• Register
Return to: Home > News > Sikka: Audit outsourcing detrimental to quality

Sikka: Audit outsourcing detrimental to quality

At the official launch of the UK Labour Party’s report, Reforming the Auditing Industry, concerns were expressed over the amount of audit work that is outsourced by the Big Four and the affect it may have on audit quality.

Prem Sikka, lead author of the report, noted that sources from within Big Firms told those working on the report that up to 20% of audits, in terms of hours, were being outsourced to countries such as Bangladesh, India, Vietnam and Romania, amongst others, where the audit regulator does not have any jurisdiction.

He described them as ‘effectively call centres processing information overnight’. 

He said that once this issue was raised, those working on the report questioned Big four partners on this issue as previously they had made no mention of outsourcing audit work. Once questioned, they admitted that some of the audit work was outsourced, but that it equated for about 6% upwards of the total time spent on the full audit.

Sikka said: “There is no revelation anywhere in any audit report, any public document, what percent of audit was actually outsourced.”

The report stated: “A mechanical checklist mentality dominates within the firms to the detriment of audit quality. A culture of profit maximisation has resulted in inadequate time budgets, irregular auditing practices, offshoring (or outsourcing) of audit work and reliance upon work performed by staff not under the direct control of the firms.”

Sikka drew parallels between how outsourced audit work may be going to people who are not appropriately qualified and how the audit of BHS was conducted before it collapsed. He said: “The audit partner spent two hours on the job and the audit team on the daily basis was basically supervised by somebody with one year of post-qualification experience.”

A PwC spokesperson said: "We are committed to constantly improving audit quality. We do not outsource audit work outside of the PwC network. All work, wherever it is performed is the responsibility of the UK audit engagement leader and all of the working papers are kept on the UK audit files and are available to our regulators."

Top Content

    Addressing tax challenges and the digitisation of the economy

    As the economy becomes even more globalised through digital sources, the tax systems currently in place need to be scrutinised to examine whether they are still fit for current and emerging business models. Joe Pickard reports on the OECD’s approach to this issue.

    read more

    Primary financial statements: a game changer in reporting?

    International Accounting Standards Board chair Hans Hoogervorst delivered a speech at the Seminario International sobre NIIF y NIF, organised by the Consejo Mexicano de Normas de Información Financiera in Mexico. The Accountant presents the highlights.

    read more

    FASB readies standards for the netflix generation

    The US Financial Accounting Standards Board (FASB) has updated its accounting standard for entertainment, with a specific eye on keeping up to date with how episodic content, such as television programmes, is consumed in the modern world. Jonathan Minter reports.

    read more

    Brexit: why it takes two to tango

    Former TA editor Vincent Huck, now editor of Insurance Asset Risk, looks at why Brexit might unleash geopolitical intrigue in Europe’s accounting standard-setting scene – and why IFRS 17 will be an incredible source of opportunity for firms in the coming years.

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.