IIA advises on audit resourcing

Internal Auditor, August, 2005 by J. Whitley

A NEW IIA POSITION paper provides guidance to management, audit committees, and chief audit executives on the various issues involved when considering the resourcing of the internal audit activity. IIA Position Paper on Resourcing Alternatives for the Internal Audit Function: Considerations When Evaluating Outsourcing Alternatives covers a range of considerations for providing resources for internal auditing, from a fully in-house internal audit function to a completely outsourced function.

The 11-page paper states that internal auditing best addresses management's strategic objectives when internal audits are performed by competent professionals in accordance with The IIA's International Standards for the Professional Practice of Internal Auditing. The document also notes that a fully resourced and professionally competent staff that is an integral part of the organization is the best resource to perform internal audits. The IIA recognizes that many partnering arrangements with outside providers have been effective in helping organizations obtain internal audit services that contribute to management's strategic objectives. Moreover, The Institute acknowledges that the optimal solution can be different for every organization and may change over time.

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The paper provides additional guidance on key considerations for evaluating resourcing options, including:

* Available resources.

* Size of the organization.

* Types of outsourcing alternatives.

* Applicable laws, states, or regulations.

* Contracts and engagement letters for outsourcing engagements.

* Policy for outsourcing engagements.

In addition, The Institute suggests that organizations prepare an analysis of the advantages and disadvantages of various resourcing options. Issues to be considered include the service provider's independence and qualifications, the flexibility in staffing resources required to meet engagement needs or special requests, the organization's cultural receptiveness to service providers, the service provider's insight into the organization, and the provider's coverage of remote locations.

Given the significance of internal auditing to an organization's governance process, The IIA stresses that any recommendation to outsource all or a significant portion of the internal audit activity should require the audit committee's approval and be reported to the board of directors or other governing body. In cases where organizations choose to outsource all internal audit services, The IIA believes that oversight and responsibility for the internal audit activity cannot be outsourced. Instead, an in-house liaison--preferably an executive or senior management employee--should be assigned responsibility for management of the internal audit activity.

To view a copy of the resourcing position paper, visit The IIA's Web site at www.theiia.org and search for "resourcing alternatives."