Research on External Coordination Mode of Internal Audit

Abstract

With the accelerating process of world economic integration, the rapid changes of economic environment lead to more intense market competition and more detailed specialization. Modern enterprises are unlikely to achieve optimal strongest in each aspect. Many enterprises choose to concentrate their superior resources on the development of the most core business. For those businesses that enterprises are not familiar with or not good at, they often choose to transfer to external professional organizations, so the external coordination mode of internal audit also arises at the historic moment. External coordination of internal audit means that the management of an enterprise entrusts all or part of its internal audit function to an external third party. External coordination of internal audit can be manifested in three modes: outsourcing accounting firms, cooperating with Certified Public Accountants or other internal audit personnel, and cooperating with other internal audit institutions to implement cross-audit. This is an enterprise governance mode established according to the principle of cost-benefit and in line with the principle of modern corporate governance. It not only has profound theoretical basis but also is a realistic choice in the process of institutional change. External coordination of internal audit can solve the problems of insufficient internal audit resources and lack of skills of internal audit personnel. External coordination of internal audit can improve the independence of internal audit, reduce audit cost and improve audit quality. The limitation of external coordination of internal audit is that it cannot meet the personalized requirements of enterprises, and it is not conducive to the establishment and improvement of internal control. And it is difficult to coordinate with the long-term goals of enterprises. In addition, the process of external coordination of internal audit may involve the leakage of trade secrets and other problems. When considering the choice of external coordination mode of internal audit, enterprises should make comprehensive analysis and judgment from the three aspects of audit independence, cost-benefit and audit quality. The final decision is made by the management according to the specific situation and actual needs of the enterprise.