Outsourcing (internal audit)
The assignment of the entire internal audit function to an external service provider. Requires clear service level agreements, independence and oversight by the audit committee or board.
Source: IIA GIAS 2024, IIA Standard 1000
Outsourcing internal audit means assigning the entire internal audit function to an external service provider, while the organization itself retains ultimate responsibility. The external party plans, performs, and reports on audits based on clear service level agreements and an agreed audit plan. Under the Global Internal Audit Standards (GIAS) 2024 of the Institute of Internal Auditors (IIA), independence and objectivity remain safeguarded, and the audit committee or board oversees quality and scope.
For the board, the supervisory board, and the audit committee, outsourcing matters because it provides access to independent assurance without building an in-house audit department. Smaller and mid-sized organizations in particular often lack the scale to staff a full function internally. The audit committee, however, remains responsible for the mandate, the audit plan, and the follow-up of findings; outsourcing shifts execution, not governance.
In practice, outsourcing works through a fixed point of contact, a multi-year audit plan aligned with the organization's risks, and periodic reporting to the board and audit committee. The Standards require a formal internal audit charter setting out the purpose, authority, and responsibility of the function, even when it is delivered externally. Clear arrangements on access to information, escalation, and independence are essential to prevent conflicts of interest, for example when the same party also delivers advisory work.
At ONE Risk Advisory, an organization places execution of the internal audit function entirely with us, while the audit committee retains ultimate responsibility. This suits organizations that do not want to build their own audit department but still need independent assurance. We run the function with senior auditors and report directly to the board and audit committee, keeping the line to governance short and transparent.
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Frequently asked questions
Does outsourcing also transfer our responsibility for internal audit?
No. With outsourcing, the audit committee remains responsible for the mandate, the audit plan, and the follow-up of findings. Only execution shifts to the external party; governance and ultimate responsibility stay within the organization.
How is independence safeguarded when we outsource audit?
Independence is set out in the internal audit charter and the service level agreements, in line with the Global Internal Audit Standards (GIAS) 2024. The external auditor reports directly to the audit committee and may not assess work it has itself designed in an advisory role.
When is outsourcing preferable to an in-house audit department?
Outsourcing suits organizations that lack the scale to staff a full internal audit function but still need independent assurance. It provides access to senior expertise without fixed personnel costs.
What is the difference between outsourcing and co-sourcing of internal audit?
Outsourcing assigns the entire function externally; co-sourcing supplements an existing in-house function with specific expertise or capacity. Co-sourcing fits organizations that have their own function but need temporary reinforcement.