In the present society, outsourcing is a frequent business practice. Many businesses have begun outsourcing accounting firms. In this paper, the reasons why accounting firms would want to outsource will be discussed. Afterward, it is going to speak about the way the Sarbanes-Oxley Act of 2002 (SOX) impacts the dilemma of outsourcing. Finally, a fast look at a Big Four accounting firm that has taken the chance to outsource.
When speaking about the issue of accounting companies outsourcing, first we must examine the reasons why an accounting firm will want to outsource in the first location. Following CPA Trendlines, there are seven main reasons why an accounting company would like to outsource. The first explanation is that the accounting profession is aging. It follows that a lot of those who are employed in the accounting area is getting older and intend to retire. This then brings in the demand for a brand new, new pair of people to take over these positions. The second rationale is to outsource the profitable work. When firms do so, they could spend more time and resources are the services that clients notice more, like consulting work. The third reason accounting companies outsource is it creates just in time’ hiring simpler. What this indicates is that many (if not all) accounting companies hire extra people during tax season. Also, many of the full-time employees get overworked and this could lead to a greater turnover. With outsourcing, accounting firms leave the just in time’ hiring to all those outsourcing firms. This is a lot simpler for the accounting companies because instead of taking the time of hiring many new staff members, they only have to hire one outsourcing firm. The fourth reason why outsourcing is getting popular with accounting companies is because of the need for all being digital, it compels standardization. Visit hr outsourcing here. This means companies examine processes more closely, and they’re able to ensure everything is exact with the criteria. This is considered a hidden advantage. The next reason is that their growth is virtual rather than physical, companies can take on more customers and not need to enlarge their physical areas, such as new centers, computers, and staff. The next reason outsourcing is a favorite with accounting firms is the turn around time is quicker. In places that function is outsourced, such as India, can be 10 hours beforehand here in the USA. This means that work that’s sent out after the workday can be returned by the start of the following workday. Lastly, outsourcing is less costly than doing the same job here in your home. Work that could cost between $20 – $25 U.S. bucks an hour here in the United States would only cost between $10 – $12 U.S. bucks if outsourced. Additionally, companies can avoid things like payroll taxes, sick pay, vacation time, benefits, and space and equipment costs. It’s common knowledge that in the accounting profession, there are many rules and regulations. How can it be possible that outsourcing may occur and remain with the standards which are already installed? We focus on the Sarbanes-Oxley Act of 2002 and how it impacts the outsourcing of accounting.
The Sarbanes – Oxley Act of 2002 (or SOX) is a U.S. national law that establishes new or enhanced accounting rules and regulations for public accounting firms and other types of businesses. The impact of SOX and outsourcing are discussed in Paul Cervantes’s article”Sarbanes-Oxley and the Outsourcing of Accounting”. The implementation of SOX first made companies hesitate on what they’d outsource and what they would maintain. Since SOX made business profits go down and capital improve, outsourcing accounting-related functions are a good way for businesses could reduce prices. Accounting companies are examples of firms that seem to outsource. Deloitte is a good illustration of an accounting firm that has begun outsourcing. Deloitte partnered with Mastek to promote organizations to outsource business practices, particularly to India. Outsourcing allows Deloitte to operate with finance professionals with a proven secure provider, and also it decreases work turnaround by 40%. Though outsourcing seems like a simple way to solve the implication of SOX there are a few hurdles, particularly in Sections 302 and 404. Section 302 states that the company and managing executives are liable for material weakness in the internal controls of the business. Section 302 also claims that these executives must report fraud to investors. Section 404 requires that management evaluate the internal controls of the business in each quarterly or yearly report. These segments make it difficult for companies to outsource accounting-related services because even though these solutions are outsourced, they are considered to be an elongated section of the company. That means that the corporation would to ultimately liable, not the service supplier. Despite the implementation of SOX, this doesn’t prevent accounting firms from outsourcing additional services.
KPMG is one of the four largest four accounting firms in the world, and they’ve started to use outsourcing. According to Sarah Johnson’s post, “What KPMG’s Lastest Purchase Means” KPMG had purchased EquaTerra. EquaTerra is an outsourcing advisory firm. EquaTerra’s job is to assist corporate clients with an outsourcing plan. This means that they help them connect to clients and finish the agreements. The advisory company will have stipulations and intellectual property. Now, KPMG will have the ability to close outsourcing deals and agreements, with no outside advisor. In general, this merge provides clients with a full life cycle of capacities. Talk to us at PEO Canada and get a free quote.
As we can see, outsourcing is a business practice of the future. Not only does this cut costs, but it also increases productivity. Even with the implementation of SOX, businesses, and companies are still taking advantage of outsourcing opportunities. What we have to look forward to in the future is how much firms and companies are willing to outsource and what type of new legal obligations may be imposed on them. This will continue to be a very present issue in the future