Offshoring of Audit Work in Australia: Preliminary Insights from Literature and Interviews

Abstract

Addressing a gap in research, this study explores the issue of offshoring audit work in Australia. We conduct a review of extant largely US-based literature and interviews with auditors at Australian firms to understand the extent of offshoring activity, the drivers of the decision to offshore audit work, the perceived benefits, the risks, and the impact upon audit quality. We find that offshoring is pervasive amongst large audit firms in Australia, whereas smaller audit firms are not engaging in the activity. The main drivers of offshoring audit work are cost savings and staff availability, stemming from the underlying pressure to maintain audit fees while continuing to deliver excellent service. While the quality of work performed offshore is perceived by some auditors to be of lower standard and those not offshoring, this potential risk is outweighed by the cost savings which then enables firms to increase the review of work performed offshore while still improving profitability.

Keywords: offshoring, outsourcing, audit