Abstract

This study explores internal audit outsourcing practices in South Africa, an area that has not been researched over the past decade. The extent of internal audit outsourcing practices within 30 large listed South African companies, the rationales behind their outsourcing decisions were determined and their preferred external internal audit function providers, as well as the perceived status of in-house and outsourced internal audit functions. Statistical analysis was conducted on data obtained from questionnaires submitted to all the major stakeholders in the internal audit environment. The study reveals that due to a lack of appropriate skills, cost implications, company policies and the perceived objectivity of external parties internal audit functions are outsourced within selected companies, to mainly Big 4 public accounting firms. The status of both in-house and outsourced internal audit functions was perceived to be high. These results enable the Institute of Internal Auditors to assess its outsourcing standards, allow external providers to identify internal audit outsourcing opportunities, and give companies the opportunity to compare their own outsourcing practices with those reported on.

Key words: Internal audit, internal auditing, outsourcing, co-sourcing, internal audit functions, internal audit skills, internal audit function status.