Sunita S. Ahlawat
The College of New Jersey
D. Jordan Lowe
Arizona State University West
Abstract: The internal audit function is evolving from its traditional oversight function to one that includes a broader advice and consultation role. In addition, economic pressures have forced many companies to consider outsourcing as an alternative. These ongoing changes have caused some concern regarding the potential lack of objectivity for internal auditors. This exploratory study examines whether outsourcing of the internal audit function is susceptible to client advocacy vis-à-vis in-house auditing, which itself may be sensitive to an employer advocacy. Sixty-six practicing members of the IIA completed a case study involving a corporate acquisition scenario. Advocacy was manipulated by asking participants to assume the role of internal auditor for either the buyer or the seller of a target division. Results indicate that significant advocacy existed in the judgments of both in-house and outsource internal auditors. However, the extent of advocacy was less severe in the case of outsource auditors.
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