Published Paper: Offshore Shared Services Center Usage by U.S. Big 4 Audit Engagement Teams

Publication: Journal of Accounting Research (April 2025)

Abstract: Auditors frequently outsource audit work to offshore Shared Service Centers (SSCs) to reduce costs and ease the workload burdens of audit team members. However, concerns persist about whether these benefits come at the expense of audit quality. Using proprietary audit engagement-level data, I evaluate whether greater SSC usage by Big 4 audit teams has an association with either, or both, audit quality and audit costs. I find that SSC usage is nearly universal in Big 4 audits, with the percentage of audit hours SSCs perform increasing in recent years. Consistent with the audit firm’s objectives, evidence suggests that SSC usage is associated with fewer audit hours and lower audit fees. Importantly, I find no evidence that SSC usage is associated with lower audit quality. Overall, results suggest that SSCs have the intended effect of reducing audit costs without sacrificing audit quality.

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The economic research fellows and staff economists generate high-quality working papers that inform the oversight activities of the PCAOB and are disseminated to stimulate discussion and critical comment to the benefit of the public. Working papers are preliminary materials that have not been approved by the Board and reflect only the views of the author(s).

The research topics of economic research fellows, including a description of any nonpublic data sets required for research, are presented to the Board for approval and research papers are reviewed to confirm that the topic of the paper is consistent with the researcher's proposal. That review does not, however, encompass an evaluation of the conclusions reached by researchers.