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Chapter 12 3 4

4.2 Disadvantages

 Professional firms lack the intimate knowledge and understanding of the
organisation that employees have.

 Engagements with professional firms are constrained by contractual terms.
Flexibility and availability may not be as high as with an in-house function.

 Professional fees tend to be high. The decision may be based on cost with the
effectiveness of the function being reduced.

 Possible conflict of interest if provided by the external auditors. In some
jurisdictions – e.g. the ACCA Code of Ethics, prohibits external auditors of a
listed company from providing internal audit services for the same client where
the service relates to internal controls over financial reporting.

 Pressure on the independence of the outsourced function, for example, if
management threaten not to renew contract.

 Lack of control over the standard of service.

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