U.S. audit firms face skills crisis from offshoring

WASHINGTON, D.C., UNITED STATES — Audit firms are voicing concerns about the unintended consequences of offshoring on early-career auditors in the United States.

According to a recent report by the Public Company Accounting Oversight Board (PCAOB), the increasing reliance on shared service centers (SSCs) — both onshore and offshore — is diminishing foundational skills among junior auditors, potentially jeopardizing audit quality in the long term.

One respondent highlighted the issue, stating, “Our staff now will never see cash testing, as it is done offshore. We are going to see the impact of that when they are managers.” 

This reflects a broader concern that outsourcing critical entry-level tasks deprives young professionals of the essential hands-on experience needed for career advancement.

Shared service centers: A double-edged sword

SSCs have become integral to modern audit operations, handling standardized, low-risk tasks such as mathematical accuracy checks and IT control testing. While these centers improve efficiency and standardization, firms like Deloitte, EY, KPMG, PwC, BDO USA, and Grant Thornton acknowledge significant trade-offs.

According to the PCAOB report, one firm’s use of SSCs surged by 28% in 2023, accounting for 84,000 hours of work — or 6% of total audit hours. Another firm has set a goal for SSCs to handle 20% of all U.S. engagement hours. 

However, respondents raised concerns that this shift prioritizes cost savings over opportunities for junior staff to build foundational skills.

Audit quality faces long-term risks

While some respondents praised SSCs for standardizing low-judgment tasks, others warned that newer auditors may struggle with advanced responsibilities later in their careers due to a lack of basic experience. 

One firm has attempted to address this issue by sending U.S.-based auditors to SSCs for integration efforts and vice versa, but such initiatives remain limited compared to the scale of offshoring.

Profitability pressures drive offshoring decisions

Profitability metrics are often cited as a key factor driving offshoring strategies. Firms are under pressure to “get the [profit] margins right,” which frequently involves sending more work overseas. Although firms claim revenue growth is not pursued at the expense of audit quality, some respondents remain skeptical about balancing these competing priorities.

While the PCAOB’s report did not take a definitive stance on offshoring, it highlights its growing prevalence and potential risks. As firms continue to expand their reliance on SSCs, questions remain about how this trend will shape both audit quality and workforce development in the years ahead.

Best practices for effective offshoring

To mitigate risks and maximize benefits, firms should adopt the following best practices when offshoring tasks:

1. Clearly define objectives: Articulate specific goals for offshoring—such as cost reduction or efficiency improvement — and align them with long-term business strategies.
2. Conduct thorough due diligence: Evaluate potential offshore providers based on their expertise, reputation, infrastructure, and data security measures.
3. Establish robust communication channels: Regular meetings and clear communication protocols between onshore and offshore teams ensure alignment on expectations and progress.
4. Prioritize training and integration: Provide ongoing training for offshore staff and promote cross-training between teams to build collaboration and reduce skill gaps.
5. Monitor performance continuously: Use key performance indicators (KPIs) to assess offshore team performance regularly and identify areas for improvement.
6. Ensure compliance and security: Work only with vendors who adhere to stringent data protection protocols like GDPR or ISO certifications.

By following these practices, firms can balance efficiency gains with maintaining audit quality while fostering strong partnerships between onshore and offshore teams. Successful offshoring requires not just cost-cutting but also strategic planning and ongoing management to avoid long-term skill erosion among junior auditors.