Internal Audit Outsourcing Practices among Micro, Small and Medium Sized Enterprises (MSMEs) in Lagos State

Micro, small and medium scale enterprises (MSMEs) are recognized globally as the engine of growth in any development oriented economy. MSMEs significantly contribute to employment and the Gross Domestic Product (GDP) in emerging economies. As a result of the adverse effect of the COVID-19 pandemic, the Federal Government through the Central Bank of Nigeria (CBN) inaugurated a N75 billion (Seventy-five billion naira) survival fund to revitalize and reinvigorate the MSMEs in the country. Consequently, to ensure effective utilization of the fund, the study investigated the impact of internal audit outsourcing on audit quality of MSMEs in Lagos State. The study adopted survey research designs, using purposive sampling technique to select 170 respondents among the registered MSMEs in Lagos State. A structured questionnaire was used to collect data, validated using Cronbach alpha with 85% response rate. The data was analyzed using descriptive and inferential statistics. Majority of the MSMEs, indicated that the extensively outsourced the function of ensuring compliance with established policies, plans and procedures. The study recommended that owners and managers of MSMEs should ensure that the internal auditors’ functions of their firms are outsourced to external audit firms in order to achieve audit independence and high audit quality at a reduced cost