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I was reading advantages of outsourcing internal audit functionand one of the point was this ” professional firms are responsible for their activities and hold insurance”. What kind of insurance is being referred here ?
Types of insurance is outside the scope of the AA syllabus – it’s examinable in AAA as one of the measures to restrict auditor’s professional liability. The two main types are:
Fidelity Guarantee Insurance (FGI) against dishonesty of staff – many businesses have this.
Professional Indemnity Insurance (PII) which pays compensation to injured parties in case of negligence.
Both PII and FGI may be mandatory – e.g. to obtain an ACCA licence to practice.