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Internal Audit Outsourcing: A Literature Synthesis and Future Directions

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  • Grace Mubako

Abstract

The internal audit function (IAF), which has traditionally been an in‐house function, is increasingly being outsourced to outside consultants, in line with global trends for other services. This study synthesises research on the outsourcing and co‐sourcing of internal audit services over the last three decades, and suggests directions for future research. It draws from professional and academic literature to highlight the nature of organisations that outsource the IAF, and the main reasons behind the outsourcing decision. The study further examines the financial impact of outsourcing, as well as its impact on financial reporting, internal audit quality and auditors’ independence. The study shows widespread adoption of outsourcing of internal auditing services, largely due to the perceived cost benefits as well as perceived improved access to specialised internal auditing resources. There are mixed findings on the impact of outsourcing of internal auditing services on quality, cost, independence and availability of resources. This study contributes to internal and external audit, corporate governance and outsourcing literature in general, by synthesising the existing research and providing a roadmap with which to understand the origins, development, present state and impact of outsourcing of internal auditing.

Suggested Citation

  • Grace Mubako, 2019. "Internal Audit Outsourcing: A Literature Synthesis and Future Directions," Australian Accounting Review, CPA Australia, vol. 29(3), pages 532-545, September.
  • Handle: RePEc:bla:ausact:v:29:y:2019:i:3:p:532-545
    DOI: 10.1111/auar.12272
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    Cited by:

    1. Barra Kevin De, 2023. "Making internal audit count," Administration, Sciendo, vol. 71(4), pages 25-44, December.
    2. Viktor Koval & Piotr Olczak & Mira Hakova & Mykhailo Bilyi & Dmitry Kretov & Olga Laktionova, 2023. "Analysis of Financial Outsourcing Management in Regional Environmental Systems," Sustainability, MDPI, vol. 15(15), pages 1-24, August.
    3. Fabian, Jette, 2022. "Auswirkungen der internen Revision auf die Qualität der Rechnungslegung – Eine kritische Analyse [Effects of Internal Auditing on the Quality of Financial Reporting – A Critical Analysis]," Junior Management Science (JUMS), Junior Management Science e. V., vol. 7(5), pages 1242-1269.
    4. Stéphane Lhuillery & Marion Tellechea & Stéphanie Thiery, 2021. "Open innovation in managerial innovation: the case of internal audit," Working Papers of BETA 2021-19, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    5. Saeed Rabea Baatwah & Adel Ali Al-Qadasi, 2020. "Determinants of outsourced internal audit function: a further analysis," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 10(4), pages 629-659, December.

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