Outsourcing: its impact on us all; Whether inside the United States or overseas, CPA service outsourcing appears here to stay.

• Author: Wilder, Brent
• Position: Cover Story

Just say the word "outsourcing" in a crowd of CPAs and watch the reactions. For some, it's a dirty word. For others, it's a best practice. But for everybody, it's a fact of life.

Outsourcing is hardly new, but with the eye of the American public focusing on outsourcing as a heated political campaign issue, CPAs are also taking sides--despite the common, longtime practice of outsourcing accounting work to third-party contractors. It's when outsourcing becomes "offshoring" that tempers appear to rise; when jobs go overseas instead of to American workers, controversy ensues--particularly in an election year. Although most public attention has focused on job losses in the industrial and tech sectors, CPAs are also increasingly sending work outside the country's borders.

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Regardless of where the work goes, recent focus on the issue has been intense, largely due to U.S. economic conditions and political rhetoric, and that has caused many companies and organizations to challenge their own thoughts on outsourcing. After lengthy discussion, the AICPA Professional Ethics Executive Committee (PEEC) has proposed revisions to the Code of Conduct that will require CPAs to disclose when any professional services may be performed by an outside party. AICPA representatives say the proposals are proactive, not a reaction to any specific incidents. Likewise, in addition to enhancing the client-CPA bond of trust, the Ethics Committee believes notification will provide inherent guarantees of security and actively promote responsibility at the engagement firm level. When faced with the difference between faster work for less money and more expensive work that can take longer, most clients are probably going to pick the less expensive option.

As We Go to Press

The exposure draft proposed by the AICPA, which would add and modify rules for CPA usage of third-party providers, was scheduled to be discussed at the Professional Ethics Executive Committee's Oct. 28-29 meeting. The response period to the Aug. 9 publication of the exposure draft concluded Oct. 8. As of early September, Professional Ethics Division Director Lisa A. Snyder said she had only received a handful of largely positive comments on the draft, noting she anticipated further comments to be received closer to the deadline.

"Most people read through it, yawn and say, 'sounds like a good idea, nothing controversial here.' I don't think we're going to get much of a response," says Michael R. Dickson, CPA, CITP, past-chair of The Ohio Society's Executive Board. "Many small- and medium-sized members read it and say, 'outsourcing, that's what the big firms do--this doesn't apply to me.' But, the small- and medium-size firms that do do it are going to have to be more accountable than their bigger counterparts" because the proposed rule change would not address the ability of accounting giants to keep everything in-house with a worldwide network of internal offices, Dickson notes.

Snyder says she perceives AICPA members to be largely supportive of disclosure and transparency, the key measures the rule modifications seek to ensure. Snyder says anecdotally, she believes CPAs already typically disclose third-party work to clients, but that with public tensions on outsourcing so high, the AICPA believes now is the time to proactively review guidelines that have stood unmodified for 30 years. "We are not aware of any specific examples where CPAs compromised client security or where private information has been used by a third-party contractor," Snyder says. "However, with the public debate on outsourcing, we wanted to address its impact in the (CPA) profession" more clearly, she notes.

Before exposing the proposals for comment, the AICPA Professional Ethics Executive Committee met three times to debate the issues of outsourcing--specifically considering whether to revise disclosure requirements for any third-party professional services and add responsibility and confidentiality layers to disclosure. Snyder is careful to point out that the committee did not differentiate between outsourcing to American or foreign third-party contractors. "We did not want to make any...