Sarbanes-Oxley and the Outsourcing of Accounting

The following paper analyzes the outsourcing, offshoring, and offshore outsourcing of accounting following the passage of the Sarbanes-Oxley Act of 2002 (SOX). The outsourcing of accounting services is growing at a phenomenal pace and is affecting firms of all sizes, regardless of industry or market capitalization. This is leading to a strategic shift in what, where, and by whom accounting services are performed. The outsourcing of accounting following SOX is analyzed in five areas: First, the initial impact of SOX on onshore and offshore outsourcing of accounting, in particular, the emergence of India as a major destination for offshore outsourcing. Second, the outsourcing of accounting services in small and medium sized firms; in addition, the application of outsourcing theory as a metric to gauge sourcing decisions. Third, accounting pronouncements which impact the desirability to outsource accounting following SOX. Fourth, transaction cost economics and its application to the outsourcing of accounting. Last, the emergence of global accounting standards and the future of accounting outsourcing. These five areas provide a comprehensive outlook towards the impact of outsourcing on the accounting industry.