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Published 04 April 2013 10:47, Updated 11 April 2013 00:45
Kate Spargo says accountants offshoring client information need to comply with existing privacy laws and provide adequate disclosure to clients. Photo: Jessica Shapiro
Accountants sending audit and tax work to low-cost centres in Asia are being asked by their ethical body to disclose to their clients when and where work is being outsourced.
The Accounting Professional and Ethical Standards Board (APESB) – the body that sets standards for the accounting industry – says accountants need to take greater care in keeping client information secure when outsourcing to third parties, and reveal the location of where work is being outsourced.
Technological changes are aiding growth in outsourcing of professional services, including at the big four accounting firms, where significant cost savings are being made by sending basic tax work to lower-paid staff in cities such as Manila.
That’s why the APESB has released the guidance note, APES GN 30 Outsourced Services, after one year of consultation with stakeholders including the main accounting bodies.
The board’s members include the big industry bodies CPA Australia, the Institute of Chartered Accountants and Institute of Public Accountants, who had argued that the guidelines were previously “overly prescriptive in tone, such that it reads more like a standard than like guidance”.
As a result the new outsourcing guidelines are simply a “point of reference” rather than a mandatory code, says ABESB chairwoman Kate Spargo.
But she says it aims to highlight risks of outsourcing, and ensure accountants comply with existing privacy laws that require them to provide adequate disclosure to clients.
The guidance note says the provision of outsourced services may create threats to compliance with laws such as the Privacy Act. “Where threats cannot be eliminated or reduced to an acceptable level ... the member [the accountant] is reminded to consider the legal and other implications of existing contractual arrangements,” it says.
“It should be noted that where a member in public practice outsources a professional service to a third party it creates a threat to the fundamental principle of confidentiality contained in the Code, as the third party will have access to confidential information of the client,” the guidelines say.
Spargo says accountants need to ensure that they protect the confidentiality and integrity of information transferred. “Outsourcing arrangements should be disclosed to clients and the client’s consent should be obtained,” she says.
The only exemption to this is in relation to group audits, which is addressed by existing auditing standards, she says.
The Institute of Public Accountants chief executive Andrew Conway says the accounting profession has been waiting for guidance on outsourcing for some time.
“It is not just the big four firms that utilise outsourcing,” he says. “Many small and medium size firms outsource simple tasks in order to keep client costs to a minimum.
He says clients have the right to know if their work is being outsourced. “[They] need to be assured that their confidential information is protected from abuse,” he says.
A report published by CPA Australia in 2010 cites global figures showing finance and accounting services make up about 10 per cent of the $US975 billion worldwide BPO (business-process outsourcing) market and that the figure is expected to increase.