Faculty Scholarship 1994 - Present
Outsourcing Internal Audit in Banking Institutions: Can and Should an External Auditor Wear Both Hats?
Can an auditor wear both hats--acting as both internal and external auditor? Based on the published guidelines, yes it is possible and permissible, provided that the auditor does not assume a management or employee role in either fact or appearance. Should an auditor wear both hats? Probably not. While an auditor may make every effort to remain independent in fact--- and may in fact remain independent---remaining independent in appearance may be difficult when an auditor performs both the internal and external audit functions. As always, an auditor must exercise sound judgment on a case-by-case basis to determine whether independence has been impaired. Unfortunately, given the divergence of guidance in this area, the SEC, AICPA or federal bank regulatory agencies may disagree with the auditors opinion. Until concise standards are developed and implemented by the governing bodies, discretion may remain the better part of valor.