Analyse this scenario: An administrator of a leading hedge fund based in the US has a heated argument about the treatment of tax line items related to income earned by the fund. The auditor, representing one of the ‘Big Four’ audit firms is adamant that the treatment carried out by the accounting staff of the administrator is contradictory to the IFRS and US GAAP Guidelines. Both are putting forward their respective best arguments. Both have boasted about their respective experience with the Wall Street, Hedge Funds, and Fund of Funds. Interestingly, none of them has ever been to the US. The administrator is based in Pune and the auditor is based in New Delhi. Welcome to the world of offshoring in the accounting profession.
It all started with IT services. India has one of the largest IT workforces globally, providing a wide range of services to offshore clients based in the US, the UK, and other parts of the world. However, the offshoring processes in accounting and finance is nothing new. When the world witnessed a financial recession in the years 2007-08, the accounting offshore companies in India thrived on the opportunities. India has a large pool of accounting professionals. There are more than three lakh chartered accountants in India.
Ample governance professionals
Besides this, there are hundreds of thousands of MBA (Finance) professionals in the country. Also, the number of governance professionals in the country (Company Secretaries) is more than 62,000 which is the largest workforce of governance professionals in the world. The total size of the accounting industry is close to $576 billion which makes it one of the most substantial sectors in the world. The CAGR of the sector is at 0.3 per cent per annum and given the massive size, the overall growth is approximately $1.78 billion per annum, according to the Business Research Company. Even though Covid-19 has disrupted overall growth, it is anticipated that the market would recover and grow at a CAGR of 6 per cent from 2021 and reach $687.7 billion in 2023.
The trends are largely positive in the context of the US with some of the largest audit firms, hedge fund administrators, insurance companies, banking and financial services companies outsourcing financial and management accounting projects to the India-based offshore staffing firms. Another opportunity for the Indian professionals could be in form of the UK-based companies which are embracing accounting outsourcing at a fast pace, just like their US counterparts.
Standards are the best
There are different reasons for the growth of accounting professionals in India. First, the courses such as CA, CS, and CMA in India are at par with the Western counterparts. The courses are updated quite often and all the international standards are followed. Hence, offshore companies do not have to worry about the standards and quality of the financial statements and other services outsourced from India. Besides this, India has one of the largest English-speaking workforce in the world which ensures coordination between professionals and foreign-based organisations.
The large accounting and finance companies including hedge funds companies and Big Four audit firms have branch offices in the country. Companies such as Credit Suisse, Merrill Lynch, Fidelity, Morgan Stanley, Deloitte, KPMG, PwC, and E&Y have several offices in India. However, the opportunities in the future would be based on the small and medium-sized firms who would be willing to outsource the accounting services to Indian professionals.
With the improvement in information technology, fast-paced internet, enabling ecosystem, a large number of IT professionals and environment, and improvement in cloud technology the overall future of the industry would be even better in the future. The growth rate in the offshore industry has just started and the future is bright. Accounting offshoring trends for the Indian professionals would witness a significant growth in the next few years with the best in class workforce and systems present in the country.
(The writer is Co-founder and CEO, Entigrity Group.)