Dennis Caplan
Iowa State University
Craig Emby
Simon Fraser University
Abstract: We examine whether internal auditors and internal audit outsource providers evaluate internal controls similarly. We use a series of mini-cases involving tests of internal controls, such as might occur on a typical internal audit, to compare these auditors in their evaluation of control weaknesses. We also obtained responses from traditional external auditors. We compare these three groups along two dimensions: their characterization of the control objective associated with each control weakness, and their judgment as to the severity of the weakness.
Results show substantial similarity between traditional internal auditors and outsource providers. Where differences between the groups occur, outsource providers tend to fall between traditional internal auditors and external auditors. To the extent that internal auditors and outsource providers concur in their judgments, they offer a comparable product. To the extent that differences occurred between them, the possibility exists that the sourcing decision affects the quality of the services provided.
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