QUESTION NO. 2:
As the company is investigating and considering growth opportunities and different platforms to which they apply their energy and employ their workforce to attain the success objectives. As the company has suffered many dilemmas and gone through various strategical changes I the organization, the company is now considering the best new market opportunity to grow and to expand the current range of services by starting any new business venture or exploring thedifferent market opportunity.
After the promulgation of law i.e. known as Sarbanes-Oxley Act, American public companies are required by law to account for the internal controls of the company and their operations in the company related to financial practices and policy making. By that law, the annual reports are required to be filed after the internal control assessing measures. By this law, the companyneedsto perform the internal audits of their financial practices and document their current system and changes that they have made over time. ExlService is in the process of considering new ventures and considers this business appropriate to be combined with BPO service to create additional advantages. The decision of offering internal audit services is not appropriate because of the nature of the service, other reasons that contribute to the inappropriateness of decision are:
- EXLSERVICE has expert staff, but the opening of internal audit services requires additional training and expertise to run the business Moreover, training and trainers require additional cost to incur. This additional cost of training is ongoing as the changes in any GAAP require additional training for grasping the core concept and making it useable during audit accordingly. Trainers are also expert and if they are hired on full-time basis company could suffer high costs. SarbOx work requires such expertise and training that currently the employees at ExlService do not have.
- The ExlService work and the process management is done from India, and most of the SarbOx work i.e. 80% related to auditing requires to be done on site, most of the companies residing in U.S. i.e. their control and management was in U.S. so only 20 % work can be assigned to employees in
- Additional workforce cost could be incurred if thecompany goes for this business, linguistic and other cultural barriers would also hinder the performance of the company.
- Hundred percent of BPO work is done by employees from India, the compensation for the employees dealing in SarbOx business would also become a point of concern for the company.
- SarbOx business has seasonal nature, the anticipation of the company is that it would not be profitable and adds to cost more than if it would add to profits. The internal audit department works during the third and fourth fiscal quarters and stays redundant during other two quarters.
- The cost of the internal audit is also not easily ascertainable for the company in the beginning.
By considering the above factors, it would not be advisable to start internal audit services business as the outcome is not certain and not goes for thecompany……………….
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