Research Of Internal Audit Outsourcing On Small And Medium-sized Enterprises In China

Internal audit outsourcing is an independent and objective assurance andconsulting activity, in which enterprises’ internal organizations review andevaluate their business operation and the appropriateness, legality andeffectiveness of internal controls together by seeking external assist. Internalaudit outsourcing has several functions, such as optimizing the corporategovernance model, improving audit quality, enhancing the independence ofinternal audit, balancing cost and profit; strengthen core competitiveness ofenterprises and so on. However, along with the rapid development of globaleconomy, the fast-changing information technology, and the diversifiedcompetition of the same trade, small and medium-sized enterprises (SMEs) inChina have exposed the development bottleneck from the enterprise interior. Themajority of small and medium-sized enterprises (SMEs) limited to many factorsdo not have the ability to set up specialized agencies which to be engaged ininternal audit work. They just set up part-time internal audit staff. For the otherpart of the SMEs, the role of internal audit has not been due to play even they setup full-time internal audit staff. Therefore, the introduction of internal auditoutsourcing into the SMEs which due to optimize internal controls, has become awidespread concern of scholars at home and abroad.The theory research and empirical analysis of internal audit outsourcinghave been raging systematically in foreign countries, but domestic debates onthis subject are gathered at the theoretical level. Based on the combination oftheory analysis and empirical research, this article discusses the implementapproach of internal audit outsourcing in the SMEs in China. The article isdivided into five parts: the first part, briefly introduces the research background,summarizes and comments research literature on internal audit outsourcing athome and abroad, and presents the innovation of this paper; the second part,defines the related concept of internal audit outsourcing in the SMEs, discusses the internal audit outsourcing theoretically from the perspective of outsourcingorganization function theory, principal-agent theory, transaction cost theory, andcore competence theory, and meanwhile systematically studies the feasibility ofthe implementation of internal audit outsourcing in SMEs in China based onanalysis of the practice condition, the inherent demand of the enterprises, and theinternal audit services provided by outsourcers; the third part, empiricallyanalyzes the status of the SMEs’ internal audit and its outsourcing throughquestionnaire survey, summarizes the current problems of internal outsourcing inpractice based on the survey results, and analyzes its causes; the fourth part,constructs the implement approach framework of internal audit outsourcing inthe SMEs, combs the practice processes of outsourcing the internal audit in thewhole decision-making, and analyzes small, micro and medium-sized enterprisesdifferently in the process of discussing outsourcing risk and selecting forms; thefifth part, makes a summary, and put forward relevant suggestions and futuredirections.Based on the theoretical discussion on the SMEs’ internal audit outsourcingand several problems summarized from the empirical research, this article putforward practical solutions for the implementation of internal audit outsourcing:within the enterprise, enterprises should strengthen the management concept andmanagement outsourcing risk identification consciousness, clear enterprisestrategic target and outsourcing implementation path; outside the enterprise,outsourcing supervision system and the laws and regulations should be soundand perfect. Thus, outsourcing of internal audit can get the real execution in oursmall and medium-sized enterprises (SMEs) in China and helps to realize theenterprise value.