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Internal Audit Outsourcing: The Perfect Solution for Small Businesses
Do you know: Internal audits are a business’ first line of defense against financial errors or misconduct?
But can outsourcing internal audits truly benefit your small business compared to handling them in-house?
An internal audit is a systematic review of the business’ financial dealings over a period of time. It reveals where and how money was spent. It involves rigorous data verification to ensure authenticity.
Internal audit outsourcing is popular among US businesses. Businesses may audit as frequently as every quarter, or on an annual basis. Regardless of the timetable, internal audits are not an everyday accounting task. This makes it perfect for outsourcing. By contracting internal audit outsourcing firms during audit time, businesses can save money and ensure financial transparency.
Small businesses and start-ups are especially well-suited to internal audit outsourcing, as they typically do not have in-house accounting functions. Self-managing accounting and having it reviewed for assurance quarterly is a good practice.
In this blog, we will go over the intricacies of internal audit outsourcing and answer the following questions:
✔️ Why is internal audit outsourcing so popular,
✔️ The advantages it presents,
✔️ and WHY it may cost you to miss it.
As the business world grows increasingly competitive and financial regulations grow stricter, it is imperative that businesses avoid financial trouble through robust internal audits and financial controls.
What is Internal Audit Outsourcing?
Internal audit outsourcing entails hiring third-party firms to do an internal audit on the company’s behalf. It is similar to an external audit, where a third-party unbiased firm comes to review a business’ financials on behalf of the government or investors.
In the case of internal audit outsourcing, the business itself is the one requesting the audit to be done. Outsourcing internal auditing is useful in several scenarios. Businesses looking to save costs opt for internal audit outsourcing. Many firms like to contract internal audit outsourcing services to receive a second opinion on their financial records.
Want to know more about external audits? Here’s our quick and easy breakdown of Internal Audit vs External Audit for your reading pleasure.
Why is Internal Audit Outsourcing Important?
Internal audit outsourcing is a vital part of the financial ecosystem. Audits are a mechanism to prevent fraud or erroneous financial reporting. At the same time, they are not something just anybody can do. Internal auditing requires a specialized skill set, and entrepreneurs cannot simply handle it like accounting and bookkeeping. Internal audit outsourcing is the alternative option available to small businesses that do not have established accounting functions.
Looking at the numbers, 41% of small business owners handle their own accounting. Most of these business owners are not experienced accountants. They need the services of a registered CPA to be able to conduct a proper audit. Such internal audit services are not a desperate measure, either. In fact, outsourced internal auditing services are some of the best when it comes to delivering robust audit results. Let’s go over the major advantages internal audit outsourcing brings to the table:
The Advantages of Internal Audit Outsourcing
Cost-Efficiency
As mentioned previously, the cost savings offered by internal audit outsourcing are too good to pass up. Internal auditing is generally a short affair, lasting a few days or weeks depending on the size of the business and audit frequency. Retaining an in-house auditor for something that happens a few times a year is not cost-effective.
Yet the need for an internal auditor remains. The work is simply too complex for ordinary entrepreneurs. By leveraging internal audit outsourcing services. Businesses can solve both problems in one go. They can have their business audited by a certified professional, as well as only spend as much money as is needed for the duration of the audit. Internal audit outsourcing is typically a contractual affair, with a fixed cost for the project or hourly billing.
Either way, it is miles cheaper than hiring an in-house auditor. Not only do you need to afford the extravagant salary demands accountants present these days, but you also have to spend money in the hiring process to find an auditor. By the time your internal audit in-house setup is sorted, you’ve already spent a considerable chunk of money.
Of course, an internal auditor is also an accountant and will be managing the accounting workload as well. But even in that case, a remote outsourced accountant can also address both tasks long-term while costing a fraction of the investment.
Experience, Expertise, and Trust
Internal audit outsourcing services are not simply a cheap method of getting an internal audit. These services provide a huge roster of professionals with years of experience in various industries. Well-known veterans of the industry work in outsourcing firms, providing consultations and high-level services at an affordable price. Their experience and expertise give small businesses the best bang for their buck when it comes to internal audits.
Small businesses need to audit themselves to be able to present investors with a clear financial report. Self-conducted unprofessional auditing leaves businesses at risk of missing funding opportunities. A veteran auditor who is recognized in the industry makes securing funding easier with just their presence. Not only can they provide a robust audit report for the business and correct any internal financial issues, but their presence also vouches for the business.
A trusted and well-liked accounting professional by your side can drastically improve the odds of winning over investors and securing capital.
Access to Infrastructure and Quality-Assured Practices
Internal audit outsourcing is an easy way to access tools and infrastructure normally unavailable to small businesses. Access to sophisticated automation tools, analytical software, and financial control mechanisms is integral to a successful audit today. Without such tools, internal auditing is a tedious, time-consuming task that can bring growth to a standstill. Consider how much opportunity is lost when an entrepreneur is forced to spend weeks sorting through receipts and ledgers for an audit.
Work that can be done in hours with the right tools. Tools that are available to internal audit outsourcing firms and used to facilitate auditing at scale. When you pay for internal auditing services, you not only receive professional help, but you also have the full force of dedicated auditing infrastructure behind you. On top of that, these firms heavily regulate quality, ensuring that industry-standard best practices are utilized to provide clients with a smooth audit experience.
Conclusion
Throughout this discussion, we have talked about the various reasons why small businesses should invest in internal audit outsourcing. We have also discussed the advantages such services bring to the table. Yet still, there remains a good chunk of entrepreneurs unwilling to leverage these services.
Reasons vary, from distrust in third-party firms to very strict budget constraints. Regardless of the reason, the important realization everybody needs to come to is that outsourcing is the way forward. Inflation is at an all-time high, and businesses are struggling to retain in-house employees. All across the US, the largest corporations are experiencing mass layoffs as they switch to offshore talent.
The fact of the matter is that in these economically volatile times, outsourcing is a way out for businesses. Whether it be outsourced accounting in general or just internal audit outsourcing, there is no better alternative available to fill skill gaps.
Investing in outsourcing services not only saves you money, but contributes towards building a global workplace. Developing nations can gain economic strength through outsourcing, creating a mutually beneficial relationship that guarantees everyone’s survival in the predicted hard times of recession.
In this case, investing in an internal audit outsourcing firm like Expertise Accelerated ensures that your business’ financials are in order. EA CEO Haroon Jafree is a veteran of the US CPG industry and brings with him industry trust and an expansive skillset. By leveraging the talents of EA’s robust internal auditing professionals, US CPG businesses can thrive even in difficult times.