Off-Shoring of Tax Preparation Services by U.S. Accounting Firms: An Empirical Study (Report‪)‬

OVERVIEW For purposes of this study, off-shoring is defined as the procurement of services by CPA (certified public accounting) firms outside the United States through electronic media. The term outsourcing in this study refers to procurement of services outside the firm, but inside the U.S. A review of current literature indicates that off-shoring of accounting services has been increasing and will continue to increase in the future. A survey was conducted yielding a sample of thirty-five (achieving a twenty percent response rate from a population of 175) of the top accounting firms in seven major U.S. cities. The authors encountered resistance from several firms in obtaining information because of the sensitive nature of this topic. The most significant finding from the sample data was that an increasing trend in off-shoring was not evident. Thirty-seven percent of the responding firms off-shored only limited amounts of tax return preparation to India, a country that possesses an abundance of English-speaking, trained accountants. In making the off-shoring decision, both cost-savings and non-cost related factors played a role. Almost half of the firms reported a negative impact on the firm from the decision to offshore and most claimed to experience negligible cost-savings. More than half planned to decrease or discontinue off-shoring in the future. The increased disclosure requirements of the American Institute of Certified Public Accountants (AICPA) and various State Boards of Accountancy along with the fear of losing clients may have influenced firms' decisions not to pursue off-shoring more vigorously. In the next phase of research, intermediaries or third-party service providers identified in this study may be contacted to gain more insight into the actual and relative volume of tax work done off-shore and the future direction of off-shoring activity in accounting firms.