The Institute of Internal Auditors (IIA) re-released an interesting position paper this week regarding the role of internal versus external auditors and auditor independence. It’s definitely an interesting read and an issue you should be aware of if you haven’t thought about the issue already. The issue centers around what the role of the internal auditor should be and how they can maintain independence and thus provide worthwhile feedback to an organization.

The question comes up, should organizations outsource their internal audit function? From reading the title of the release one would be led to believe that this is the case. However I’m not sure that’s really what they’re trying to get across. It seems to be the discussion is not about should you outsource this business function or not, but rather how do we ensure that auditors maintain their independence as they perform their audits.

If the same organization that’s handling your external audits is also performing your internal audits – bingo, we have a conflict of interests. External auditors should be there to oversee the work of the internal auditors to ensure correct reporting to the Board of Directors. This shouldn’t be just another checkbox for some compliance purpose we’re trying to meet.

So my hat’s off to the IIA for reposting this. It’s an important issue. Auditors need to be able to be independent. Don’t get extreme, they’re not bashing outsourcers. But their emphasis on the separation of duties between internal and external auditors is a good one to remember. Chew on that. 

Here’s the full article if you haven’t seen it yet:

  (Old Link Removed)

Think about it today and your company’s position on this. Makes for some good watercooler talk today.

Update: Unfortunately this article has since been removed from the IIA’s site. But it’s still a good point for discussion if you have a chance to review the content.