Q2 . (a) Internal audit is a review of operations and records undertaken within a business by specially assigned staff of the organisation.It is a post transaction review to evaluate the correctness of records and the effectiveness of operation. Internal auditing outsourcing is the process whereby the management purchases the services of auditing from outside.with internal audit outsourcing,companies can use external services for their internal audit function. ADVANTAGES OF INTERNAL AUDIT OUTSOURCING: Expertise:Outsourcing an internal audit function of a company brings expertise .For large companies,it is very common to have a dedicated internal audit function.But incase of smaller companies it may not be possible.Hence outsourcing helps those companies to perform their internal audit function with the assistance of external expertise. Time saving:Companies carrying internal audit function by it's own have to go through a lot of steps.It involves establishing structure,hirinh employees,determining the procedures etc.All these steps are time consuming process.Through outsourcing companies can reduce the time to be spend on the above mentioned procedure to a extend. cost saving:Internal audit outsourcing is considered as a cost effective process.It saves cost through bringing experts,they will perform functions economically.In addition to this,this contract is based on a fixed amount.so no additional amount is required to spend . Better Independence:one of the critical issue with in an internal audit function is undue influence of management over their workers.with i ternal audit outsourcing,the same does not apply. Benchmark establishment:The outsourced internal auditors create new reference points and standards or may modify the existing benchmarks and standards for a better performance. unbaised report:The outsourced internal auditors give unbiased reports which consist of new ideas and proposals for best performance. DISADVANTAGES OF INTERNAL AUDIT OUTSOURCING: Initial Cost:Internal audit may result in lower costs.usually companies need to dedicate resources to help audit firms to get used to their operations.companies may also need to invest in systems to keep the information confidential.All these activities huge initial costs. Loss of control:Assigning internal audit function to an external source will result in loss of control.Company may not use their control over the outsourced internal audit workers .Overall,it can cause unwanted problems for the company. Not suitable for small companies:Internal audit outsourcing may not be suitable for small companies with a low number of transactions and controls.usually these companies do not need an internal function at all.However,even if they do use internal audits,outsourcing may not be ideal given the requirements. Security:Every organisation has its own secrets.Through this process,companies have to take the risk of sharing this secrets with external source. The internal audit function in a company carries out a number of responsibilities.Internal auditors need to overlook the company's operations continuously.Having an outsourced internal audit function may,therefore,be more challenging.