Internal Controls Over Financial Reporting in the Context of Offshore Outsourcing: A Theory-Based Research Agenda

Posted: 19 Feb 2010 Last revised: 7 Mar 2015

See all articles by Partha Sarathi Mohapatra

Partha Sarathi Mohapatra

Zayed University

Li Xu

Washington State University, Vancouver

Date Written: December 31, 2009

Abstract

Auditing Standard No. 5 (AS-5) of Public Company Accounting Oversight Board (PCAOB) suggests, for organizations (user) that are outsourcing their processes to service organizations, that user management should evaluate controls at the service organization, as well as related controls at the user company, when making its assessment about internal controls over financial reporting. In spite of this directive, a number of PCAOB inspection reports find user auditors making judgment errors related to internal control reports generated by service organizations. Thus, it seems third-party internal controls seem to be a neglected area in terms of practice as well as research. Though, outsource offshoring has become a strategic business model, related internal controls issues have not been explored by academicians. This paper is an attempt to develop a research agenda that is grounded in theory, and supported by prior literature, and interviews with practitioners. The paper has implications for academicians as well as practitioners.

Keywords: Offshoring, Internal Controls, SAS 70, SSAE-16

Suggested Citation

Mohapatra, Partha Sarathi and Xu, Li, Internal Controls Over Financial Reporting in the Context of Offshore Outsourcing: A Theory-Based Research Agenda (December 31, 2009). Available at SSRN: https://ssrn.com/abstract=1554749 or http://dx.doi.org/10.2139/ssrn.1554749

Partha Sarathi Mohapatra (Contact Author)

Zayed University ( email )

Academic City
Dubai
United Arab Emirates

Li Xu

Washington State University, Vancouver ( email )

14204 NE Salmon Creek Avenue
Vancouver, WA WA 98686-9600
United States

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