External audits in an SSC environment

The growing expansion of SSCs

Many multinational organizations are expanding their use of Shared Service Centers (SSCs) to improve the efficiency and consistency of finance and accounting operations. Rather than having each local entity independently perform accounting activities, companies are increasingly centralizing these functions within regional or global service hubs.

An SSC differs from traditional outsourcing. In most cases, the SSC is an internal group function that provides standardized services across multiple legal entities. Its responsibilities may extend beyond transactional processing to include significant portions of the month-end close and financial reporting process.

Typical SSC activities include:

• Accounts payable and expense processing
• Accounts receivable and collections management
• General ledger maintenance and month-end close activities
• Payroll administration and master data management
• Intercompany transactions and account reconciliations
• Management reporting and financial statements preparation support

From a group perspective, SSCs can standardize processes, improve consistency, and create economies of scale. However, for Korean entities, the centralization of activities often results in greater complexity in financial reporting and audit processes as work locations, process owners, approvers, and supporting documentation become dispersed across different jurisdictions.
 

How the role of the Korean finance team changes

At first glance, SSC implementation may appear to reduce the workload of local finance teams. In practice, however, while manual and repetitive processing activities may decline, oversight and governance responsibilities typically increase. 

The Korean finance team often becomes responsible for:

• Monitoring the performance and quality of SSC activities
• Reviewing exceptions and resolving processing errors
• Ensuring compliance with Korean accounting, tax, and regulatory requirements
• Coordinating among headquarters, the SSC, and local business functions
• Preparing audit support and responding to auditor inquiries
• Designing and overseeing internal controls

As a result, the role of the local finance function shifts from that of a transaction processor to that of a business partner and control owner. Team members are increasingly expected to focus on analysis, review, judgement, and coordination rather than routine transaction processing. 
 

Responsibility remains with local management

Even when an SSC performs accounting activities, management of the Korean legal entity remains responsible for the entity’s financial statements and financial reporting process.

The fact that a transaction was processed by the SSC does not relieve local management of responsibility for errors, control deficiencies, or non-compliance. Effective oversight remains essential, particularly in areas such as:

• Appropriateness of payment approvals and vendor master maintenance
• Accuracy of journal entries and account classifications
• Timely resolution of outstanding reconciling items
• User access management and segregation of duties (SoD)
• Compliance with Korean tax and statutory reporting requirements
• Management of close timelines and audit deliverables

Ultimately, accountability for the accuracy and completeness of the financial statements remains with the local entity’s management.
 

The link between external audits and SSC operations

Historically, key accounting processes were largely performed within the Korean entity, allowing auditors to obtain an understanding of processes through local interviews and on-site review of supporting documentation.

In an SSC environment, however, process owners may be located overseas, and certain systems, records, and supporting documents may be maintained outside Korea. As a result, auditors must gain an understanding of both the local entity and the SSC environment to adequately assess risks and evaluate relevant controls.

Common audit considerations include:

• Who performs, reviews, and approves key transactions?
• Are roles and responsibilities clearly defined between the Korean entity and the SSC?
• Are process changes and control deficiencies communicated on time?
• Are access controls and segregation of duties appropriately designed and operating effectively?
• How does local management monitor SSC performance and retain evidence of its oversight?
• Can audit evidence be obtained on a timely basis when requested?

These considerations are increasingly important as finance processes become more centralized and geographically dispersed.
 

Common practical challenges during external audits

Differences in communication and local regulatory requirements

SSC personnel often support multiple countries simultaneously and may not be fully familiar with Korean-specific requirements, such as electronic tax invoices, withholding taxes, or employee benefit obligations. This can result in accounting adjustments, additional audit inquiries, or delays in providing supporting documentation during the audit process.

Unclear ownership and accountability

When responsibility for error correction or responses to audit questions is not clearly assigned, issues may remain unresolved for extended periods, leading to inefficiencies and increased audit risk.

Decentralized controls and documentation

Controls, supporting evidence, and system records may reside across multiple countries and platforms. This can make it more difficult for auditors to obtain a complete understanding of process flows and evaluate the effectiveness of key controls.

Time zone constraints and audit timelines

Differences in time zones and local holiday schedules can delay document requests, walkthroughs, and interviews. Advance planning becomes particularly important when statutory audit deadlines overlap with group reporting timetables.
 

The importance of auditors’ global collaboration capabilities

In an SSC environment, external audits are no longer limited to the Korean legal entity. Auditors may need to communicate directly with SSC personnel, perform interviews, evaluate controls, and obtain audit evidence from multiple jurisdictions.

For this reason, companies should consider an auditor’s ability to operate effectively in a global environment. In some cases, leveraging network firms located in the same jurisdiction as the SSC may be the most efficient approach. Local teams can perform procedures, assess controls, and share their findings with the Korean engagement team.

When selecting an auditor, organizations utilizing SSCs should consider factors beyond industry expertise and audit fees, including:

• Language capabilities and project management skills for direct communication with SSC personnel
• Experience auditing SSC environments and cross-border finance processes
• Access to network firms in the countries where SSCs are located
• Experience coordinating with group auditors and component auditors
• Ability to appropriately integrate audit procedures performed at the SSC into the local statutory audit

These capabilities can significantly improve audit efficiency, enhance communication, and reduce execution risks.
 

Preparing for an audit in an SSC environment

To facilitate a more efficient audit process, Korean entities should consider the following preparations before year-end:

• Maintain an up-to-date RACI matrix or responsibility assignment framework between the local entity and the SSC
• Document key process flows and system architectures
• Retain evidence of reconciliations, exception reviews, and management approvals
• Schedule audit interviews with SSC personnel in advance
• Track recurring local compliance issues and known control deficiencies
• Determine whether relevant SSC assurance reports or control assessment reports are available for audit reliance

Proactive preparation can help reduce delays, improve audit readiness, and support more effective coordination among all stakeholders.
 

Conclusion

The expansion of SSCs represents far more than a cost-efficiency initiative. It fundamentally changes the way finance and accounting activities are performed across an organization.

As operating models evolve, so do the requirements for external audits. Auditors must be able to understand and assess not only the Korean entity but also the broader global processes that support financial reporting. Accordingly, companies should seek auditors with the capability to communicate effectively across borders, coordinate with overseas stakeholders, and leverage global networks when necessary.

In the SSC era, the ability to audit complex, cross-border finance operations is becoming just as important as traditional audit and industry expertise.