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Internal Audit Sourcing Arrangements: The Benefits to Using a Service Provider

In accordance with the Institute of Internal Auditors’ (IIA) newly-updated Three Lines Model, the Internal Audit (IA) function is a third-line role that provides independent and objective assurance and advice on all matters related to the achievement of organizational objectives. Depending on the size and complexity of the organization, the IA function can look very different from one to the next, including in the way the function itself is sourced. In general, there are four types of sourcing arrangements for an IA function:

In-house

  • The organization maintains its own internal audit department (i.e., employees).

Outsourced

  • An IA service provider or independent accounting firm is engaged to perform the internal audit function.

Co-sourced

  • The internal audit function is performed through a partnership between the internal audit department of the organization (i.e., in-house employees) and an IA service provider (i.e., independent accounting firm).

Staff augmentation

  • The organization maintains its own internal audit department (i.e., in-house employees); however, it may, from time to time, subcontract with an IA service provider for a specific engagement or portion of some engagement, typically for a limited period of time. Management and oversight of such engagements normally are provided by in-house IA staff.

At Citrin Cooperman, our Technology, Risk Advisory and Cybersecurity (TRAC) team is experienced in providing IA services in a variety of arrangements and capacities. Based on our experience and discussions with our clients that have utilized our IA services, we have identified some great benefits to utilizing an IA service provider, in any capacity:

  • Gaining access to specialized IA talent (e.g., skills, knowledge, expertise) for complex audits.
  • Gap coverage for unexpected staffing needs and shortages.
  • A third-party point of view or perspective in risk assessments and audit planning.
  • Cost-savings through reduction or elimination of costs associated with employee compensation and fringe benefits.
  • Increased external auditor reliance on IA function, due to increase in perceived quality, independence, and objectivity, which in turn, reduces external audit effort and, therefore, cost.

To help decide which IA arrangement may best suit your organization, consider setting up a meeting to discuss how Citrin Cooperman can help provide value to your business. To get started, please reach out to Michael Camacho at mcamacho@citrincooperman.com or Samantha Kerwin at skerwin@citrincooperman.com

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