential over-familiarity that may have formed and reinforcing the ‘Three Lines of Defence’. There is also a perception that the independence of an outsourced internal auditor will be strengthened due to being clearly distinct from management.
- Track record – Through using a professional firm you will likely be working with an organisation which has developed a strong track record with the regulators and industry peers over many years. This reputation provides trust over the quality of the services delivered.
Of course, on the flipside there can still be benefits to be gained from maintaining an inhouse internal audit function, or from adopting a co-sourcing model (a mix of inhouse and outsource), however we hope that this provides some food for thought in these interesting times. Please reach out to your local PKF Audit & Assurance if you would like to explore your internal audit options.
