ACCA Applied Knowledge · Business and Technology · Internal controls

Marlow Co is deciding whether to set up its own internal audit department or outsource the function to an accountancy firm. Which of the following is an advantage of outsourcing rather than an in-house function?

Outsourcing allows the company to buy specialist skills only when needed, without permanent staff costs, and the provider may be more independent of management. Deep knowledge of company systems is an in-house advantage, and outsourcing still requires contractual terms defining scope and timing.

AStaff will have a detailed understanding of the company's culture and systems
BSpecialist skills can be obtained when needed without employing permanent staff, and the provider may be more independent of managementCorrect
CThe company retains full control over the scope and timing of work with no need for contractual terms

Explanation

Outsourcing gives access to specialist skills flexibly and can improve independence from management. In-house staff, not outsourced staff, usually have better knowledge of the culture and systems. Outsourcing requires a contract defining scope and timing, so control is not unlimited. A key caution is that the external auditor of the company should not normally also provide its internal audit.

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Marlow Co is deciding whether to set up its own internal audit department or outsource the function to an accountancy firm. Which of the following is an advantage of outsourcing rather than an in-house function?

Explanation

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