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ACCA Strategic Professional · Strategic Business Leader · Audit and compliance

Brindle Retail's board is debating whether to establish an in-house internal audit function or outsource it. The company is a listed retailer with 120 stores, complex IT systems and a need for continuous monitoring of store controls. Which factor most strongly favours an in-house function over outsourcing?

The strongest argument for an in-house function is the need for continuous, detailed monitoring and deep business knowledge across 120 stores. Outsourcing suits one-off specialist work or avoiding staffing costs, and using the external auditor would threaten its independence.

  1. AThe need for ongoing, detailed knowledge of the business and continuous monitoring across many sitesCorrect
  2. BThe wish to avoid any cost of staff recruitment and training
  3. CThe need for a specialist one-off review of a rarely used treasury derivative
  4. DThe wish for the external auditor to perform the work to avoid duplication

Explanation

In-house teams build deep business knowledge and can monitor continuously, which suits a large multi-site retailer. Avoiding recruitment costs and one-off specialist needs favour outsourcing. Having the external auditor perform internal audit would create independence threats.

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