Accounting Outsourcing Agreement
We are often asked how we can outsource accounting, so we have described below how this happens. Instead of adopting a cookie-cutter approach to complying with the law, the parties can think about which party will be able to better control changes to which laws and enforce laws in applicable jurisdictions. For example, most providers have set up shared supply centres to achieve a number of results that may include compliance with general functions such as applying a reasonable payroll tax. Some of the savings achieved by the customer by outsourcing certain research and development features are based on the use of these shared delivery centers. On the other hand, some compliance functions are better managed by modifying the client`s accounting systems. This approach allows the customer to retain the right to define its requirements and to ask the supplier to define what it can do to meet these requirements. Audit fees are an important element of any outsourcing agreement, but they become more important when the scope covers the functions of the research and development. D. The outsourcing agreement must include a strong set of audit rights, which include not only internal audit rights, but also audits by public regulators and other third parties. In the case of research and development agreements, there are generally two types of audits: (1) audits to confirm whether the supplier is meeting its contractual obligations and (2) audits related to the research and development functions themselves.
These latter audits can be considered as the same audits that the client would have to perform for the research and development functions if these functions were performed in-house. The scope of these audits focuses more on whether outsourced research and development functions are performed in accordance with GAAP and the client`s accounting methods than on the fact that the supplier is doing what it has agreed. Regardless of the type of review, however, providers may attempt to limit the amount of review assistance that is included in the base charges. In this case, the client should try to create a certain amount of audit support at a fixed price with the possibility of obtaining additional audit assistance if necessary. However, there should be an exception for reviews resulting from the supplier`s breach of its obligations. Compliance failures are a major risk in research and development subcontracting agreements. This often involves a trade-off between maintaining internal controls, which the customer relies on for research and development functions in general, and the use of internal controls that the provider has designed and implemented in its shared service distribution centres.