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ACCA Strategic Professional · Strategic Business Leader · Management and internal control systems

Calder Pharma is deciding between outsourcing internal audit to a professional firm and keeping it in-house. Which of the following is a recognised risk specific to outsourcing?

A recognised outsourcing risk is loss of organisational knowledge and dependence on a provider whose priorities or staffing may change. Access to specialists and broad geographic coverage are generally benefits of outsourcing, and a formal contract normally exists to control the relationship.

  1. ALoss of organisational knowledge and reliance on a provider whose priorities or staffing may changeCorrect
  2. BInability to access specialist expertise
  3. CDifficulty obtaining a wide geographical coverage
  4. DLack of any formal contract terms

Explanation

Outsourcing risks include dependence on the provider, reduced organisational knowledge, staff turnover and possible conflicts of interest. Access to specialists and wide geographic coverage are usually benefits of outsourcing, and a contract is normally present and is the main control over the provider.

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