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ACCA Applied Knowledge · Business and Technology · Internal controls

Dorian plc's board is deciding whether to outsource its internal audit function to a firm of accountants rather than keep it in-house. Which of the following is the most likely advantage of outsourcing, and not a disadvantage?

The likely advantage of outsourcing internal audit is access to specialist skills, such as IT auditing, on a flexible basis without the cost of permanent employees. Deeper company knowledge, tighter control and better confidentiality are normally associated with an in-house team instead.

  1. AAuditors will have a deeper knowledge of the company's culture and systems
  2. BSpecialist skills such as IT audit can be obtained when needed without permanent staff costsCorrect
  3. CManagement retains full control over the day-to-day activities of the auditors
  4. DThe risk of loss of confidential information is reduced

Explanation

Outsourcing gives flexible access to specialist skills without carrying full-time salary costs. Deeper company knowledge and stronger control are typical advantages of in-house teams, and outsourcing usually increases, not reduces, confidentiality risk.

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