Offshoring Accounting: How To Ensure Quality and Compliance With International Standards

Offshoring accounting is the practice of outsourcing accounting and financial tasks to a service provider in another country, usually with lower labor costs and taxes. Offshoring accounting can help accounting firms save money, access skilled talent, and focus on their core competencies.

However, offshoring accounting also involves some risks and challenges, especially when it comes to ensuring quality and compliance with international standards. Accounting firms are subject to various regulations and guidelines, such as the AICPA Code of Professional Conduct, the Sarbanes-Oxley Act (SOX), and the Securities and Exchange Commission (SEC) regulations. These regulations require accounting firms to maintain accurate financial records, provide assurance on internal controls, and adhere to ethical principles.

How can accounting firms ensure quality and compliance while offshoring accounting tasks? Here are some tips and best practices to follow:

Choose a reputable offshore service provider

The first step to ensuring quality and compliance is to choose a reputable offshore service provider that has experience and expertise in providing accounting services to US clients. Accounting firms should do their due diligence and research the offshore service provider’s credentials, qualifications, certifications, reputation, reviews, testimonials, and references. They should also check the offshore service provider’s compliance status with respect to local and international laws and regulations.

Some of the factors to consider when choosing an offshore service provider are:

• Quality and reliability: The offshore service provider should deliver high-quality services that meet the expectations and requirements of the accounting firm and its clients. The offshore service provider should also have robust quality control and assurance mechanisms in place to monitor and improve the performance and quality of the offshore team.
• Security and confidentiality: The offshore service provider should have adequate security measures in place to protect the sensitive financial data of the accounting firm and its clients. 
• Communication and collaboration: The offshore service provider should have effective communication and collaboration tools and methods to facilitate smooth communication and feedback between the onshore and offshore teams. The offshore service provider should also ensure that the offshore team has a clear understanding of US regulations and standards, as well as AICPA guidelines. The offshore service provider should also provide regular reporting and updates on the progress and status of the offshore tasks.
• Cost-effectiveness: The offshore service provider should offer competitive pricing that matches the budget and value proposition of the accounting firm. The offshore service provider should also provide transparent pricing and billing policies, without any hidden fees or charges.

Establish clear roles and responsibilities

The second step to ensuring quality and compliance is to establish clear roles and responsibilities for both the onshore and offshore teams. Accounting firms should define the scope, objectives, deliverables, timelines, expectations, and standards for each offshore task. Accounting firms should also assign a dedicated project manager or supervisor for each offshore task, who will be responsible for overseeing, coordinating, reviewing, approving, and communicating with the offshore team.

Some of the roles and responsibilities that accounting firms should clarify are:

• Onshore team: The onshore team is responsible for providing guidance, instructions, feedback, support, training, and resources to the offshore team. The onshore team is also responsible for ensuring that the offshore tasks are aligned with the client’s needs and expectations, as well as US regulations and standards. The onshore team is also responsible for verifying and validating the quality and accuracy of the offshore tasks, and for resolving any issues or problems that may arise.

• Offshore team: The offshore team is responsible for performing the offshore tasks according to the guidance, instructions, feedback, support, training, and resources provided by the onshore team. The offshore team is also responsible for complying with the local and international laws and regulations, as well as AICPA guidelines. The offshore team is also responsible for reporting and updating the onshore team on the progress and status of the offshore tasks, and for escalating any issues or problems that may arise.

Implement effective internal controls

The third step to ensuring quality and compliance is to implement effective internal controls for the offshore tasks. Internal controls are policies, procedures, systems, and processes that help accounting firms ensure that their financial records are accurate, complete, reliable, and compliant. Internal controls also help accounting firms prevent and detect errors, fraud, or theft.

Some of the internal controls that accounting firms should implement are:

• Segregation of duties: Segregation of duties is the principle of dividing a task into different steps or stages, and assigning them to different people or teams. This helps prevent conflicts of interest, collusion, or misuse of authority. For example, the person who initiates a transaction should not be the same person who approves or records it.
• Authorization and approval: Authorization and approval are the processes of verifying and validating a transaction or activity before it is executed or recorded. This helps ensure that the transaction or activity is legitimate, appropriate, and compliant. For example, a purchase order should be authorized by a manager before it is sent to a vendor.
• Reconciliation and review: Reconciliation and review are the processes of comparing and verifying different sources of information to ensure consistency and accuracy. This helps identify and correct any discrepancies or errors. For example, a bank statement should be reconciled with a cash book to ensure that all transactions are recorded correctly.
• Audit trail and documentation: Audit trail and documentation are the processes of recording and maintaining evidence of a transaction or activity. This helps provide accountability, transparency, and traceability. For example, an invoice should be accompanied by a receipt or a proof of delivery to show that the goods or services were delivered.

Monitor and audit performance and quality

The fourth step to ensuring quality and compliance is to monitor and audit the performance and quality of the offshore tasks. Monitoring and auditing are the processes of measuring and evaluating the results and outcomes of the offshore tasks against the predefined criteria and standards. Monitoring and auditing help accounting firms assess the effectiveness and efficiency of their offshore service provider, as well as identify any areas for improvement or corrective action.

Some of the monitoring and auditing methods that accounting firms should use are:

• Key performance indicators (KPIs): KPIs are quantifiable metrics that indicate how well a task or process is performing in terms of quality, timeliness, productivity, cost, etc. Accounting firms should establish KPIs for each offshore task and track them regularly to measure the performance and quality of the offshore team. For example, a KPI for an offshore bookkeeping task could be the number of errors or discrepancies per month.

• Feedback and surveys: Feedback and surveys are qualitative methods that collect opinions and perceptions from the stakeholders involved in or affected by the offshore tasks. Accounting firms should solicit feedback and surveys from their clients, onshore team, and offshore team to evaluate the satisfaction and expectations of each party. For example, a feedback form or a survey could ask about the communication, responsiveness, professionalism, and quality of the offshore team.
• Audits and inspections: Audits and inspections are independent and objective assessments that verify and validate the compliance and quality of the offshore tasks. Accounting firms should conduct audits and inspections periodically or randomly to ensure that the offshore team follows the internal controls, policies, procedures, systems, and processes. For example, an audit or an inspection could check the accuracy, completeness, reliability, and compliance of the financial records produced by the offshore team.

Conclusion

Offshoring accounting can be a beneficial and strategic option for accounting firms that want to optimize their accounting functions and achieve their goals. However, offshoring accounting also requires accounting firms to ensure quality and compliance with international standards. By following the tips and best practices outlined in this article, accounting firms can mitigate the risks and challenges of offshoring accounting and enjoy its advantages.

Vintti: A great alternative for offshoring accounting

If you are looking for a reliable and cost-effective offshore accounting service provider, you may want to consider Vintti. Vintti is a headhunter agency that specializes in providing world-class financial and accounting talent from South America, fully aligned with your time zone. Vintti can help you find and hire qualified and experienced accountants who have excellent proficiency in US GAAP, cultural fit, and communication skills. Vintti can also handle all the formalities of hiring and managing the offshore team, saving you time and hassle.

By working with Vintti, you can enjoy the benefits of offshoring accounting without compromising on quality and security. To learn more about Vintti and how they can help you with your accounting needs, book a call with us.