Unraveling Governance Issues in Global Sourcing of Accounting Services: A Qualitative Exploration

Introduction

Global sourcing of accounting services is expanding and has become appealing choice for many firms in order to gain access to talent, saving cost and gaining competitive advantages. Since early 1990s, various business processes have been outsourced from different parts of the world including Western Europe and the USA, to vendor firms in Asia such as India, China and Malaysia mainly because of the upgrades in international telecommunications. India remains the best location for global sourcing, followed by China and Malaysia (AT Kearney, 2021). The best locations for global sourcing are usually ranked based on the availability of talent, financial attractiveness and business environment. Recently the automation and cybersecurity factors are considered as important criteria for choosing the best location for global sourcing.

The literature in this context is sparse as previous studies have mainly focused on the risks in global sourcing of accounting services (e.g., Aman & Maelah 2011; Aron & Singh 2005; Aman & Nicholson 2009; Amirudin, Aman, Auzair, Hamzah & Maelah 2013; Fernandez & Aman, 2018). The studies investigated relational risk due to opportunistic behaviour and performance risk mainly related to unsatisfactory quality of services delivered (Aman & Maelah 2011). Other type of risks identified are related to financial security and confidentiality (Fernandez & Aman, 2018). In order to manage the above aspects of risks and achieve audit compliance, some firms in global sourcing apply migratory governance path framework (Simon, Poston & Kettinger 2009; Mayer & Phillips 2017; Blasi & Bair 2019). This is crucial especially in managing global sourcing relationships between clients and vendor at the same time for monitoring vendor’s performance. Managing relationship between client and vendors requires a formal governance process comprised of trust and transparency. On the other hand, monitoring vendor’s performance requires agreements or contracts such as Service Level Agreements (SLAs) which is competitive and meet client’s expectations. Nevertheless, there is a need to understand different types of governance mechanisms that are used in a specific context of global sourcing of accounting services. In this article, governance refers to different types of control used in order to overcome risks in global sourcing of accounting services (Mayer & Phillips 2017).

This study refers to migratory governance path framework (Simon et al., 2009) in order to understand various governance issues faced by global sourcing firms and identify mechanisms used by these firms to mitigate risks in global sourcing of accounting services. To achive this objective, two research questions were formulated as follows: 1) What are the governance issues in global accounting services? 2) How do global sourcing firms mitigate the governance issues? The research attempts to answer these questions by employing a case study approach. The following sections outline literature review and theoretical framework. The empirical study is developed from in-depth interviews with selected case study. Subsequently case study is analyzed through thematic analysis using selected theoretical framework to identify how the governance issues and provide empirical evidence of governance mechanisms used in global sourcing of accounting services. Final section provides conclusion, recommendations and avenues for future research.