One of the most common hitches accounting firms face is in the audit process. Players of the industry will often come across tales where the lack of understanding of a certain process, or jargon in the auditing sector has led to a tremendous breakdown in the business – operations, profits, and their reputation. However, there is a solution to this. Strategic teamwork and a proactive approach can help organizations thrive during audits. It is important to acknowledge and accept that there are professionals who are equipped to handle complex business situations better than an accounting firm leader. That is where outsourcing comes into the picture.
Auditing is a complex business process. Some nuances can miss your eye if you have to wear multiple hats at the same time. And this is, indeed, the case with small accounting firms. Outsourcing audit services includes hiring a specialized team of people who can handle several audit functions ranging from planning to execution and finalization of the audit. Outsourcing financial statements, internal audits, compliance audits, and more can help accounting firms leverage internal expertise and ensure accuracy and compliance.
Understanding the complexities of the audit processes
Most of the time, accounting firms tend to believe just like they handle all other accounting processes and functions, they can deal with the audit part of the businesses. While they might be aware of how the audit processes work, there are many complexities to that. Let us delve deeper into them:
- Regulatory compliance:
Small accounting firms lack the time and bandwidth to keep up with the ever-changing regulatory needs and demands. Auditors need to navigate through several regulations – Generally Accepted Accounting Principles, International Financial Reporting Standards, and industry-specific guidelines. These regulatory changes are frequent and they require auditors to stay updated and adjust their practices accordingly. Accounting firms struggle a lot with the industry-specific guidelines and it’s tough to keep up with them.
- Technological updations:
We live in a technological world. Artificial Intelligence has been advancing at a rapid pace and it is important to keep up. For small accounting firms, there are concerns about investing in new-age technology and training their teams to use them and make the most of them. These new-age audit processes have revolutionized the audit processes. These technologies have many benefits while demanding that auditors possess specialized technical skills. When audit teams struggle with adopting new-age tools and technologies, they often fall behind in their cire functions, leading to errors and low-quality outputs.
- Volume and variety of data:
The data available to auditors is vast. They come from different sources and need to be categorized specifically. Data includes financial records and statements, operational data, external databases, etc. The data available also comes in a wide variety of formats and sources. During audit processes, even historical data can be brought to use. This adds to the complexity of the data analysis and validation. Small accounting firms often lack the expertise to deal with this wide variety of data.
- Spreading global operations:
No matter the size of the accounting firm, they want to grow. When firms want to expand their horizon to different geographies, they need to be well-informed about the country/state-wise regulations and accounting practices. If these firms try too hard to keep up, they lose valuable time off their core functions. Auditors in small accounting firms fail to navigate through the variations and ensure that compliance is met on a global scale.
- Risk management:
Risk assessment and management are key aspects of the audit processes for accounting firms. They deal with clients with complex business structures, financial tools and instruments, and emerging risks like cybersecurity threats that require auditors to adopt sophisticated risk management approaches. Accounting firm leaders and professionals need specialized skills to combat risks and ensure that they follow the right track.
How can outsourcing benefit the audit processes?
- Lowering operational costs:
One of the major reasons why accounting firms turn to outsourcing is to reduce costs. So is the case for auditing too. Instead of maintaining an in-house team, when you outsource your audit functions, you can significantly reduce labor costs. Countries like India and the Philippines, which are the hub of accounting outsourcing have low-cost labor as compared to the US. These cost reductions aren’t just limited to salaries. It also includes benefits, training, and other infrastructure. For small accounting firms, these savings are quite large, and these can be used in strategic areas like marketing, technology, strategy, etc.
- Easy adaptation to client demands:
When you outsource your audit functions, you make your teams capable of scaling the operations quickly and efficiently. For example, during peak audit seasons, there can be increasing client demands. Having a flexible outsourced team allows you to increase your capacity without many delays that are associated with hiring and training new staff. The responsiveness helps improve client satisfaction and maintain top-notch quality of services even during busy times. This ensures that you seamlessly meet client deadlines.
- Improving compliance and security through risk management:
An offshore audit team is capable and well-versed in handling country-specific, state-specific or industry-specific regulations. There are many complexities associated with compliance and data security. When you choose an outsourced partner who has international standard certifications in place, clients can put more trust in your services. The right outsourcing partner also has a thorough security system in place, which helps mitigate the risks associated with data breaches and non-compliance with global accounting standards. All of these provide an additional layer of security, and peace of mind for your clients.
- Leveraging cutting-edge tools:
In modern times, there is a constant need to be technologically ahead of others. Offshore providers build holistic audit technologies, including AI and data analytics tools which help accounting firms stay competitive on a global scale. By partnering with a trusted accounting outsourcing provider, you no longer need to invest in these tools or train the resources. There are no acquisition or maintenance costs that you need to bear. This access to technology helps improve the efficiency and accuracy of the auditing processes. From automated transaction testing to sophisticated assessment models – you get access to it all.
- Building long-term relationships:
Hiring an offshore team is not a one-time thing. Gone are the days when your outsourcing partner was merely a medium to get the tasks done. Today, they are more about becoming a strategic partner, ones who can help you with advice. Audit is a critical business function and finding a strategic partner helps build stability and reliability in the service delivery. It also gives accounting firms the opportunities for continuous improvement and collaboration on future projects.
Leveraging outsourcing for complex audit processes – End Note
The audit process is complex in nature and can pose significant challenges for accounting firms. But outsourcing can not only help simplify the processes but also improve efficiency, and maintain compliance with evolving regulations. As accounting businesses continue to evolve in their pursuit, it is important to stay ahead of the trends and embrace innovative outsourcing solutions. By adopting strategic partnerships with reputable outsourcing providers, accounting firms can improve their competitive edge.
To know more about outsourcing, write to us at connect@finsmartaccounting.com.
Director Growth Strategy & Alliance
Maanoj Shah is a finance and outsourcing expert with strong Business Strategy and Scaling-up experience. Over the last 20 years, he has incubated multiple businesses and helped build global enterprises in verticals as diversified as hospitality, technology, and healthcare.
