The twentieth century saw dramatic changes in the nature of national and global competition in many industries. In the past transportation costs, trade barriers, and communication limitations meant that most industries were organized on a national basis with minimal cross-border activity. Now, many industries have been transformed, and firms compete globally in industries where most national boundaries are transparent. These trends have been captured in research studies (Bartlett & Ghoshal, 1998), and popularized in the trade press (Friedman, 2005). While globalization happened faster in some industries than others, and competition evolved in unique ways as a result differing structural characteristics, few industries have been unaffected by globalization. One industry that has remained very much influenced by national boundaries is public accounting. The recent development of international accounting standards, the trend towards listing equities on multiple exchanges, and the increasing prevalence of electronic accounting data, are among the factors that are now facilitating a globalization of the accounting industry. Although the largest accounting firms have operated across many countries for decades, in practice local partnerships have been semi-autonomous entities that focused on the domestic market while facilitating the audit, tax, and consulting needs of multinational companies. In many ways this was similar to how IBM, other computer companies, and software consulting firms operated prior to the development of the internet. In these industries, local sales, service, support, and software development teams worked closely with local companies to develop specific solutions for each client's unique needs, even if they were part of a multinational corporation. Similar to other industries, the accounting industry may experience changes in competition, organizational form, and distribution of work in the coming decade. More specifically, national offices are likely to become less autonomous, and certain tasks will be performed by employees or contractors who might be located anywhere in the world.
HOW GLOBAL IS THE PUBLIC ACCOUNTING INDUSTRY?
Large companies operating in multiple countries have responded to the increasing flatness of the global economy in many ways (Friedman, 2005). In the world of financial reporting, however, a variety of regulatory forces seem to have constrained responses by large public accounting firms. While the largest public accounting firms, known as the "big four," are global organizations, they are organized as networks of national affiliates rather than as truly integrated global firms. One reason for this organizational form has been the national regulatory environments within which public accounting firms operate. Historically, national accounting standards, auditing standards, and security regulations made it difficult or impossible for public accountants from one country to have the appropriate expertise and/or mandated certifications to effectively function in other countries. Hence the structure of the worldwide accounting industry was one where there were a number of individual nationally-based industries, each with its own unique characteristics, competitors, and regulatory structure. As their clients (corporations) expanded internationally, however, accounting firms began to affiliate with independent accounting firms in other countries. Gradually these firms came to operate under similar "brand names," and evolved into network structures of interdependent, yet fairly autonomous entities.
Nevertheless, there are signs that public accounting firms are now shifting their organizations and human resource management approaches. For some time, U.S. corporations have outsourced a number of functions to lower cost environments such as India. Work that is commonly outsourced offshore includes service work such as customer service, bookkeeping, information systems management, and accounting. …