Offshoring audit work raises concerns

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It's fair to say that when it comes to outsourcing, financial and professional services firms have become much more comfortable with sending more complex work offshore.

There was a time when people thought offshoring of office work would always be limited to call center and data entry-type work, but that has changed. Audit firms have been steadily sending more work abroad for years, joining investment banks, which are sending more low-level, garden variety stock analysis and investment banking duties to offshore centers. There's even been media companies offshoring basic journalism work. That trend has raised some compliance concerns, especially when it comes to audits.

Reuters notes that, "The U.S. arms of the Big Four audit firms - Deloitte Touche Tohmatsu Ltd, KPMG, PricewaterhouseCoopers and Ernst & Young Global Ltd - said that work handled by Indian employees is routine and systematically sent back for review to the United States. But some audit firms are layering on more complex tasks in the offshore centers and Indian workers are rising to senior positions in the auditing ranks, said Big Four firm employees and others in the accounting industry in India…Concern is growing that no coherent regulatory system exists to closely police the work in India, to gauge its quality, and to take action if problems should develop."

As of now, U.S. auditors do not have the right to inspect physically the offshore centers of U.S. auditors, nor do they review the work performed there. That has been a problem so far, as only about 5 percent of total audit work is performed abroad. But audit firms should be thinking about what they can do to create a system of accountability and quality assurance--ahead of the regulators.

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Related article:
Outsourcing within U.S. picks up

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