Ethical Considerations of Outsourcing

by MICPA | Jun 03, 2014   ()

The AICPA’s Professional Ethics Division addressed the use of third-party providers as early as 1973 in Ethics Ruling No. 1, under the AICPA Code of Professional Conduct, Rule 1.700.001, Computer Processing of Client Returns. While that ethics ruling specifically deals with using outside services to process tax returns, it also would apply to any use of third-party providers. The ruling advises that members “must take all necessary precautions to be sure the use of outside services does not result in the release of confidential information.”

The Code also states that a member remains responsible for ensuring the accuracy and completeness of the services provided by the third-party provider. Specifically, it requires all professional services to be performed with professional competence and due professional care (see Rule 1.300.001, General Standards. Accordingly, using third-party providers to assist in performing services for clients does not in any way excuse practitioners from these or other responsibilities under the Code.

In view of these requirements, members should satisfy themselves regarding the competence, practices and procedures of any third-party provider, regardless of the type of services provided or the location at which they were performed. At a minimum, it seems advisable for members to discuss with the third party the specific controls in place to safeguard the client’s information and to assure the controls are adequate.

As part of their overall responsibility to ensure that all professional services are performed with professional competence and due professional care, members are responsible for adequate supervision of all such professional services. The member should review all work performed by a third-party provider since he or she will remain fully responsible for the accuracy and completeness of the services provided. Should a question be raised regarding compliance with professional responsibilities, including those discussed above, a member’s position may be stronger with proof of taking reasonable steps to meet those obligations.

The Code does not require members to advise clients regarding their use of a third-party provider. Therefore, advising the client of such use is at the sole discretion of the member unless the client questions the member regarding such practice. However, whether or nor clients are advised of the use of third-party providers, members are not relieved of their responsibilities to comply with the Code as outlined above.

Source: Journal of Accountancy

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