Open Letter to the Institute of Internal Auditors on Resourcing the Internal Audit Function
June 29, 2005
On behalf of the Board of Directors of the Association of College and University Auditors (ACUA), I write to express our views on the recently issued IIA Position Paper on Resourcing Alternatives for the Internal Audit Function. In light of The IIA’s guidance on this matter, ACUA reaffirms the position expressed in our 2004 Position Paper, The Importance of Retaining The Internal Auditing Activity In-House.
ACUA fully supports the responsibility imposed by The IIA Professional Standards that requires the Chief Audit Executive to bring to bear on every engagement the requisite knowledge, skills and other competencies through the internal audit staff or “outside service providers.” Our own anecdotal evidence supports The IIA Position Paper’s observation that most practitioners agree that some combination of internal and external resources is appropriate.
However, ACUA continues to believe that the internal audit function should be organizationally based within the institution for the reasons expressed in our Position Paper, and we have the following additional observations.
The IIA Position Paper states in part, “The IIA believes that a fully resourced and professionally competent staff that is an integral part of the organization whether insourced or outsourced (emphasis added) best performs the internal audit activity.” It is very difficult for us to imagine an outsourced function that is an “integral part of the organization” when one considers the values of institutional knowledge of the organizational culture, understanding the policies and procedures and their application over time, internal relationships fostered by staff continuity and understanding of the ways in which change is best brought about in the institution.
Further, as we consider the advantages and disadvantages to outsourcing as articulated in The IIA Position Paper we are struck by the notion that the advantages ascribed to outsourcing (e.g. greater staffing flexibility, availability of specialized skills, or more protected ownership of workpapers) can be mitigated by the use of outside service providers to augment the in-house internal audit function. Conversely, the unique advantages of an in-house internal audit function as articulated in the ACUA Position Paper are intrinsic, and cannot be mitigated by an outsourced service provider. Simply put, while technical expertise or specialized services can be acquired incrementally, “local knowledge” can’t be acquired on an as needed basis.
As a result, and while we value the contributions made to our internal audit programs by outside service providers, we continue to believe that the most appropriate model for our higher education institutions is one in which the internal audit function is organizationally based in-house.
Sincerely,
Patrick V. Reed
ACUA President