UK Audit Regulator Warns That Offshore Audit Work Requires Stronger Oversight

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The UK's Financial Reporting Council (FRC) has raised concerns about the growing use of offshore audit teams by large accounting firms, warning that while global delivery models can improve efficiency, responsibility for audit quality can never be outsourced.

The comments were made in the FRC's Annual Review of Audit Quality 2026, which examined how firms are adapting to increasing workloads, skills shortages and changing business models.

A Changing Way of Working

For many years, large accounting firms have used offshore service centres—particularly in countries such as India—to perform routine audit procedures, administrative work and data processing.

Today, these teams are playing a much larger role. According to the FRC, some firms are now using offshore teams to perform work that requires significant professional judgement rather than simply carrying out routine testing. While this can help firms access specialist skills and improve efficiency, it also introduces new risks that must be carefully managed.

Why Regulators Are Concerned

The FRC says firms need to ensure that expanding offshore operations does not affect audit quality. Its concerns include:

• Effective supervision of overseas teams

• Consistent application of professional judgement

• Maintaining audit quality when key audit work is performed offshore, and

• Ensuring that engagement partners remain fully accountable for the final audit opinion.

The regulator stressed that while audit work may be shared across international teams, responsibility for the audit remains with the engagement partner and the audit firm.

Governance Matters Too

The FRC also highlighted governance concerns within some international accounting networks. During its inspections, it identified instances where overseas member firms provided non-audit services to UK audit clients without obtaining the necessary approvals. Although only a small number of cases were identified, the findings demonstrate how easily governance issues can arise when work is performed across multiple jurisdictions. As a result, the regulator has indicated that it will closely monitor how firms manage these "extended team" models over the coming year.

Lessons for Every Practice

Although the review focuses on the UK's largest accounting firms, the underlying message applies to practices of all sizes.

Many firms outsource bookkeeping, payroll, tax administration, audit support or other professional services to external providers, whether locally or internationally. Outsourcing can improve efficiency and provide access to specialist skills, but it does not transfer professional responsibility. Clients engage the firm, not the outsourced service provider, and expect the same level of quality regardless of who performs the work.

This principle is also reflected in ISQM 1, which requires firms to identify and manage quality risks arising from the use of external service providers and network resources. Firms remain responsible for ensuring that all work is appropriately supervised, reviewed and complies with professional standards.

Why This Matters

As firms increasingly adopt global and outsourced delivery models, regulators are placing greater emphasis on governance, supervision and accountability.

The FRC's review is a reminder that outsourcing is a business decision, not a transfer of responsibility. Whether work is completed in the next office or on another continent, firms remain accountable for the quality of the services they deliver.