Management is considering outsourcing the manufacturing of a portable MRI machine to a vendor in Mexico. This product has only been on the market for two years. In that time, it has been a commercial success in North America and Asia. The company has a patent on this product and is currently the only company selling a portable MRI machine. The U.S. plant where the product is being made is not being closed. The Mexican company being considered does manufacturing for other large U.S. medical devices companies such as Medtronic and Boston Scientific.
A) What are the most significant risks (at least 4)?
B) What key controls need to be in place to address the risks?
C) What role can internal auditing play in assisting management both prior to signing the outsourcing contract and after the process has been outsourced?
