July 22, 2005
Companies move more accounting work offshore due to Sarbanes-Oxley
The Sarbanes-Oxley Act is wreaking havoc (potentially much needed) on the corporate world. Since the rule was implemented in 2002, companies have been required to keep much more transparent accounting and financial records. This has caused a sharp increase in demand, however, and has had the unintended consequence of shifting a great deal of accounting work overseas. Reports from some Indian outsourcing companies indicate that work arising directly from Sarbanes-Oxley is rising at a rate of 50% per year. Much of this shift is due to the fact that companies are trying to limit the increased cost requirements of the new accounting regulations by shifting work to India where accounting wages are just 1/3 that of the US. Some corporate analysts argue, however, that the rush toward outsourcing accounting work may be a bit premature. A Gartner report argues that companies are failing to account for differences in management costs, efficiency differentials, communication and cultural differences. All these combine to limit the cost savings available through outsourcing. But just as in other industries, western companies are enticed by the wage differentials and consequently pay little attention to mitigating factors. accountingweb.com reports:
"In 2004, we saw a lot of business being done on site, but now we are getting into year two and year three, and there will be more of the technology components of compliance offshored," he told the Journal.
Read More: Experts Advise a Go-Slow Approach to Outsourcing
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