Outsource of Auditing

Date: 31-03-2014

Subject: Outsource Auditing

Background:

With the development of globalization, many companies would like to outsource jobs to overseas, especially the developing countries. A hot topic in global these few years has been outsourcing auditing. It is a double-edged sword. Thus, it is important for the principal auditing firm considers the benefits and risks associate with outsourcing.

Analysis:

On the one hand, there are many benefits of outsourcing auditing. For example, outsource auditing could improve the productivity of the audit by achieving 3E principles (efficiency, effective and economy). And, the management could save the energy and time to focus on the core business. Based on cost and benefit consideration, outsourcing could save the establishing and operating costs and the principal auditing firm could access to outside expertise, get the advanced services and so on. For instance, if an auditing firm needs to value something precious, like antiques and paintings, they could outsource to expertise.

For the multinational auditing, the principal auditing firm may spend more money than benefit during the whole process of auditing, so the principal auditing firm would consider outsource the auditing to the local auditing firm.

On the other hand, the risks associate with outsourcing auditing are obvious. The client does not know the auditing firm outsources some part of the auditing services. The principal auditing firm will bear the risks of reputation damage and lawsuit costs if something goes wrong during outsourcing.

Further, many auditing firms would like to outsource the IT department to India. However, the service provider could access to some important and confidential documents, the principal auditing firm probably have less control for these business.