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Auditing of US corporations' financial books, a vital underpinning of investor confidence, increasingly relies on work carried out in India, where there is no clear system of oversight.
The US arms of the Big Four audit firms - Deloitte Touche Tohmatsu Ltd, KPMG, PricewaterhouseCoopers and Ernst & Young Global Ltd - said that work handled by Indian employees is routine and systematically sent back for review to the United States.
But some audit firms are layering on more complex tasks in the offshore centers and Indian workers are rising to senior positions in the auditing ranks, said Big Four firm employees and others in the accounting industry in India.
Given the failures of US auditors so alarmingly displayed in recent accounting problems - for instance, February's $2 million penalty against Ernst & Young over its past Medicis Pharmaceutical Corp audits - some experts said having more Indian auditors on the job may result in better audits.
Yet concern is growing that no coherent regulatory system exists to closely police the work in India, to gauge its quality, and to take action if problems should develop.
Perhaps as much as 5 percent of US audit work is presently done in India, said M.G. Fennema, an accounting professor at Florida State University who has researched offshoring. That is up from an estimated 1 to 2 percent about five years ago when the firms launched offshoring pilot projects.
"If it's done properly, it would be OK, but the risks are that work will be offshored that is beyond the training, skills and experience of the people that it's offshored to," said Douglas Carmichael, former chief auditor of the Public Company Accounting Oversight Board, or PCAOB, a US watchdog group.
Auditing is labor-intensive. In offshore centers scattered from Mumbai to Bangalore, swarms of entry-level workers review piles of documents and cross-check numbers on balance sheets. In India, many rookie accountants consider $10,000 a generous annual salary; their US peers earn five times that.
Attracted by wage savings and Indians' command of English, the US arms of the Big Four have opened offices or joint ventures in India and hired thousands of local workers to do a range of tasks, including tax, consulting and audit work.
PCAOB Chairman James Doty said offshoring helps large firms be efficient. He added: "We have to watch, to be alert for, when efficiency becomes an enemy of quality." The firms said that their offshored audit work meets the same quality standards as work done in the United States.
A PwC executive said about 4 percent of its US corporate audit work is conducted at "alternate delivery centers," located both inside and outside the United States.