Outsourcing Accounting and Finance

Outsourcing in accounting and finance refers to the contracting of independent entities to perform accounting and transactional activities that otherwise would be performed by in-house staff. Outsourced activities and functions within the realm of accounting and finance can run the gamut from relatively unsophisticated operations to highly complex processes (Michael, 2008). There are benefits that are associated with the outsourcing of finance and accounting activities, not the least of which are lower costs. There also are risks involved; however, as the ultimate accountability and the responsibility for the quality, legality, and ethical character of the output remains with the company, not with the outsourced contracting entity (Duganier, 2005).

With respect to the quality, legality, and ethical character of financial and accounting records, reports, transactions, and other outputs, the situation becomes even more complicated for globally operating companies. Such companies must assure that the operations, records, data security, reports, and all other aspects of the financial and accounting functions conform to the standards that are applicable in (a) the home country of the company and (b) the host countries within which the company operates (Heffes, 2008). Such standards likely will include the following:

> International Financial Reporting Standards (IFRS), as these standards apply

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do business in the larger economies or the have their equity shares traded in those economies most frequently must provide financial data that are consistent with the national accounting standards of the economy where they want to do business. Frequently also, such companies must prepare reconciliations to do business in several major economies (Ford, 2008). Differences in the GAAP applied in different economies create potentially serious threats to companies that operate globally. Thus, the higher level of commonality of GAAP and general financial reporting practices the lower the accounting-related risk to global companies and investors. The IAS is the principal organization that is responsible for international accounting standards. It is through the IAS that proponents of the international acceptance of the body of IAS pursue the implementation of these standards globally (Pounder, 2007). A compelling issue confronting the financial and accounting community globally is the harmonization of international accounting standards. The globalization of business activity has generated an increasing need for standardization among countries with respect to accounting practices and standards. These needs are particular

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