Benefits of Outsourcing/Co-Sourcing in Internal Audit Functions

In today’s business world, globalization, technological speed, increasingly complex legal regulations, and unpredictable risks are fundamentally changing the role of the internal audit function, one of the most fundamental pillars of corporate governance and the assurance provided to organizations. Internal audit, traditionally seen only as the auditing of financial controls and compliance, or as inspection/supervision with definitions different from the past, has now transformed into a proactive mechanism that adds value in achieving the strategic goals of organizations, anticipates risks, and increases operational efficiency.

Is outsourcing in the internal audit function a strategic necessity or an operational choice? In this article, we will seek the answer to this question. One of the biggest challenges companies face in transformation processes is to make the diversity of expertise and technological infrastructure needed by internal audit departments sustainable under one roof with a full-time staff. At this point, “Outsourcing” and “Co-Sourcing” models stand out as a strategic solution for modern businesses. 

This article will examine internal audit trends worldwide and in Turkiye using statistical data, discuss the technical and strategic advantages of outsourcing from academic and industry perspectives, and detail Teolupus’s holistic approach in this field.

Internal Audit and Outsourcing/Co-Sourcing in the World and Turkey

Outsourcing in the internal audit function is no longer just a cost-saving tool, but also a strategy of “accessing talent, expertise, knowledge, and experience” and “prioritizing time”. Global data shows that this trend is getting stronger every year.

Global Trends

• IIA – The Institute of Internal Auditors Reports: According to the “Future of Internal Audit” research conducted by the IIA, more than 60% of large-scale companies worldwide use outsourcing or co-sourcing in at least one part of their internal audit activities (especially IT audit, cybersecurity, and data analytics).
• PwC Global Internal Audit Survey: 73% of participants stated that obtaining external expert support is “critical” for internal audit functions to keep pace with the changing risk environment. The demand for external expertise, especially in agile audit processes, has increased by 40% in the last 3 years. 
• Sectoral Distribution: Financial services, energy, and technology sectors lead in outsourcing. This is primarily due to rapid changes in regulations in these sectors and the need for specialized technical expertise.

Turkey Panorama

A similar trend is observed in Turkey. Based on TIDE (Turkish Institute of Internal Auditors) data and local market research, the following conclusions can be drawn:

• SMEs and Medium-Sized Enterprises: Family businesses and medium-sized enterprises in Türkiye find it less costly to outsource audit activities entirely rather than establishing a full-time internal audit unit.
• BIST Companies: Among companies traded on the Istanbul Stock Exchange, the use of “Co-Sourcing” to support existing internal audit teams on special projects (e.g., fraud or sustainability audits) has reached 45%.
• Digital Transformation Impact: 55% of audit managers in Türkiye report outsourcing due to difficulty finding competent personnel in areas such as data analytics and robotic process automation.

Technical Advantages of Outsourcing Internal Audit

Having the internal audit function supported by an external perspective or expert team creates many catalytic effects within the organization.

Access to Expertise and Technical Depth

Internal audit is no longer just about checking accounting records. Today, an internal audit plan must include cybersecurity, GDPR compliance, carbon footprint measurement, supply chain logistics, and AI risks, as well as various assurance and management consulting topics. 

“Internal auditors cannot be expected to know everything; however, they are expected to audit everything. The only way to resolve this paradox is through flexible outsourcing models that can incorporate specific expertise into the process when needed.” (Harvard Business Review, “The New Frontier of Internal Audit”).

Multidisciplinary Team: Outsourcing provides organizations with immediate access to experts in different fields such as information technology, human resources, strategy, and forensic accounting, whom they cannot employ full-time. 

Up-to-date Regulatory Monitoring: External audit firms are required to monitor continuously updated global regulations and local tax laws, such as the IIA (Institute of Internal Auditors) standards and the IPPF (International Professional Practices Framework). This allows organizations to share/transfer the burden of compliance with regulatory changes.

Technological Advantage: Instead of investing in costly audit software or data analytics tools, companies benefit from the advanced technological infrastructure already used by the external provider.

Through outsourcing, companies gain access to highly specialized expertise (industry depth, technical engineering, forensic accounting, etc.), best practices, and project consulting services throughout the internal audit process that they would not be able to retain in-house.

Strengthening Independence and Objectivity

One of the most fundamental principles of internal auditing is independence and impartiality. Internal auditors, no matter how professional they are, can be influenced by internal hierarchies, social relationships, or habits, which are collectively referred to as “organizational blindness.” Independence, the most fundamental principle of internal auditing, is taken to the highest level with an external perspective. 

• Preventing the “Check Your Own Homework” Syndrome: Internal auditors may overlook certain risks due to their familiarity with processes or social relationships. An external team provides an “unbiased” assessment.
• Exemption from Political Pressure: External auditors can report their findings directly and transparently to the Audit Committee/Board of Directors without being influenced by internal hierarchies, internal social relationships, and management pressure.
• Fresh Perspective: An external perspective is much more effective at identifying ingrained errors or inefficient processes rooted in the mindset of “we’ve always done it this way.”

Cost Flexibility and Operational Efficiency

A full-time internal audit team incurs high fixed costs, including salaries, benefits, continuing training, office space, and software licenses.

• Transition from Fixed to Variable Costs: In an outsourcing model, companies only pay for the audit hours or project-based services they need. In some models, this transition can significantly reduce operational costs.
• Scalability: The team can be rapidly expanded during periods of increased business volume, entry into a new business line, investment in a new country, or acquisition of a company; costs are minimized during periods of stagnation.
• Prevention of Idle Capacity Risk: Personnel costs can be optimized during periods of reduced audit activity.
• Elimination of Recruitment and Training Burden: The consulting firm is responsible for the methodological and technical development of its own employees. The responsibility for finding, recruiting, and continuing to train competent auditors rests entirely with the service provider firm. Following international standards and frameworks, obtaining certifications and licenses such as CIA (Certified Internal Auditor) and CRMA (Risk Management Assurance Certificate), accounting/finance/capital market certifications, adhering to best practices, and maintaining professional competence are the service provider’s responsibilities.

Transferring Best Practices to Your Organization

Outsourcing professionals conduct audits in dozens of different sectors and companies throughout the year, possessing a significant benchmarking database. This gives them extensive comparison capabilities. Expert organizations like Teolupus not only report shortcomings but also help you adapt industry “best practices” to your company.

• Solution-Oriented Approach: Expert organizations like Teolupus not only report findings but also offer concrete, implementable suggestions for resolving these issues in the industry, prioritizing information privacy and information security. 
• Process Improvement: The auditors’ experience with diverse corporate structures enables rapid adoption of efficiency-enhancing methods and innovative control mechanisms for your organization. The assurance and consulting aspects of internal audit can be implemented.

A Critical Problem: Talent Shortage and Human Resource Management

In 2025, the biggest problem in the internal audit world was the “talent war.” Finding and retaining qualified internal auditors is now more difficult than ever. Outsourcing acts as a “Talent Repository” in this regard. 

• Continuous Training: Keeping internal auditors up-to-date across every area, from cybersecurity to sustainability, is costly. Outsourcing firms solve this professional training need in-house. 
• Career Path Congestion: In small internal audit departments, advancement opportunities for auditors are limited, leading to resignations. Outsourcing removes this operational risk from the organization.

Strategic Service Models and Depth

Co-Sourcing: Establishing the Ideal Balance

The “Co-sourcing” model, which bridges the gap between outsourcing and the in-house team, is the most preferred strategy today.

• Creating Synergy: Audit quality is improved by combining the organizational memory of in-house auditors with the methodological depth of external experts. 
• Knowledge Transfer: External experts contribute to the development of the in-house team by teaching them modern techniques and tools during the audit.
• Flexibility in Critical Projects: In situations requiring high confidentiality and expertise, such as fraud investigations, mergers and acquisitions, new investments, cost optimization in critical functions such as human resources/procurement/ production/logistics, technological development projects, and legal solutions, co-sourcing minimizes risk.

Technology Focus: The Power of Data Analytics and Artificial Intelligence

Modern internal auditing has now moved beyond manual controls and adopted a data-driven structure.

• Continuous Auditing: Thanks to the technological infrastructure of external providers, data can be analyzed in real-time or periodically, not just once a year.
• Eliminating Error Margin: AI-powered tools detect anomalies and signs of fraud in millions of lines of data much faster than manual methods.
• Enhanced Reporting: The digital tools used by Teolupus provide boards of directors with interactive data visualizations, not just text, thereby accelerating decision-making.
• Consulting and Digital Development: With technological consulting covering data analytics, robotic process automation, and artificial intelligence tools, processes advance and accelerate, and customer relations and fraud auditing can benefit from innovations across different areas.

Compliance with Sectoral Regulations and Rapid Adaptation

Complex legal regulations across different sectors are among the most significant pressures on internal audit units.

• Finance and Energy Sector: Global knowledge of outsourced auditors is critical for complying with the rapidly changing legal regulations in these areas. 
• GDPR and Information Security: In 2025, as cyber risks rise, cybersecurity audits are conducted using the most up-to-date threat libraries through outsourcing. 
• International Standards: In companies’ overseas operations, full compliance with local laws, international reporting standards (IFRS, SOX, etc.), and capital market regulations is facilitated by outsourcing support.

Forensic Expertise in Fraud and Error Detection

In-house auditors may have difficulty detecting or reporting fraud due to social ties with colleagues and the potential for organizational blindness.

• Objective Review: External auditors apply the principle of professional skepticism at the highest level, remaining free from corporate sentimentality.
• Forensic Accounting and Information Systems Auditing: In cases of suspected fraud, it is possible to engage forensic accounting professionals specializing in this area (e.g., CFE (Certified Fraud Expert) and CISA (Certified Information Systems Auditor)) through outsourcing, beyond general auditors.
• Deterrent Effect: The awareness that a “professional outside eye” will conduct an audit throughout the organization significantly deters potential fraudulent intentions.

Agility and Strategic Flexibility in Crisis Periods

Internal audit units need to react quickly during unexpected global crises or periods of sudden growth.

• Rapid Mobilization: When a new investment decision is made, while it can take a long time to form an in-house team, outsourcing allows an expert team to be on the ground within a few days. In some important projects, an outsourced internal audit team can earn the parties’ trust by bringing impartiality and expertise to the tense environment that may exist within the company, thereby delivering time savings, efficiency, and project management methodology.
• Operational Agility: The ability to quickly shift the audit focus to critical risk areas during supply chain disruptions or market changes is gained. 
• Strategic Consulting: External auditors not only conduct audits; in times of crisis, they act as strategic advisors to management, offering risk mitigation suggestions.

Determining the Maturity Level of Internal Audit Outsourcing Needs

Not every company has the same outsourcing needs. At Teolupus, we can analyze organizations’ “internal audit maturity curve”.

• Beginner Level: For companies without an audit unit yet, “Full Outsourcing” is the safest and fastest option.
• Advanced Level: For organizations with a strong team but needing support in digitalization and specific technical areas, “Co-Sourcing” is ideal.
• Quality Assurance Assessment: Outsourcing is also used as an external assessment tool to measure the effectiveness of the existing internal audit unit and improve its performance. The Quality Assurance and Improvement Program, which is included in international internal audit standards, involves the methodological review of the company’s own internal audit unit’s work according to international standards.

Cost and Quality Balance in Outsourcing

Outsourcing the internal audit function has long been a subject of debate in the literature. One of the most authoritative studies on this subject, the article “Internal Audit Outsourcing: An Agency Theory Approach” (Caplan and Kirschenheiter), published in the journal Contemporary Accounting Research, sheds light on this debate through the “Agency Theory”.

In this study, the competitive claims between in-house auditors and outsourcing independent audit firms are analyzed. The findings of the study reveal the strategic value of outsourcing in internal audit:

• Test Depth and Quality: The research scientifically proves that outsourcing to professional accounting and audit firms results in much more comprehensive and higher-level tests (audit procedures) than in-house auditors. This supports the claims that outsourcing provides “higher audit quality”.
• Cost and Efficiency Paradox: While the study accepts the claim that in-house auditors provide “lower-cost services,” The article states that outsourcing offers “higher quality and assurance.” In other words, outsourcing is not just a cost management method, but a direct investment in quality. 
• A Directly Proportional Tendency with Risk Level: One of the most striking findings of the article is that the need for outsourcing is directly proportional to risk. According to the research;
  1. In situations where the risk of control weakness is high, 
  2. And the potential loss from an undetected error is significant, companies tend to turn to outsourcing and maximize the benefits they derive from this model.

Kurum İçi ve Dış Kaynaklı İç Denetim KarşılaştırmasıComparison of Internal and External Internal Audits

Teolupus’s Differentiating Approach to Internal Audit Outsourcing Services

Teolupus positions internal audit not just as a control mechanism, but as a strategic partner that strengthens the organization’s immune system. As highlighted on our Teolupus Internal Audit Services page, our approach blends international standards with local dynamics.

Why Teolupus?

1. Methodological Competence (IPPF Compliance): We conduct our audits in accordance with the International Internal Audit Standards. This ensures that the reports we provide are valid worldwide and of high quality. Our work is designed within a multi-dimensional planning framework aimed at strengthening the corporate structure in the long term.
2. Risk-Oriented Perspective: Instead of auditing everything, we identify the “most risky” areas for your organization together with the company using our unique methods and focus on them. This allows you to use your resources in the most efficient way. As we stated in our supply chain risks article, we analyze complex processes by breaking them down into their components and identifying root causes. At Teolupus, we apply our own end-to-end risk-focused methodology to encompass all company functions, including production, purchasing, logistics, warehousing, R&D, quality, accounting, finance, human resources, sales, and marketing.
3. Technology and Data Analytics: At Teolupus, instead of using sampling methods, we use digital audit tools to analyze the entire dataset (Full Population Testing), present the results to the company, and obtain its approval. With this method, we minimize the possibility of errors and fraud.
4. Hybrid (Co-Sourcing) Models: If you have an existing internal audit team, we view them as colleagues and a strategic stakeholder supporting the process. We strengthen your team in areas requiring specialized expertise (information technology, fraud, sustainability, quality, etc.), ensuring that internal memory is combined with expertise.

Some of the topics included in our services:

• Establishing and managing an Internal Audit Function in accordance with International Internal Audit Standards
• Quality Assurance and Development Program Evaluation of the Internal Audit Function
• Preparation and Implementation of Risk-Based Internal Audit Plans
• Information Technology Audits and Security Analyses
• Fraud Prevention and Investigation Audits
• Other assurance services within the scope of problem diagnosis

Decision-Making Guide: Which Model is Right for Your Company?

The following comprehensive survey is designed to determine the most efficient working model by deeply analyzing your organization’s internal audit needs from operational, financial, and strategic perspectives. This tool reflects Teolupus’s expertise perspective, blended with international standards.

Strategic Decision Support Tool: Teolupus Internal Audit Model Determination Methodology

To determine which path will provide you with the highest added value when structuring your internal audit function, Teolupus has developed the Teolupus Internal Audit Model Determination Methodology, the intellectual and industrial property rights to which belong to Teolupus, and whose basic questions in the survey section are as follows.

The following questions cover only the basic survey section of this methodology.

Please answer the following questions. For each question, please indicate the score (from 1 to 5) that best suits your organization’s current situation.

Point Scale:

• 1: Strongly Disagree / No Need
• 2: Disagree / Low Need
• 3: Undecided / Moderate
• 4: Agree / High Need
• 5: Strongly Agree / Critical Need

Teolupus Internal Audit Model Determination Methodology: Analysis of Results and Decision Matrix

The total score you receive from the survey determines your organization’s internal audit roadmap as follows:

• 20 – 45 Points: Internally Focused Structure: Preserving corporate memory is a priority for you. If you have an existing team, strengthening it with external support only for particular projects (Project-based outsourcing) may be sufficient.
• 46 – 75 Points: Strategic Co-Sourcing Model: You need a hybrid approach. You can achieve the highest efficiency by combining your internal team’s mastery of the corporate culture with Teolupus’s digital audit, cybersecurity, and fraud expertise, along with value-added services.
• 76 – 100 Points: Full Outsourcing Strategy: Your company’s needs for independence, technological depth, and expertise are critical. Delegating the audit function to a professional organization for a period you deem appropriate and overseeing it will provide you with both cost advantages and maximum assurance.

Conclusion: Outsourcing/Co-sourcing as a Strategic Partnership

Outsourcing/co-sourcing in the internal audit function should now be viewed as an investment rather than a cost item. By adequately planning resources for this, companies can move towards their long-term goals with greater confidence. The speed and variety of risks faced by companies are challenging traditional internal audit structures. Outsourcing can significantly contribute to ensuring not only the survival but also the growth of organizations by providing impartiality, in-depth expertise, technological superiority, and flexibility. Companies can plan internal, co-sourcing, and outsourcing in a way that allows them to transition within a strategic framework.

At Teolupus, we are here to help you manage your business risks, strengthen your control environment, and provide reasonable assurance to your board of directors and committees. With our experienced team, we create tailor-made solutions specific to your organization’s needs, transforming internal audit into a multifaceted strategic value center that also includes a consulting role. In this way, as your strategic partner, we support you in achieving your company goals with your chosen strategies and secure methods. 

Are you ready to secure your future?

Meet Teolupus’s expert team to modernize your organization’s internal audit processes, optimize costs, and elevate risk management, internal control, governance, and internal audit quality to the highest level. Let us implement the comprehensive Teolupus Internal Audit Model Determination Methodology in your company, conduct an external corporate assessment, measure how well your governance structure and risk perspective support your goals and strategies, and identify your corporate needs. Staying competitive and leading the way goes hand in hand with being resilient and proactive, and this can only be achieved in collaboration with internationally recognized quality stakeholders.

Contact Us: Visit teolupus.com or contact our experts directly to discuss how we can make your internal audit function more effective.

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