Outsourcing is used increasingly for all types of goods and services. The accounting profession is no exception. Years ago, CPAs began outsourcing by hiring part-time staff who sometimes worked at home. As staff shortage problems increased and CPAs looked for new ways to reduce costs, they entered into international outsourcing arrangements. Usually the type of work outsourced is routine, such as transaction processing or tax return preparation. These arrangements reduce costs, improve efficiency, and free CPAs to focus on more value-added client services.
The increasing use of outsourcing arrangements led to questions about professional responsibilities, including the quality of work and privacy. To address these questions, the American Institute of CPAs (AICPA) and the Canadian Institute of Chartered Accountants (CICA) jointly established a set of 10 privacy principles for public accountants and offered the following guidance explicitly related to international outsourcing (2009, p. 3):
Complexity increases when the entity that performs the outsourced service is in a different country and may be subject to different privacy laws and perhaps no privacy requirements at all. In such circumstances, the organization that outsources a business process will need to ensure that it manages its privacy responsibilities appropriately.

Exhibit 4.3 provided examples of issues that financial institutions should consider when they engage in international outsourcing of information technology (IT). Refer to these issues as you answer the following questions. Suppose a CPA is thinking about outsourcing the preparation of routine income tax returns to an accounting firm in another country.
A. Discuss whether the CPA can be sure that services are performed competently and with due professional care. Does it matter whether the services are performed by local staff or in another country? Why or why not?
B. Discuss whether the CPA can be sure that client data will remain confidential. Does it matter whether the services are performed by local staff or in another country? Why or why not?
C. If the CPA decides to outsource, should clients be informed that their tax returns are prepared in another country? Why or why not?
D. Describe the pros and cons (including business risks and strategic issues) of outsourcing to theCPA.

  • CreatedJanuary 26, 2015
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