An examination of internal auditor objectivity: In-house versus outsourcing

Sunita S. Ahlawat, David Lowe

Research output: Contribution to journalArticlepeer-review

81 Scopus citations


The internal audit function is evolving from its traditional oversight function to one that includes a wider spectrum of activities that add value to their organizations. 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 and independence 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 Institute of Internal Auditors (IIA) completed a case study involving a corporate acquisition scenario. Of the 66 participants, 35 were from corporations (in-house), while the remaining 31 were from the Big 4 accounting firms (outsource). 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.

Original languageEnglish (US)
Pages (from-to)147-158
Number of pages12
Issue number2
StatePublished - Sep 2004


  • Assurance
  • Internal auditing
  • Objectivity
  • Outsourcing

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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