Abstract
M.Comm.
Corporate governance has become an important part of doing business today,
especially in the aftermath of the massive corporate failures that have occurred in the
recent past. Corporate governance legislation and corporate social responsibilities have
placed pressure on companies to implement an internal audit function within their
organisations. As such boards of directors (boards) have to decide whether they should
incur the cost internally by implementing an in-house internal audit function and thereby
employing more resources or pay an outsourced service provider to perform this
function.
This study looks at the fundamental considerations that should be taken into account in
determining whether outsourcing the internal audit (IA) function will adequately and
effectively address this obligation.
Fundamental considerations that should be taken into account in assessing and
evaluating the alternative of outsourcing the IA function were formulated on the basis of
the literature review performed. Subsequent to this relevant questions associated with
these fundamental considerations were formulated. These questions boards or those
charged with corporate governance should be focused on in assessing and evaluating
the alternative of outsourcing the IA function. The fundamental considerations and
relevant questions were then analysed by means of semi-structured interviews to access
the validity and appropriateness of these fundamental considerations and relevant
questions.
The study concludes that the fundamental considerations formulated and relevant
questions are valid and appropriate in assisting organisations in deciding on the most
effective and efficient manner in which to staff their internal audit function and thereby
comply with corporate governance legislation and corporate social responsibilities.Most interviewees believed that a degree of co-sourcing or partial outsourcing was the
most beneficial practice in general. This is dependent, however, on an evaluation of all
the pertinent considerations by each organisation.