December 2012 Issue 520 www.InternationalAccountingBulletin.com A light in the dark How the profession can illuminate the potential of UK business

●●SEC steps up China audit work paper dispute ●●The accounting profession’s top 50 influencers ●●Industry comment: Understand your global clients International Accounting Bulletin Awards 2013

14th of March, Moorgate Place, London

Sponsored by :

Nominations are now open for the International Accounting Bulletin Awards 2013.

The event showcases individuals and companies that have delivered excellence throughout the year.

Nominations close January 30th 2013 and nalists will be announced February 2013.

This is a great opportunity to build new contacts and celebrate the best in the industry.

Don't miss your chance to be recognised as a leader within the accounting industry

For more information and to nominate please visit www.internationalaccountingbulletin.com Or email [email protected]

“We have a very strong connection to the accounting industry and this gives us a great platform to recognise high achievers and innovation”

'Fred Crawley, Asset Finance and Accounting Group Editor International Accounting Bulletin editor’s letter International Accounting Bulletin Awards 2013 CONTENTS

14th of March, Moorgate Place, London News 02-03 A turbulent year

■ Judge rules in Deloitte’s favour in Longtop case ■ BDO International revenues up 14% Sponsored by : nother 12 months have flown by Nevertheless, as UK firm leaders state unani- ■ SEC steps up China audit work paper dispute and here we are again – rushing to mously, the profession has a vital role to play ■ HP shareholders sue directors, get our last-minute shopping done in restoring public confidence in business. KPMG and Deloitte and get our affairs in order for the Restoring trust in financial institutions and A enabling business growth is priority num- Christmas break and the start of the New comment 04-05 Nominations are now open for the International Year. Reflections on the shape of the global ber one – but until that happy situation is 04: jane howard, wragge & co profession will largely be left for our Janu- reached the profession must take its share of Accounting Bulletin Awards 2013. ary issue and its World Survey, but one can- knocks. 05: philip Coleman, RSM Tenon not avoid a certain degree of reflection in December. The event showcases individuals and companies POWER 50 06-13 Looking back at the past year, it’s fair to Closer to home that have delivered excellence throughout the say the period has been both eventful and Looking inwards for a moment, 2012 was a Leaders from professional bodies, turbulent for accounting firms globally. year in which IAB made some big steps. We firms, standards setters and regula- year. tors are among the 50 most influential Focusing on the UK market (see page 14-22) held our inaugural awards event in Q1 and people in the accounting profession. several things spring immediately to mind: – given the industry reaction – decided to International Accounting Bulletin and sister publication The Accountant have the Competition Commission investigation; repeat the experience in 2013. May I remind compiled the only truly global list of trouble at RSM Tenon and consequent inves- readers that to do so, we will need you to Nominations close January 30th 2013 and top influencers tigation of its auditor PwC by the Financial nominate outstanding firms and individuals nalists will be announced February 2013. Reporting Council; BDO UK and PKF’s to us before 30 January. imminent merger; and innumerable busi- We also teamed up with publishing and country survey 14-22 ness challenges related to the state of the UK data provider Timetric, making us part of a This is a great opportunity to build new contacts economy. If 2012 has been a restful year for bigger family and giving us a lot of options and celebrate the best in the industry. 14-22: UK any firm leaders, I’m sure the rest would love in terms of developing our content. To this Despite a recent growing in the UK to know their secret. end we have recently launched a new-look accountancy market, UK professional The past month alone has brought to website, as well as an upgraded version of services firms are bracing themselves Don't miss your chance to be recognised as a for slowing growth and other hurdles. light several news stories likely to fill IAB our data tool International Accounting Intel- Ana Gyorkos speaks to UK firm lead- headlines in the year to come. While the ligence, featuring a comparison report tool ers about maintaining the reputation leader within the accounting industry of the profession and helping clients litigation environment has been relatively and an all-web platform. through difficult economic times. quiet through the year, the past few weeks Later on down the line, we’re looking at have seen a surge of litigation involving even more possibilities for the way we gather For more information and to nominate please accounting firms. First, KPMG and Deloitte and publish data – so watch this space. In were named in a suit by Hewlett-Packard’s the meantime, we’ve created an online entry visit www.internationalaccountingbulletin.com shareholders over accounting errors leading form for World Survey data, which you will Or email [email protected] to controversy over the price of acquisition hopefully have found makes participation target Autonomy. Then, Ernst & Young in easier. Editorial Advisory Board Canada agreed to a record settlement of There have also been some changes on our Frank Arford, Crowe Horwath International CEO Kevin Arnold, Nexia International executive $117m over its audit of Chinese timber firm team and as I write my fifth editor’s letter director Sino-Forest Corp – despite denying liability. I would like to thank you all for the sup- Geoff Barnes, Baker Tilly International president and CEO Then we saw the US Securities and Exchange port you have given me through the past few Graeme Gordon, Praxity executive director Commission start an administrative proce- months. I hope in 2013 we will continue our Stephen Jacobs, INPACT International president Jon Lisby, Kreston International executive dure against the Big Four and BDO for not good relationship, and that you’ll help us director disclosing documents related to Chinese make IAB even better. James Mendelssohn, MSI Global Alliance CEO “We have a very strong connection to the Christian Mouillon, Ernst & Young global vice- companies listed in the US. The IAB team wishes you a Merry Christ- chair, assurance As public and political frustration mas and a happy New Year. accounting industry and this gives us a great Ed Nusbaum, Grant Thornton International CEO with the economic situation continues to Michael Reiss von Filski, Geneva Group Inter- platform to recognise high achievers and national CEO simmer globally, more litigation and Ana Gyrokos Liza Robbins, Morison International CEO regulatory intervention can be expected. [email protected] innovation” Martin van Roekel, BDO International CEO Jean Stephens, RSM International CEO Robert Tautges, HLB International CEO 'Fred Crawley, Asset Finance and Accounting Group Editor Pauline Wallace, PwC head of public policy and regulatory affairs

www.InternationalAccountingBulletin.com December 2012 y 1 news round-up International Accounting Bulletin

IAB Online - DECEMBER news round-up Top 5 articles US BDO International said the fastest- this month’s debate was cut short BDO International revenues up Judge rules in Deloitte’s growing region for the firm was the final document is likely to be 14%. favour in Longtop case Asia-Pacific with fee income delayed until early next year, with A US district judge has rejected up 48%. Driving this increase the vote on the final document HP shareholders sue directors, claims that Deloitte Shanghai were acquisitions made in Japan expected in February next year. KPMG and Deloitte. misled Longtop Financial and Australia, where BDO took Initially the vote was scheduled for Anglo Irish to sue E&Y over Technologies’ shareholders by over PKF’s offices in Brisbane, December. auditing failures. certifying the company’s books. Melbourne and New South Wales. Longtop, the US-listed Chinese Recently BDO International UK E&Y defends Olam audit opinion. software company, has been at the announced it will merge with PKF PwC dropped by RSM SEC steps up China audit work centre of an accounting scandal UK and parts of PKF China, moves in aftermath of audit paper dispute. since Deloitte quit as the company’s which are expected to boost controversy auditor last year, when it discovered revenues for the current fiscal year. RSM Tenon is to appoint a new Most re-tweeted article Longtop had falsified financial auditor, after 64% of shareholders EUROPE at the firm’s AGM voted against HP shareholders sue directors, records following short-seller Citron KPMG and Deloitte. Research’s report questioning Juri struggles to agree on retaining PwC UK. Longtop’s high margins. audit reform The firm expects new auditors to Longtop shareholders alleged A meeting of the European be appointed before the 30 June that, had Deloitte audited Longtop Parliament Committee on Legal 2013 year end. Speculation over Read in 151 countries to generally accepted auditing Affairs (Juri) revealed conflicting RSM Tenon’s choice of auditor standards, it would have found the amendments to the draft audit has been rife since errors in its UK 28% company’s financial statements did market regulation document accounts led to a restatement of its US 14% not fairly represent its business and published by the committee’s annual report. In its annual report Australia 5% operations. rapporteur Sajjad Karim in for the year to 30 June 2012, RSM India 4% However, in her 40-page opinion, September. Tenon restated the previous year’s South Africa 4% US District Judge Shira Scheindlin The main areas of friction are underlying operating profit as Other 55% rejected these claims, instead around some of the key areas £18.5m, when it had been originally arguing that Longtop had “duped” such as the provision of non-audit reported as £30.1m. While some of Deloitte, as Deloitte had argued in services and mandatory rotation. the discrepancy was due to planned its resignation letter in 2011. Karim said there are five key business divestitures and a change points that still need further to accounting policy, a significant GLOBAL debate before a compromise can proportion was due to material BDO International revenues be reached within the committee, errors in accounts. Consequent up 14% including the definition of a to this, the figure for underlying BDO International has reported public interest entity (PIE), the operating profit in 2012 was a revenues of $6.01bn for the year content of the audit report, the loss of £8.9m, while management ending 30 September 2012, up 14% provision of non-audit services, the estimates prior to the realisation year-on-year. appointment and reappointment of of accounting errors had projected In euros, BDO International earned the auditor of PIEs or the so-called a marginal profit. The discovery of Join our online community €4.6bn, up 6% on the previous mandatory rotation, and the legal the material errors led to a major year. The reported revenues include form of the proposals. restructure of the firm e months LinkedIn Group exclusive members in the US, as In response to Karim’s report 900 leading up to the firm including World Accounting well as Spanish firms’ alliances. amendments were submitted and as 10% staff cut. Intelligence

Twitter WAI_News movers & shakers

Facebook page PwC has reappointed Dennis Detroit office in 1974. the job. World Accounting Nally (pictured) as the Nally said he was “honoured” by She will be replaced by Elisse Intelligence global chairman of the decision and that he Walter, who is currently an SEC the firm. was “gratified to have commissioner. This is Nally’s the confidence of Scan our QR code for quick second PwC member firm Former Securities and Exchange smartphone access to IAB consecutive partners around Commission chief accountant term as the world.” James Kroeker has joined chairman and Deloitte US as deputy managing will start on partner of the firm’s professional 1 July 2013. Mary Schapiro practice. Nally has has stepped down Kroeker has worked for the Big worked in as chairman of the Four firm prior to taking the job various client US Securities and at the SEC and his appointment and leadership roles Exchange Commission is subject to Deloitte US board at the firm since joining its (SEC), after nearly four years in approval.

2 y December 2012 www.InternationalAccountingBulletin.com International Accounting Bulletin Analysis news

SEC steps up China audit work paper dispute

he US Securities and Exchange Com- making efforts for the past several months tries have not yet been able to find common mission (SEC) has begun adminis- to obtain documents from these firms. The ground on these issues, we remain hopeful trative procedures against all Big audit materials are being sought as part of that a diplomatic agreement can be reached, Four firms in China, as well as BDO SEC investigations into potential wrongdo- and we stand ready to assist that effort in T ing by nine China-based companies whose China, for refusing to produce audit work any way we can,” Deloitte said. papers and other documents related to securities are publicly traded in the US and The SEC and the Chinese government China-based companies under investigation the audit firms are said to have refused to have failed to agree on putting mutual by the SEC for potential accounting fraud cooperate in the investigations. inspections in place with negotiation said to against US investors. “Only with access to work papers of for- be taking place. The SEC charged Deloitte Touche Tohm- eign public accounting firms can the Secu- PwC China said the action by the SEC is atsu Certified Public Accountants, Ernst & rities and Exchange Commission test the the result of conflicting laws between the Young Hua Ming, KPMG Huazhen (Special quality of the underlying audits and protect US and China. The firm emphasised its obli- General Partnership) and Pricewaterhouse- investors from the dangers of accounting gation to comply with its legal obligations Coopers Zhong Tian CPAs, as well as BDO fraud,” said Robert Khuzami, director of under China law. China Dahua, with violating the SEC Act the SEC’s enforcement division. “This action involves an issue that needs to and the Sarbanes-Oxley Act. An administrative law judge will schedule be resolved between the US and China regula- The SEC and Sarbanes-Oxley Acts require a hearing and determine the appropriate tors as it impacts all audit firms in China serv- foreign public accounting firms to provide remedial sanction against the firms. The ing clients who are registered with the SEC. the SEC upon request with audit work judge has to issue an initial decision no later PwC China hopes for continuing dialogue papers involving any company trading on than 300 days from the date of service of between those two parties to resolve the US markets. the order. matter.” Earlier in the year the SEC began such pro- KPMG said that it remains hopeful that ceedings against Deloitte, but dropped the Firms’ response the ongoing discussions between US and order later on. Deloitte said in a statement that the SEC’s Chinese regulators will result in a positive In the past, accounting firms have said proceedings confirm that the issue of docu- diplomatic resolution. they are unable to provide such documents, ment release by Chinese accounting firms to Deloitte’s and Ernst &Young’s statements as by doing so they would be violating foreign regulators is a matter that needs to were in the same vein calling for an agree- Chinese secrecy rules. be resolved on a profession-wide basis. ment on mutual oversight and diplomatic The SEC said its investigators have been “While it is unfortunate that the two coun- agreement. <

HP shareholders sue directors, KPMG and Deloitte

Hewlett-Packard’s (HP) shareholders are ing improprieties and misrepresentations” any greater detail without HP’s consent.” suing its directors, as well as KPMG and had led to HP having to write off $5bn Deloitte UK said last week that it was Deloitte, over alleged mis-statements related from the acquisition. not engaged by either HP or Autonomy to to the acquisition of UK software company In response to the suit KPMG said: “The provide any due diligence in relation to the Autonomy in 2011. claims made against KPMG are based on acquisition. KPMG and Deloitte were both involved incorrect understandings about the firm’s The firm stated: “Deloitte UK was audi- as advisor on the deal between HP and role in this matter and are without merit. tor to Autonomy at the time of its acqui - Autonomy worth $11.1bn. KPMG was not engaged by HP to perform sition by HP. Deloitte’s most recent audit The suit, filed at San Jose Federal Court any audit work on this matter. opinion on Autonomy’s financial state - in California, seeks unspecified damages “The firm’s only role was to provide a ments was for the year ended 31 December and corporate governance reforms based limited set of non-audit related services. 2010 and was signed in February 2011. on claims of financial mis-statements, KPMG did not audit or oversee the work “Deloitte categorically denies that it had breaches of fiduciary duties, waste of being questioned regarding Deloitte’s any knowledge of any accounting impro- corporate assets, unjust enrichment and audit of Autonomy, nor did KPMG review prieties or misrepresentations in Autono- negligence. Deloitte’s work papers as part of this my’s financial statements. We conducted The action follows HP’s announcement engagement. Within the narrow scope of our audit work in full compliance with reg- that, following an internal investigation by non-audit tasks KPMG did perform, we ulation and professional standards. We are PwC, the company discovered that Auton- can say with confidence that we acted unable to discuss our audit work further omy inflated its financial accounts before responsibly and with integrity. Our profes- due to client confidentiality. We will coop- the sale. sional obligations and client confidential- erate with the relevant authorities with any HP said: “A serious number of account- ity agreements prevent us from speaking in investigations into these allegations.” <

www.InternationalAccountingBulletin.com December 2012 y 3 comment Jane Howard, Wragge & co International Accounting Bulletin

Legal Professional Privilege – will its scope be extended? ast month saw the long-awaited hear- Prudential’s accountants was subject to LPP to be extended to members of other profes- ing by the Supreme Court of the case of and Prudential sought judicial review of the sions who gave legal advice, serious questions R (on the application of Prudential Plc decision. would then arise as to its scope and applica- and another) v Special Commissioner Prudential argued that the advice it had tion. As a result, the Court of Appeal found L received was legal advice and, as such, it that any extension to the LPP rule could only of Income Tax and another (2010) EWCA Civ 1094. should be protected by LPP. It should not be considered by Parliament. The Court of Appeal’s decision in October matter whether the advice came from its Prudential appealed to the Supreme Court 2010 rejected arguments that legal profes- accountants rather than its lawyers. The and, such is the importance of the issue to sional privilege (LPP) should be extended status of the adviser should not be the deci- be determined, the Institute of Chartered to cover communications between a client sive factor; what was important was the fact Accountants in England and Wales, the Gen- and its accountants which sought and gave that it was legal advice and therefore the very eral Council of the Bar and the Law Society legal advice on tax issues. Prudential had type of advice that should be covered by LPP. were all given permission to intervene. Rep- attempted to avoid disclosure (under section The court at first instance refused the resentatives for all parties appeared before 20 of the Taxes Management Act 1970) of application for judicial review and the Court the seven-member panel of the Supreme advice it had obtained on tax matters, on of Appeal subsequently affirmed that deci- Court on 5 November. The decision is the basis that the advice was subject to LPP. sion. The Court of Appeal confirmed that expected early in the New Year and will be This included advice it had received from its LPP did not apply at common law to any eagerly awaited by all. Watch this space… lawyers and its accountants. HMRC and professional other than a qualified lawyer. It the Special Commissioner of Income Tax was the essence of the rule that it should be ❙ Jane Howard is a partner in the profession- did not accept that the advice received from clear and certain in its application. If it was al liability group at Wragge & Co

4 y December 2012 www.InternationalAccountingBulletin.com

NO116_MagTheAccountant152x210_V2PR.indd 1 31/03/11 4:48 PM International Accounting Bulletin philip Coleman, RSM Tenon comment

Understand your global clients

he UK Competition Commission is Until regulators can all agree on one set reviewing the UK’s listed company of globally accepted regulations, the glob- audit market. Among its working al auditor will need to have information papers is a document considering regarding these differences in regulation to T hand in language understandable to clients. the merits and otherwise of international networks, since all the major UK and inter- Additionally, the effective global auditor national audit and accountancy practices needs to pay great attention to culture, lan- are part of global networks. guage and practice, both within the client One of the more interesting observa - organisation and within the cross-border tions in that paper is that “International audit teams. professional service networks have histori- Again, Dohrer adds that while differ - cally developed from a single firm’s need ences in regulation are difficult enough to to service existing clients that expanded comprehend, the risk of misunderstanding overseas, and have since grown as newly is multiplied when those differences need created overseas offices became legally to be explained and understood in a variety independent firms.” of languages and cultures. It is a recognised fact that professional In many cases, the way something is said ■ Philip Coleman, RSM Tenon. services firms exist to serve their clients, or how it is said can be more meaningful but if the global networks exist and have than the words that are used, and this is developed to serve their global clients, easily lost in cold email traffic, technical what are the implications? or complex group instructions and out-of- The standard-setters’ response, at a hours’ conference calls. global level, has been the development of Registration and understanding The global auditor also has to pay spe - ISA 600 and its more recent US equivalent, Clearly, geography and regulation play sig- cific attention to group legal structures and AU-C 600, addressing the unique aspects nificant roles. In most countries, the ability understand the differences between legal of group audits. to audit an entity is based on the need for and management structures. registration in that jurisdiction and having Legal structures are usually based on Standards a strong understanding of local laws and tax efficiency – observe Amazon – while Over the past two to three years, these key regulations. One also needs to be able to the way in which the group is run may be standards have reversed the traditional deploy resources cost-effectively and there- totally different. concept of “the group auditor” in pull - fore “troops on the ground” are helpful. A global auditor has to report to “those ing together a disparate collection of audit While this is also true of an effective charged with governance”, but also has to work that ticked local boxes and added up business client, the registration footprint recognise the importance of the manage- to “enough coverage across the group”. is more specific to the audit network and ment team that actually runs the business. The role now is clearly focused on being can often be misunderstood by clients who If group structures don’t always reflect the auditor of the consolidated financial believe that global audit firms are one a tidy and neat hierarchy of entities rising statements, with risks and responses col - group, like a commercial business, and not in a regular pyramid, understanding the lated and played out at group level and key a network of individual businesses who are innate complexity of the audit client and aspects of the work effectively assigned to independent of one another. the implications for audit processes across those troops on the ground. Regulatory differences often cause issues borders is a key skill in an effective audit of International professional service net- on the scope and cost of compliance. In group financial statements. works were born of a need and desire to jurisdictions where audit exemption is serve their clients. the norm, understanding the compliance Globalisation Obstacles and challenges in serving requirements of universal or widespread Events or practices that can manifest global clients exist due to a variety in how audit requirements – and the not insubstan- themselves as relatively small matters in clients are structured, added complex - tial cost, both internally and externally – a particular territory can rise unchecked ity from varying local regulation, and can be a problem. to cause issues at the global level, espe - underlying these obstacles are cultural Bob Dohrer, RSM’s global leader – cially where they arise from factors which differences. In order to provide excep - quality and risk, observes that the rate of are acceptable in one territory but not in tional service to clients, knowing and growth in these regulatory differences is others. understanding your global client has never accelerating as regulators around the world The globalisation of regulation, such as been more important than it is today. engage in what seems to be a game of one- the Foreign Corrupt Practices Act and the upmanship where no regulator wants to be UK Bribery Act, has made the audit pro - ❙ Philip Coleman is an audit partner at seen as being more lenient than another. cess more global in its approach. RSM.

www.InternationalAccountingBulletin.com December 2012 y 5 feature POwer 50 International Accounting Bulletin

Top influencers in the profession Leaders from professional bodies, firms, standard-setters and regulators are among the 50 most influential people in the accounting profession.International Accounting Bulletin and sister publication The Accountant has compiled the only truly global list of top influencers

veryone from politicians, regulators sector financial reporting at the top of its n TOP 50 and firm leaders, to professional agenda in the past year particularly as the body chiefs, standard-setters and soverign debt crisis has become more preva- List of judges chief financial officers have made lent. Ball has urged the G20 to take action Sue Almond, technical director, E Association of Chartered Certified it onto International Accounting Bulletin’s against current inconsistent and unreliable Accountants (ACCA) and sister publication the The Accountant’s reporting. J Kevin McGrath, chief executive,Crowe 2012 Power 50, which lists the accounting Horwath International profession most influential individuals. Name: James Doty Dan Noll, director of accounting standards, We whittled down a list of more than 100 Nationality: American Institute of Certified Public high-flyers with the help of seven expert American Accountants judges to come up with our top 50. The list Organisation: Public Liza Robbins, chief executive, Morison International is broken down into five categories of influ- Company Account- Pablo San Martin, chief executive, SMS ence: the top 10, 11 to 20, 21 to 30, 31-40 ing Oversight Board Latinoamerica and 41-50. (PCAOB) Naomi Smith, technical expert in However, within those categories the list is Job title: Chairman management accounting, Chartered not ranked only alphabetised. Under Doty’s leadership the PCAOB has Institute of Management Accountants finally made progress with Chinese regula- Pauline Wallace, head of UK public policy Top 10 tors securing observational visits to build up and regulatory affairs, PwC UK < mutual trust in 2012. Name: Hans He has also been instrumental in examin- the agency has become better at pursuing Hoogervorst ing ways to improve auditor independence, tips and complaints, identifying wrongdo- Nationality: Dutch objectivity, and professional scepticism such ers and inspecting financial firms. She also Organisation: as through mandatory audit firm rotation. improved stakeholder engagement and International In the past year, on the back of this, the enforced exchanges to create consolidated Accounting Stan- oversight board conducted numerous round audit trails to enable the SEC to reconstruct dards Board (IASB) tables across the US to gather feedback. It trading across various trading venues. Job title: Chairman also adopted an audit committee communi- Schapiro will be replaced by SEC commis- In the past year, Hoogervorst has continued cation standard ensuring more meaningful sioner Elisse Walter. to champion the IASB’s goal of creating dialogue between auditors and audit com- a single global accounting language, with mittees to improve the quality of audits. Name: Russia most recently adopting IFRS in full. Michel Barnier During the year, the board successfully re- Name: Nationality: French exposed IFRS 9 and IFRS 8 as well as the Mary Schapiro Organisation: Euro- insurance standard. However, recently, some Nationality: pean Commission convergence projects with the US Financial American Job title: Internal Accounting Standards Board have broken Organisation: market and servic- down. There are also some important mar- US Securities and es commissioner kets yet to adopt IFRS, including the US, Exchange Commis- Barnier’s ‘controversial’ EU audit reform China, India and Japan. sion (SEC) proposals, such as mandatory audit firm Job title: rotation and restrictions on non-audit servic- Name: Ian Ball Former chairman es have continued to make waves across the Nationality: Schapiro, who stepped down as SEC chair- region and internationally during the year. American man in November after nearly four years in In 2012, the proposals landed in the laps Organisation: Inter- the job, had a busy last year with the fate of of EU Parliament (EP) committees like the EP national Federation the regulator hanging in the balance and the Committee on Legal Affairs (Juri) to begin of Accountants US capital markets in tumult. their assessment – and the debate, as well (IFAC) Despite not successfully finalising a deci- as lobbying from accounting firms, remains Job title: CEO sion on IFRS adoption for the country during fierce. Barnier’s proposals have also led to Under Ball’s leadership IFAC has put public her tenure, one of the longest in SEC history, the Dutch Government considering early

6 y December 2012 www.InternationalAccountingBulletin.com International Accounting Bulletin POwer 50 feature

adoption in the Netherlands, which, if signed Name: Sarah, Name: into law, could act as a catalyst for other Baroness Hogg Cindy Fornelli European countries to follow suit. Nationality: British Nationality: Organisation: UK American Name: Michel Prada Financial Reporting Organisation: Nationality: French Council (FRC) US Centre for Audit Organisation: IFRS Job title: Chairman Quality (CAQ) Foundation In the past year, under Hogg’s chairmanship, Job title: Job title: Chairman the FRC was given the green light to reform Executive director Michel Prada, chairman of the IFRS Foun- its ‘outdated’ structure. It also completed proj- Under the executive directorship of Fornelli, dation since the beginning of 2012, has ects to update the UK Corporate Governance a well-reputed commentator on audit policy committed himself to improving the stan- and Stewardship codes and issued the first and a corporate governance champion in dard-setting process and promoting IFRS. two accounting standards as part of its steps the US, the CAQ issued a guide on US Pub- He also greatly contributed to business to replace the current UK GAAP reporting lic Company Accounting Oversight Board expansion of IFRS into Asia-Oceania. framework. inspections of public company auditing firms in the past year. Name: Paul Beswick Name: The body continues to influence the US Nationality: Stephen Hadrill audit market with Fornelli, who is also a American Nationality: British member of the Financial Accounting Stan- Organisation: Organisation: UK dards Advisory Council, at the helm. US Securities and Financial Reporting Exchange Commis- Council (FRC) Name: Helen Brand sion (SEC) Job title: CEO Nationality: British Job title: Acting Organisation: chief accountant Association of Acting chief accountant at the US SEC since Haddrill, FRC chief executive since 2009, Chartered Certi- July, Beswick, the former deputing chief supported the regulator’s strategy to reform fied Accountants accountant, is overseeing accounting inter- its structure. (ACCA) pretations, international accounting matters He is an avid UK commentator on Job title: and professional practice issues. transparency, regulation and the qual- Chief executive He was part of the team that put together ity of reporting, most recently criticis- Brand has been continued to drive the insti- this year’s final staff report on the work plan ing the European Commission’s audit tute’s global relationships and push for the towards global accounting standards, but reform proposals as ‘damaging to audit’. development of better education and train- which didn’t offer an opinion on whether ing in the accountancy profession in the past IFRS should be adopted in the US. 11-20 year. Under her leadership, the ACCA became Name: Name: the first professional accounting body to Paul Druckman Barry Melancon issue an integrated report publicly. Nationality: British Nationality: Organisation: American Name: International Inte- Organisation: Ian Mackintosh grated Reporting American Institute Nationality: Council (IIRC) of Certified Pub- New Zealand Job title: CEO lic Accountants Organisation: Druckman has jumped into the top 10 this (AICPA) International year due to his high-profile work in spread- Job title: President Accounting Stan- ing the word of integrated reporting (IR) and and chief executive dards Board (IASB) specifically the IIRC’s creation of the world’s Under Melancon’s leadership, AICPA, the Job title: first IR framework. world’s largest accounting institute, launched Vice-chairman He has spent the majority of the year trav- the first global management accounting des- elling across the globe engaging with a vari- ignation – CGMA – jointly with the UK’s ety of stakeholders. Chartered Institute of Management Accoun- Ian Mackintosh was appointed vice- Under his leadership the IIRC issued a tants in 2012. chairman in July 2011 and has since contin- prototype of the IR framework in Novem- This follows a growing trend of consoli- ued to support the development of the IFRS ber and is on track to issue a draft of the dation among professional bodies to serve conceptual framework and the global push framework in April 2013 followed by the better an increasingly international member for IFRS to become the single global account- final version 1.0 in December 2013. base and be heard on the global stage. ing language.

www.InternationalAccountingBulletin.com December 2012 y 7 Cfeoauntutryre survey POWER 50 International Accounting Bulletin

4 Name: James Turley profession’s most influential people. Name: Nationality: His work on corporate governance, via Barry Salzberg American the King Reports on Corporate Governance, Nationality: Organisation: in South Africa continues to influence other American Ernst & Young (E&Y) markets across other parts of the world and Organisation: global he continues to inspire the next generation Deloitte global Job title: Chairman through his professorship at the University of Job title: and chief executive South Africa in the College of Economic and Chief executive Turley, who will step down in mid-2013 after Management Sciences with a focus on Corpo- Long-time Deloitte employee, Salzberg, who 11 years as chairman and chief executive, has rate Citizenship. began his career with the Big Four firm in led the global network, which has grown by 1977, has once again ensured the world’s 8% in the past year despite continued hard- Name: Mervyn King second-largest professional services firm ships during the global financial crisis. Nationality: British sustained good growth with a 9% increase However, the year was somewhat marred Organisation: Bank in global revenues for the year to September as Turley was made to defend E&Y’s audit of of England 2012. defunct Lehman Brothers after a lawsuit was Job title: Governor In the past year, he was also appointed a filed against the Big Four firm. New York King, who is due to step down in 2013, has trustee of the IFRS Foundation. attorney general Andrew Cuomo alleged been Governor of the Bank of England since E&Y “substantially” helped the bank mis- 2003, supervising the struggle for monetary Name: Charles Tilley lead investors from 2001 until the bank’s and financial stability in the UK, particularly Nationality: British collapse in 2008, by approving a move that in the wake of the global financial crisis. Organisation: temporarily reduced Lehman’s debt, giving In late 2012, he was awarded an honorary Chartered Institute the impression the bank was in a stronger degree of civil law by the University of Kent. of Management financial position than it was. Accountants (CIMA) Name: Job title: Name: Olivier Boutellis-Taft Chief executive Leslie Seidman Nationality: French Nationality: Organisation: American Fédération des Under Tilley’s leadership in 2012, CIMA has Organisation: US Experts Comptables continued to forge close working partner- Financial Account- Européens (FEE) ships with overseas accounting institutions, ing Standards Board Job title: Chief most recently renewing an agreement with Job title: Chairman executive the Institute of Certified Public Accountants One of Seidman’s main goals as FASB chair- During 2012, Boutellis-Taft, who has been of Australia. man for 2012 was to complete the outstand- head of the FEE for six years, continued to be He has advocated global corporate report- ing US GAAP/IFRS convergence projects the leading voice for member organisations. ing reform, and has spoken around the world with the International Accounting Standards He is an avid commentator on regulation, on business sustainability and ethics. Board. However, there has been a break- legislation and standards that affect the pro- down in the boards’ ability to agree on some fession in Europe. Name: of the more controversial standards. Sir David Tweedie One milestone was reached earlier in the Name: Xie Xuren Nationality: British year though when the two reached an agree- Nationality: Chinese Organisation: ment on the contentious lease accounting Organisation: Insitute of Char- standard. Ministry of Finance tered Accountants of the People’s of Scotland (ICAS) Name: Mervyn King Republic of China Job title: President Nationality: Job title: South African Minister of Finance Organisation: Former director-general of the State Admin- Sir David Tweedie joined ICAS as president International Inte- istration of Taxation, Xuren remains in in April 2012, following a decade working grated Reporting his role as China’s minister of finance and to develop and promote IFRS as chairman Council (IIRC) continues to push for stronger support for of the International Accounting Standards Job title: Chairman China’s small and medium-sized enterprises Board (IASB). Though King has stepped somewhat out of through policy and tax reductions. He told The Accountant in an exclusive the integrated reporting limelight, allowing interview this year that in his current role his IIRC colleague Paul Druckman to pick up he wanted to encourage “bright kids” from the baton, he remains one of the accounting 21-30 deprived backgrounds to enter the profession.

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Name: Dennis Nally Name: Michael Izza reporting introduced to the market. Nationality: Nationality: British American Organisation: Name: Chen Yugui Organisation: Institute of Char- Nationality: PwC International tered Accountants Chinese Job title: Chairman in England and Organisation: Wales (ICAEW) Chinese Institute Job title: of Certified Pub- Under Nally’s chairmanship PwC remains Chief executive lic Accountants the world’s largest professional services firm In the past year, Izza has continued to (CICPA) after briefly loosing the title to Deloitte in expand ICAEW’s international connections, Job title: Deputy 2010. most recently signing an agreement with the president and sec- In 2012, despite tough global economic Institute of Certified Public Accountants of retary general conditions, the Big Four firm reported 8% Cyprus, and has pushed the sustainability CICPA deputy president and secretary gen- growth to $31.5bn. He was reappointed to reporting agenda. eral Yugui, who is an advocate of the adop- the position in November with his consecu- He’s a regular media commentator and has tion of IFRSs in China, has continued to take tive term beginning in January 2013. been at the forefront of increasing ICAEW the accounting profession further towards its engagement with stakeholders. goal of ‘going global’ in the past year. Name: Part of this is the plan to grow China’s Ernst Ligteringen Name: Sajjad Karim domestic accounting firms significantly, so Nationality: Dutch Nationality: British they are able to compete with the Big Four, Organisation: Organisation: and under Yugai’s leadership CICPA con- Global Reporting European Parlia- tinues to support this goal, most recent- Initiative (GRI) ment Committee on ly drafting a relevant policy document. Job title: Legal Affairs (Juri) Chief executive Job title: 31-40 MEP and rapporteur Karim has been in the spotlight this year Name: Bob Moritz This year under Ligteringen, GRI launched as the European Parliament Committee on Nationality: its next generation of Sustainability Report- Legal Affairs rapporteur on the audit reform American ing Guidelines, known as G4. It also worked document passed to the parliament by the Organisation: to promote the ‘Report or Explain’ agenda, European Commission. PwC US and issued proposals to improve anti-corrup- His initial report contained watered-down Job title: Chairman tion reporting. proposals and is leaning more towards a and senior partner Ligterigen has headed GRI since 2002, market-led solution to the alleged audit Moritz is in his final year as chairman of pursuing its mission to make sustainability market concentration. The committee is still PwC US, having taken over in 2009 follow- reporting common practice across the globe. working on a final document. ing a period of recession in the US. He is also on the governing board of the Name: Name: US Center for Audit Quality, which promotes Françoise Flores Steven Maijoor robust auditing practices. Nationality: French Nationality: Dutch Organisation: Organisation: Name: European Financial European Securi- Eduardo Pocetti Reporting Advisory ties and Markets Nationality: Group (EFRAG) Authority (ESMA) Brazilian Job title: Chairman Job title: Chairman Organisation: Ins- In 2011 Maijoor was appointed as the first tiuto dos Auditores chairman of ESMA, an independent institu- Independentes do In 2012, Flores has continued to lead EFRAG tion which works to reinforce the stability Brasil (IBRACON) during important talks on IFRS 9 and has and good functioning of European financial Job title: President pushed for further cooperation with the markets. ESMA contributes to the supervi- Pocetti was appointed IBRACON president International Accounting Standards Board sion of financial services firms with a pan- in 2012. Under his leadership the Brazil- and the US Financial Accounting Standards European reach. ian institute has launched a full schedule Board. Under Maijoor’s leadership, the regulator of programmes aimed at strengthening the She has been a member of EFRAG’s Techni- has spoken out in support of IFRS adoption accounting profession to meet the needs and cal Expert Group for nine years, contributing in the US and has worked tirelessly to get interests of members in Brazil’s tougher eco- her IFRS expertise. more guidance on materiality in financial nomic conditions. 4

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4 Name: Jean Rogers As well as being chief executive of KPMG US, converted its China operations from a joint Nationality: American John Veihmeyer is chairman of the Americas venture to a special group partnership with Organisation: region for KPMG International, including limited liability to place control of the firm in US Sustainability the US, Canada, Central and South America, the hands of Chinese partners after a change Accounting Standards and Israel. in Chinese regulation. Board (SASB) This year Veihmeyer has worked to pro- Job title: mote sustainability reporting, naming sustain- Name: Steve Executive director ability as a “core business strategy issue” Almond Rogers launched the US SASB in 2012 with Nationality: British the goal of setting comparable industry- Name: Organisation: specific standards for sustainability report- Michael Andrew Deloitte global ing. She previously worked with the Global Nationality: Job title: Chairman Reporting Initiative to develop the G3 guide- Australian lines and the Initiative for Responsible Invest- Organisation: ment, developing sector-specific methods for KPMG International assessing sustainability. Job title: Chairman Almond, who assumed his chairmanship in mid-2011, has helped support Deloitte’s stra- Name: Andrew, who has a career spanning nearly tegic goals during 2012, including ensuring John Veihmeyer three decades at KPMG, has continued to the network’s revenue grew – the Big Four Nationality: American push the expansion of the Big Four firm’s firm reported an 8.6% revenue increase in Organisation: global coverage most recently opening an September. KPMG US office in Myanmar, in the past year. He is also managing partner at Deloitte Job title: CEO KPMG’s Chinese arm has also officially UK.

n Grant Thornton International, CHIEF EXECUTIVE (31-40) Edward Nusbaum

What was your biggest to improved client service, consistently and What are your major goals in terms of your challenge in 2012? comprehensively throughout the world. professional influence on the accounting Our biggest chal- profession in 2013? lenge was focusing What do you think is the biggest issue facing on growth despite the accounting profession today? I have five goals for my influence on the being faced with the As a profession, we need to find ways to profession in 2013: challenge of difficult add value continuously. During an audit, economies in numerous marketplaces. we should be learning valuable information • The leaders of the top global accounting My biggest challenge during 2012 was to about the client and the industry. firms work together to add more value, and focus the organisation on quality growth We have to be willing to share that infor- improve the quality of audits and other ser- through attracting dynamic and global mation with our clients, and for publicly vices provided by the profession; clients, merging with well-respected firms in listed clients, appropriate information with • Work together with the legislators and many countries, and attracting partners and audit committees and shareholders. In our regulators worldwide to develop sensible staff at all levels to increase our technical advisory and tax practices, we need to and helpful changes to advance the qual- and service capabilities. search for avenues to add value to every ity of our services and the reputation of the assignment. profession, and better serve investors and What achievement in 2012 are you most Accountants, auditors and business advi- the users of financial reports; satisfied with? sors have been around for more than 100 • Continue to support efforts to develop In addition to tripling our rate of growth years, and I predict will be around for more high-quality and practical accounting stan- and retaining quality, I am most satisfied than 100 to come. But, as a profession, dards globally to bring greater transparency with the building of our brand promise. we need to take the responsibility to find to the users of financial reports; This was an external and internal effort. improved methodologies and approaches • Work together to expand the role of We had to expand our brand recognition, to increase quality and add more value for reporting for companies into an integrated making it clear to the marketplace and our clients and the users of financial reports. approach; and, people what Grant Thornton represents, While each firm will strive to do some of • I would like Grant Thornton to act as and operationalise the brand ideals with this on their own, we could be more effec- a leader in adding value to our services, our partners and staff into our client service. tive working together as a profession. The improving the quality of the financial and I am pleased that we successfully intro- more we add value the better we will be at non-financial information provided by com- duced our brand promise, from advertising attracting the best talent into the profession. panies, their auditors and advisors.<

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Name: Name: Alex Malley Name: Timothy Geithner Nationality: James Quigley Nationality: Australian Nationality: American Organisation: American Organisation: CPA Australia Organisation: US Department of Job title: Deloitte US the Treasury Chief executive Job title: Senior Job title: Secretary partner of the Treasury Malley, who is also a member of the Inter- Quigley, the former chief executive of Deloitte national Integrated Reporting Council, has global, has continued to engage with differ- continued to advocate sustainability and inte- ent international business organisations and Geithner was appointed as US Secretary of grated reporting strongly throughout 2012. committees aimed at shaping the policies for the Treasury under President Obama in 2009 He is also a business commentator in broad- a competitive and sustainable economy in the and has been reappointed for another four cast media and hosts the television show The past year. years. Bottom Line, screened nationally on Austra- He reconfirmed the US’s commitment to lia’s Channel 7 Digital. Name: global accounting standards in May this John Griffith-Jones year during a joint meeting held in Beijing to Name: Andy Halford Nationality: British promote US-China cooperative partnership. Nationality: British Organisation: However, the US has yet to adopt IFRS. Organisation: Financial Conduct The Hundred Group Authority (FCA - Name: Warren Allen of Finance Directors 2013) Nationality: Job title: Chairman Job title: Non-exec- New Zealand utive chairman Organisation: Griffith-Jones, the former chief executive and International Halford chairs The Hundred Group of chairman of KPMG UK, was appointed a Federation of Finance Directors, which represents the views non-executive chair of the FCA, which will Accountants (IFAC) of the finance directors of FTSE 100 and sev- begin operating next year when the Financial Job title: President eral large private UK companies. Services Authority ceases operations. It aims to promote the competitiveness of The FCA will regulate financial firms pro- Photo: David Geard the UK for UK businesses, particularly in the viding services to consumers and maintain the Allen was appointed IFAC president in 2012 areas of tax, reporting, pensions, regulation, integrity of the financial markets after serving as deputy president for the previ- capital markets and corporate governance. ous two years. He is an Ernst & Young New He also serves as chief financial officer for Name: Liesel Knorr Zealand partner and former president and Vodaphone Group and previously worked Nationality: German life member of the New Zealand Institute of for PwC. Organisation: Chartered Accountants. Accounting Stan- dards Committee of Name: Name: Germany (DRSC) Wolfgang Schäuble Guido Mantega Job title: President Nationality: German Nationality: Under the continued leadership of Knorr, the Organisation: Brazilian DRSC has been saved from extinction after German Ministry of Organisation: Brazil she solved a funding issue and in the past year Finance Ministry of Finance finalised a change to its constitution, which Job title: Job title: State min- has seen the standard-setter grow from just Finance Minister ister of finance one committee dealing with both national and Schäuble, who was central to the reunification international standards to two committees – of Germany in 1989-1990 as interior minister, Photo: Norbert Schiller the IFRS Committee and National GAAP and who turned 70 this year making him a Mantega, who had his position renewed by Committee. veteran among his peers, has been at the cen- current president Dilma Rousseff in 2011, has tre of the eurozone crisis during the year. most recently been called to account after Bra- He is part of the Euro Group tasked with zil’s economy grew a mere 0.6% in Q3 – half Name: Russell Picot saving the 17 eurozone member states from the rate he had forecast. Nationality: British breaking up. In the wake of the announcement there Organisation: HSBC have been calls for him to step down. Prior Job title: Global chief to his political career he was a professor of accounting officer 41-50 economics. Picot, who is HSBC’s 4

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n wish list Leaders share their Christmas wishes with IAB and TA Ian Ball, chief executive, International than the goals I have set for them! Federation of Accountants “Of course my overall wishes are for “Meeting our number one grandchild in Perth is improvements in our global society, from my number one wish, and we are in good shape reducing hunger and disease to reacting to the to achieve that.” numerous natural disasters that appear to be occurring at an ever-increasing pace. Paul Druckman, chief executive, International “From a business standpoint, I will wish for Integrated Reporting Council 100 new, high-quality partners around the world “A temporary communication blackout from the to join Grant Thornton to make us stronger and world – emails, texts, tweets, Salesforce Chatter, better able to grow and serve our clients. That Gmail chats, Skype IM, LinkedIn messages, and would indeed be a wonderful, practical present telephone calls.” to kick off the New Year.”

Ed Nusbaum, chief executive, Grant Thornton Mark Weinberger, incoming chairman and chief Dennis Nally, chairman, PwC International International executive 2013, Ernst & Young global “Spending a peaceful holiday with family and “The politically correct answer would be world “World peace. Short of that, a better working friends and wishing the same for PwC colleagues peace, and some of my direct reports have told world.” and clients. And maybe a new golf bag!”< me that world peace might be easier to achieve

4group chief accounting officer, is a regular Chidambaram is a corporate lawyer by trade During the past year, Kinoshita, who is chief commentator on a number of issues affecting and has a Master of Business Administration executive of JICPA, Japan’s only professional financial reporting. from Harvard University. accounting body, formed in 1949, has con- He continues to work as a member of the He also served as finance minister for four tinued to support its 23,336 strong mem- International Integrated Reporting Council, years until 2008 under a previous Govern- bership and the wider business community which is tasked with creating the world’s first ment before being appointed home affairs in the aftermath of the 9.0 magnitude earth- integrated reporting framework, a final ver- minister. quake, which rocked Japan in spring 2011. sion of which is due to be issued late 2013. Chidambaram was reappointed as finance He has also worked tirelesly on the conver- Picot has also been directly involved with minister in July by current prime minister gence of Japanese accounting standards with the Prince of Wales Accounting for Sustain- Manmohan Singh. IFRS, as well as pushing along the redrafting ability project since its inception in 2006. of the country’s standards to be consistent Name: with the clarified International Standards Name: Shri Palaniap- Toshio Kinoshita on Auditing. In 2012, on the back of the pan Chidambaram Nationality: Japanese Olympics scandal, which broke late in 2011 Nationality: Indian Organisation: after large undisclosed previous losses span- Organisation: India Japanese Institute ning more than 10 years beginning in the late Ministry of Finance of Certified Public 1990s were discovered, he also launched JIC- Job title: Accountants (JICPA) PA’s own investigation into the audit work Photo: Agência Brasil Minister of finance Job title: CEO carried out.<

n ERNST & YOUNG (E&Y) GLOBAL, INCOMING CHAIRMAN AND CHIEF EXECUTIVE 2013 (41-50) Mark Weinberger American Weinberg- economy, geopolitics and regulation, while What do you think is the biggest issue facing er has been selected at the same time navigating unprecedented the accounting profession today? as the future global changes in our profession around the world. The uncertainty around the myriad changes chairman and chief in the regulation of our profession, as well executive of E&Y, as What achievement in 2012 are you most as the need to make sure we do our part his predecessor James satisfied with? to restore confidence in the capital markets Turley steps down. I am pleased that, despite the volatility in that has been shaken over the past several His term will begin in June 2013. the global economy, our business continued years. Weinberger also sits on The Big Four to grow around the world as we worked firm’s global executive board and is global tirelessly to help our clients. What are your major goals in terms of your head of tax. On a more personal level I remain deeply professional influence on the accounting appreciative of how our people rally around profession in 2013? What was your biggest challenge in 2012? each other and their local communities, To work with regulators, policy-makers and Helping to manage a global business at a when natural disasters like Hurricane Sandy stakeholders to do all we can to restore con- time of so much uncertainty around the occur. fidence in our profession.<

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Catching up with 2012’s big influencers The International Accounting Bulletin and The Accountant approached some of the Power 50’s most influential leaders for a quick catch-up on their achievements and challenges in 2012 and what lies ahead for them in 2013

PwC International International chairman Dennis International Federation of Nally (21-30) Integrated Accountants chief Reporting executive Ian Ball What was your Council chief (Top 10) biggest challenge in executive Paul 2012? Druckman What was your 2012 has been a (Top 10) biggest challenge challenging year in 2012? The balancing act of managing a for business, with continued instability, What was your vibrant, growing organisation, with ever- natural disasters, government debt crises biggest challenge in 2012? increasing pressures, expectations, and and enduring deficits, regulatory and Galvanising a small organisation with demands, in an environment of continuing political change, all adding to the prevailing huge ambition and a fundamentally restraint and global financial instability. uncertainty. Operating in these conditions important mission – to establish isn’t easy, so I’d say the biggest challenge a consistent, collaborative and What achievement in 2012 are you most for PwC has been getting used to this new internationally accepted approach to satisfied with? That we have achieved environment. integrated reporting. significantly greater exposure on public sector financial management issues, and What achievement in 2012 are you most What achievement in 2012 are you most there is emerging consensus – finally! satisfied with? satisfied with? Our ability to post good revenue growth The consensus we have built around the What do you think is the biggest issue facing in a difficult economic climate. Our global need for organisations to explain better the accounting profession today? The failure revenue was up 8% at $31.5bn, the first the value they create. If allowed another, of national regulatory systems to keep pace time we have passed the $30bn milestone. it would be my technical team producing with the globalisation of business. Overall, our results suggest that, despite the output that has been outstandingly well sluggish global economy, there are many received, well beyond expectations. What are your major goals in terms of your opportunities out there for PwC. professional influence on the accounting What do you think is the biggest issue profession in 2013? To help integrated What do you think is the biggest issue facing facing the accounting profession today? reporting move forward in the next the accounting profession today? To define itself in this changed world of phase of development and to ensure the Regulation. The financial crisis has caused finance, especially over expectations. profession plays a leadership role in the people to revisit the auditor’s role. At PwC, development and execution of IR. we welcome the opportunity to have that What are your major goals in terms of your discussion. In terms of the audit, I think professional influence on the accounting What do you think will be your biggest there are always things we can learn. We profession in 2013? challenge in 2013? Capitalising on the are engaged in discussions with regulators To convince the profession that progress made in getting more recognition all around the world with respect to integrated reporting is one of the of the problems in governmental changes that might enhance audit quality. most important paradigm shifts in a accounting and auditing. Now there is generation. emerging consensus on the gravity and What are your major goals in terms of your scope of the problem, we need to find professional influence on the accounting What do you think will be your biggest ways to motivate more governments to profession in 2013? The financial crisis has challenge in 2013? engage in serious institutional reform fundamentally shifted the way the world Besides being able to maintain my golf of their financial management systems, views the capital markets system. Specifically handicap (of 9), it will be about making including the adoption and implementation investors want more from an audit, sure we concentrate on the big picture of International Public Sector Accounting particularly in terms of communication. goals whilst getting the detail firmly Standards. Good government accounting This is a great opportunity for PwC and the grounded.< truly is a prerequisite to both accountability profession to rise to this challenge and secure and efficient management, and can no its long-term relevance to capital markets.< longer be seen as an optional extra.<

www.InternationalAccountingBulletin.com December 2012 y 13 Country survey UK International Accounting Bulletin

Steady UK holds it nerve Despite recent growth in the UK accountancy market, UK professional services firms are bracing themselves for slowing growth and other hurdles. Ana Gyorkos speaks to UK firm leaders about maintaining the reputation of the profession and helping clients through difficult economic times.

ith alarming headlines accusing the shape and size of our business it doesn’t ■■ UK financial organisation of misus- signal anything internally or externally ing power, mis-selling products about our commitment to the market.” At a glance and avoiding or bending the Collins goes on to say that graduate and revenue W school-leaver programmes will be unaf - rules, public trust is inevitably low espe - cially as the UK’s accounting market is far fected by the cost reduction. Most revenue: PwC, £2.4bn from buoyant. Similarly, Mazars UK senior partner Least revenue: ECOVIS Intr., £3.9m While the accounting profession is not Phil Verity says that the 5% staff cut is a Highest growth: Ernst & Young, 11% faring as badly as banking, for instance, response to issues the firm had identified Lowest growth: INPACT Intr., -41% managing the reputation of the industry and his firm decided to react quickly in is increasingly on firm leaders’ agendas. order to position the business better for staff And restoring confidence in the financial the future. “We think by reducing the Largest workforce: PwC, 17,617 system is not the sole responsibility of dis- headcount we will be better placed to face Smallest workforce: ECOVIS Intr., 51 credited bankers. Professional services also challenges in the market,” he said. “We’re Most partners: PwC, 872 have several roles to play, starting with making the main cuts in our back office Most offices: IAPA, 152 helping their clients, and consequently the and not so much across our client-facing wider economy, to grow through improv- teams. We want to preserve as many staff economic indicators ing their advisory offering and audits – in as we can.” addition to complying with regulatory Despite future apprehension, Mazars National GDP: £1.5tr demands that have arisen following the reported a 6% increase in fee income to National GDP growth: 0.4% financial crisis, while also growing their £115.3m in the year to 31 August 2012. GDP per capita (PPP): $36,728 own businesses and improving margins. Returning to the Big Four, PwC retained Inflation (CPI): 2.7% These are not easy tasks and there is no its market-leading position with fee income Current Account Balance: -3.3% of GDP doubt that UK firms are experiencing chal- of £2,411m, up 6% in the year to 30 June Unemployment rate: 7.9% lenging and eventful times. Among firms 2012. PwC UK chairman and senior part- Population: 63.1m surveyed by International Accounting ner Ian Powell attributes the growth to the IAB survery indicators Bulletin, average growth was 6% in 2012, strategy the firm set out four years ago. which is completely driven by networks “We knew we were coming into a reces - Staff density: 1 accountant per 721 people because association growth was flat. sion, so we decided to hold our nerve, and Despite a 7% increase in revenues among invest deep into the recession in order to Notes: Totals apply to IAB surveyed data only, this includes surveyed networks, ensuring future pros- come out of it stronger. For example, we firms that belong to global networks and associations perity remains a pressing challenge and continued with graduate recruitment, Source: International Accounting Bulletin, IMF KPMG UK and Mazars have announced bought businesses, continued recruiting they are reducing their workforce by 3% people in specialist areas, and we’ve seen and 5% respectively, in order to keep up significant growth in those areas,” Powell 2012 – and Ernst & Young UK & Ireland business efficiency and growth. KPMG says. chairman and managing partner Steve Var- UK has yet to reveal its annual results, but “The two big growth areas for us in the ley says the growth was the largest in the chief executive Simon Collins says the firm past 12 months have been consulting and past six years. will report in the black. forensics. We’ve seen good growth in risk “The major achievement for us has been Collins says that recovery didn’t come assurance business and restructuring busi- in relation to emerging markets,” Varley strongly enough in the past fiscal year and ness, but the deals market has been quiet. says. “E&Y is number one in India, the “we reluctantly realised towards the end of Overall I’d say we made some good bets Middle East and Russia, and it’s gaining the year that we are going to have to do four years ago and that’s what has helped strength in Brazil and China. Our clients something about staffing levels. us achieve these growth numbers.” in the UK are increasingly looking to “We are a business that hires a lot of peo- The smallest of the Big Four, Ernst & access those markets, and the clients in ple each year, and while letting over 300 Young, reported a fee income increase of those markets want to go to the UK.” people go is always distressing, in terms of 11% to £1,631m in the year to 29 June Varley says it is going to be difficult to

14 y December 2012 www.InternationalAccountingBulletin.com International Accounting Bulletin UK country survey

sustain such growth as austerity is likely to BDO is already there. Both firms have and adds the biggest challenge for BDO end towards 2018 and not 2015 as initially complementary strategic strengths and UK in the coming months is the integra - hoped. “We anticipate challenging condi- they make a really good fit. We are all of tion process. tions for us and our clients for the next the opinion that mid-tier consolidation is “It is the integration that is going to take four to five years and that’s why emerging long overdue.” some time to get right. Both firms have markets are essential for British trade,” he “The merger will create the largest mid- a similar culture, a similar philosophy says. tier audit practice in the market and also around partnership, and a similar core Varley, like Powell, attributes his firm’s have significant advisory capabilities. We client base in the mid-market.” growth to strategic moves, such as develop- should be able to provide more competi - Getting an integration right is something ing fraud detection, dispute and investiga- tion to the Big Four. I think there’s a lot of RSM Tenon has learned the hard way, as tion services a few years ago, investments quality in the mid-tier, and firms are not the firm has faced the most problematic that are now bearing fruits. just trying to work for the mid-market, but period in its history. “Increased regulatory compliance for larger businesses as well. requirements by regulators have also been “Most of the M&A in our industry is Trouble at Tenon part of our success story in the financial event-driven, because of the various chal- Following RSM Tenon’s acquisition of services sector,” he says. lenges. This is a deal that does not involve RSM Bentley Jennison in 2009 and certain In the non-Big Four market Grant goodwill and is the merger of our interests. assets of Vantis in 2010, the firm had to Thornton is leading the pack – for now – The combined firm will have a strong bal- issue a profit warning in February, along with a revenue increase of 11% to £417m in ance sheet in excess of £80m of net assets with a restating of accounts for the previ- the year to 30 June 2012. Echoing PwC’s and that will ensure that we can make ous fiscal year. The firm, the only listed Powell, Grant Thornton’s chief executive investments for the long term,” he adds. accounting firm on the London Stock Scott Barnes says the growth was a result Exchange, announced a 9.3% drop in of his business keeping its “nerve” during revenues to £107.8m in the six months to the tough times of 2009 to 2011 and creat- “The merger will create the 31 December 2011, which led to it hav - ing a resilient business by diversifying. largest mid-tier audit practice ing to renegotiate bank loans, cut staff by “Increasing the size of our advisory busi- in the market and also have 11% and undergo a complete change of the ness and investing in areas like the public significant advisory capabilities. senior executive team. Despite the actions sector created a lot of resilience for us,” he We should be able to provide taken in the first six months of 2012, the explains. “And we went through a process more competition to the Big firm’s full-year fee income dropped 8.8% four years ago of making our business fit- to £208.2m in the year to 30 June 2012. ter and leaner for the future, realising that Four.” RSM Tenon head of service lines Jez things are going be quite tough for a few BDO UK managing partner Simon Michaels Filley picks up the story: “It’s been a chal- years.” lenging year, but we’ve come out of it posi- Barnes adds the firm is expecting growth tively and have made lots of good changes. in the current fiscal year, however double- Starting in February, a new chief execu - digit growth for the second year running Barnes says the improved market tive, Chris Merry, joined us, following the is highly unlikely, and it’s expected to be position doesn’t have a great significance appointment of finance director Adrian more in the range of 5 to 6%. for Grant Thornton.“We were expecting Gardner a couple of months earlier. Since Grant Thornton has held its position as something like this when we set our Ambi- then our management team has changed the largest mid-tier firm for years with its tion 2015 strategic plan and a turnover tar- significantly with only one member of the closest competitors far away; however in get of $500m,” he says. “We anticipated original team still here. 2013 this is to change. that, by 2015, there would be some con - “We’ve made some targeted cost savings In November BDO UK and PKF UK solidation in the market.” in the business in terms of redundancies announced they will merge at the start of Barnes says there might be some further and by not replacing vacancies. We’ve dis- 2013. consolidation among UK firms as a result posed of some non-core parts of the busi- The newly merged firm will be a BDO of the merger, as Grant Thornton UK and ness, such as our Stoke-on-Trent office International member firm employing BDO UK increase their lead over the rest and our IBA business in Manchester, and 3,500 people with a projected revenue total of the mid-tier networks by almost £200m generally focused on our core business and of up to £400m, positioning it neck and E&Y’s Varley believes that the merger markets, which is the SME sector, and we neck with Grant Thornton UK. will increase clients’ choice. made sure we’re aligned to deliver on that BDO UK managing partner Simon “I think in general increasing the on a cross-service line basis. Michaels says the merger is the first stra - capability of service offerings is a “Everything we’ve done has been to try to tegic merger in the accounting market for good thing for clients,” he explains. get back to focusing on our clients. Overall 15 years. “I hope this merger also illustrates the mar- it’s been a period of stabilisation to start “Both PKF and BDO have an ambition to ket works well without intervention.” with – we’re through that now – it’s now lead in the mid-market, domestically and Michaels says that clients of both firms all about consolidation and setting up our internationally,” he says. “Internationally, responded positively to news of the merger strategy of aligning ourselves to our SME

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n UK

networks - fee data Fee split (%)

Corporate Revenue Growth Audit & Tax Management Corporate recovery/ Litigation Rank Name (GBPm) rate accounting services consulting finance insolvency support Other Year-end 1 PwC*(1) 2,411.0 6% 40 27 18 - - - 15 Jun-12 2 Deloitte*(2) 2,099.0 10% 23 - - - - - 77 May-12 3 KPMG*(e) 1,851.0 8% ------Sep-12 4 Ernst & Young*(3) 1,631.0 11% 29 26 - - - - 45 Jun-12 5 Grant Thornton 417.1 11% 29 22 - 8 27 3 11 Jun-12 International* 6 BDO*(4) 282.8 -1% 34 28 - - - - 38 Jun-12 7 Nexia International* 252.9 5% 36 20 3 1 5 - 35 Jun-12 8 RSM International* 231.5 -8% 33 21 14 - 20 - 12 Jun-12 9 Baker Tilly International* 170.4 -6% 45 27 2 8 16 1 - Mar-12 10 Moore Stephens 129.1 1% 54 15 7 2 7 1 14 Dec-12 International* 11 Mazars* 115.3 6% 56 17 6 2 15 - 4 Aug-12 12 PKF International* 103.3 -5% 44 21 16 8 10 - - Mar-12 13 Kreston International* 94.0 8% 42 26 9 4 5 - 14 Oct-12 14 HLB International* 70.9 7% 48 28 10 6 3 - 5 Dec-11 15 Crowe Horwarth 61.5 5% 55 23 2 4 2 6 8 Mar-12 International* 16 UHY International* 48.7 8% 52 21 5 3 13 - 6 Apr-12 17 ECOVIS International* 3.9 0% 69 31 - - - - - Jun-12 Total revenue/growth 9,973.4 7%

Notes: *Disclaimer = Only data from the named member firm or the exclusive member firms within a network/association is included. Data relating to correspondent and non-exclusive member firms is not included. (1) Revenue from non-UK subsidiary undertaking not included; (2) Other includes all non-audit services; (3) Other includes advisory with £416m (26%) and transaction advisory £306m (19%); (4) BDO UK’s revenue includes BDO Guernsey but excludes BDO Northern Ireland. BDO provided unaudited figures as audited figures were not available at the time of publication.(e) IAB had to estimate KPMG UK’s revenues as the firm discloses its results at the end of the December. Source: International Accounting Bulletin

ASSOCIATIONS- fee data Fee split (%)

Corporate Revenue Growth Audit & Tax Management Corporate recovery/ Litigation Rank Name (GBPm) rate accounting services consulting finance insolvency support Other Year-end 1 IAPA*(1) 268.6 3% ------n/a 2 Praxity*(2) 156.9 7% 55 18 5 2 12 - 7 n/a 3 PrimeGlobal* 107.3 2% 43 26 8 3 4 - 16 May-12 4 Morison International*(3) 96.9 8% 48 20 13 3 7 - 9 Mar-12 5 Eura Audit International* 94.3 -4% 59 15 9 2 2 - 13 Aug-12 6 DFK International* 54.2 -13% 52 23 5 2 16 - 2 Sep-11 7 KS International* 40.6 -1% 56 13 14 4 8 2 3 Apr-12 8 MSI Global Alliance* 35.6 1% 40 21 7 6 15 - 11 Mar-12 9 AGN International* 34.9 1% 42 24 - - - - 34 Oct-11 10 MGI* 32.3 2% ------Jun-12 11 Alliott Group* 15.4 -39% 15 50 17 10 8 - - Jun-12 12 INPACT International* 7.9 -41% 40 21 27 2 10 - - Dec-11 13 GMN International* 6.4 0% 57 11 12 - - - 12 May-12 14 Integra International* 6.1 -37% 35 25 10 20 10 - - Sep-12 Total revenue/growth 957.4 0%

Notes: *Disclaimer = Only data from the named member firm or the exclusive member firms within a network/association is included. Data relating to correspondent and non-exclusive member firms is not included. (1) IAPA’s year end is the latest available year end of participating firms; (2) Praxity’s year end is the latest available year end of participating firms; (3) Morison International is represented by MHA Association in the UK. Source: International Accounting Bulletin

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n UK

Networks - staff data

Total staff Growth Partners Professional staff Admin staff Offices rate (%) Rank Name 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 1 PwC* 17,617 17,079 3% 872 905 13,211 12,631 3,534 3,543 34 40

2 Deloitte* 14,121 13,075 8% - 953 ------

3 KPMG* 11,612 11,816 -2% 617 583 9,149 9,992 2,463 1,241 23 23

4 Ernst & Young* 11,008 10,303 7% 549 527 8,077 7,568 2,382 2,208 21 23

5 Grant Thornton International* 3,867 3,756 3% 202 207 2,723 2,641 942 908 26 30

6 RSM International* 2,860 3,252 -12% 244 281 2,101 2,349 515 622 37 48

7 BDO* 2,599 2,643 -2% 206 205 1,836 1,826 557 612 15 15

8 Nexia International* 2,263 2,134 6% 341 340 1,202 1,179 720 688 28 28

9 Baker Tilly International* 1,831 1,935 -5% 229 117 878 1,460 499 358 28 28

10 Kreston International* 1,636 1,483 10% 163 153 1,185 1,059 288 271 43 42

11 Moore Stephens International* 1,397 1,509 -7% 142 183 931 970 324 356 33 33

12 PKF International* 1,279 1,324 -3% 70 75 1,043 1,092 166 157 23 23

13 Mazars* 1,261 1,293 -2% 115 117 932 951 214 225 17 17

14 HLB International* 734 726 1% 99 90 449 452 186 184 22 20

15 UHY International* 712 661 8% 83 94 484 441 145 126 22 19

16 Crowe Horwath International* 665 787 -16% 75 103 479 539 111 145 9 15

17 ECOVIS International* 51 52 -2% 8 8 17 15 6 6 1 1

Totals 75,513 73,828 2% 4,015 4,941 44,697 45,165 13,052 11,650 382 405

Notes: *Disclaimer = Only data from the named member firm or the exclusive member firms within a network/association is included. Data relating to correspondent and non-exclusive member firms is not included. Source: International Accounting Bulletin

Associations - staff data

Total staff Growth Partners Professional staff Admin staff Offices Rank Name 2012 2011 rate (%) 2012 2011 2012 2011 2012 2011 2012 2011 1 IAPA* 2,936 5,019 -42% 502 607 1,631 2,632 803 1,780 152 155

2 Praxity* 1,824 1,861 -2% 185 190 1,369 1,303 270 368 40 36

3 Morison International* 1,507 1,493 1% 168 146 930 839 409 508 42 37

4 PrimeGlobal* 1,492 1,446 3% 189 189 997 961 306 296 45 40

5 DFK International* 914 907 1% 115 121 619 601 164 185 30 30

6 Eura Audit International* 826 825 0% 143 144 284 569 112 112 71 72

7 MSI Global Alliance* 601 596 1% 55 55 418 255 128 286 5 5

8 MGI* 526 493 7% 75 67 293 232 158 194 19 17

9 K S International* 484 476 2% 59 63 330 327 95 86 7 7

10 AGN International* 390 379 3% 40 36 259 256 91 87 13 13

11 Alliott Group* 222 277 -20% 31 44 144 187 47 46 10 8

12 INPACT International* 119 205 -42% 11 27 82 132 26 46 4 4

13 Integra International* 92 65 42% 14 15 58 43 20 7 4 4

14 GMN International* 73 73 0% 16 15 15 15 42 43 1 1

Totals 12,006 14,115 -15% 1,603 1,719 7,429 8,352 2,671 4,044 443 429

Notes: *Disclaimer = Only data from the named member firm or the exclusive member firms within a network/association is included. Data relating to correspondent and non-exclusive member firms is not included. Source: International Accounting Bulletin

www.InternationalAccountingBulletin.com December 2012 y 17 Country survey uk International Accounting Bulletin

clients. Then it’s going to be about deliver- Collins says for KPMG the process was take on board that appetite and the change ing on that strategy and driving growth. expensive, intrusive, but necessary. “We brought about.” Filley explains how the firm managed to are awaiting the results, but we are confi- Mazars’s Verity says his firm would like get into difficulty in the first place: “Over dent that we have demonstrated to the CC the CC to listen to the investor community. 18 months we went through a lot of change that there is more and enough competition “We believe there’s an institutional bias with a significant merger followed by a sig- in the marketplace,” he says. for the Big Four firms,” he asserts, “and nificant acquisition. Strategically both of Ernst & Young’s Varley says the entire having just four large players in the market these made sense, but we didn’t leverage process so far has been very intense and puts the UK economy in a fragile position. them as well as we might have done. has taken a lot of resources to respond We have said several times joint audits “We’re very good at being a local firm, to the CC. “They have delayed the final could introduce more competitive condi - but we’re also a national firm and we announcement already, but we would tions into the market among the FTSE 100 hadn’t really figured out how to leverage encourage them to move as quickly as market.” being a national firm while still being local possible towards conclusions so that we The investigation has created an envi - to our clients. As a result, there was dupli- can get back to what we do best, which is ronment where there is more awareness cation of roles and responsibilities which focusing fully on the market,” he says. about the issue, Grant Thornton’s Barnes we’ve tried to fix.” “In terms of our expectations we’ve believes. “I think the market will be very “We have strong relationships with our always said that there is enough competi - slow to adjust unless there are some sig - clients – who have been incredibly loyal – tion and that it’s a very competitive and nificant changes brought forward by the and we’re thankful for that. Yes, they have aggressive market. So, we don’t expect the CC, but the principal value right now is asked challenging questions and been CC will find much to oppose that.” creating an environment where people are demanding, but it’s proved if you have a PwC’s Powell says that throughout the talking about it and giving profile to the trusting relationship with your clients competition debate people have become issues,” he says. then they stick with you. The client attri - confused, both in the UK and the rest of tion rate has been very small, which has the EU, about the difference between com- ■■ UK been the main positive to come out of this. petition and choice. “Everybody would Top 20 firms: fee data Our shareholders have seen some erosion accept there is limited choice, but within Rank Fee Growth of value, but that’s up to us manage going that choice there is ferocious competition,” income rate (%) (GBPm) forward and hopefully the changes we’ve he says. 1 PwC 2,411.0 6% made are the first step to rebuilding that Powell says that the firm is prepared in value.” case the CC decides to suggest any meas - 2 Deloitte 2,099.0 10% Throughout its troubled time RSM ures that would increase competition. “We 3 KPMG(e) 1,851.0 8% Tenon was audited by PwC. However in make sure the firm is in as good a shape 4 Ernst & Young 1,631.0 11% December the firm’s board voted against as possible, because then you’ve got the 5 Grant Thornton UK 417.1 11% PwC continuing to do its work and started options available to make sure we meet any 6 BDO UK 274.0 -1% a new appointment process. of the regulatory requirements that are put 7 RSM Tenon 231.5 -8% PwC and RSM Tenon are also currently on us. We’ve evaluated many different out- 8 Smith & Williamson 179.0 4% being investigated by the Accountancy and comes, but until we understand what the (1) Actuarial Discipline Board (AADB), which output is, it’s difficult to put these plans 9 Baker Tilly 170.4 -6% is said to be focusing its investigation on into practice.” 10 Mazars 115.3 6% the preparation, approval and audit of the As with European audit reform, the mid- 11 PKF UK 103.3 -5% financial statements of RSM Tenon and its tier has a somewhat different view to its 12 Moore Stephens 73.1 7% subsidiary companies for the years ending Big Four colleagues. BDO UK’s Michaels 30 June 2010 and 2011. says he’s repeatedly said this inquiry is 13 Haines Watts 61.7 7% a once-in-a-generation opportunity to 14 Crowe Clark 61.5 5% Whitehill Competition investigation change market structure. “I’m very keen The statutory audit market has mainly to see the CC come out with recommenda- 15 Saffery Champness 58.0 11% (2) made the headlines this year because of the tions that are going to make a difference. I 16 Kingston Smith(3) 40.6 -1% Competition Commission (CC) investiga- imagine and anticipate that there will be tion into the concentration of the UK statu- some change as a result of it, but I don’t 17 MHA MacIntyre 32.4 -8% Hudson(4) tory audit market. As a result, the Big Four think that change will be significant,” he 18 Wilkins Kennedy 30.2 7% and several other market players have had says. to provide large amount of evidence, open “We have had to provide a significant 19 Menzies 28.5 2% their doors to investigators, and provide amount of evidence to the CC, as have all 20 Chantrey 28.4 3% Vellacott(5) testimonials at hearings. The investigation the larger firms. Notes: (1) Smith & Williamson is part of Nexia International; (2) Saffery has mainly been kept behind closed doors, “And, what we hope the PKF deal shows Champness is part of Nexia International; (3) Kingston Smith is part of K S International; (4) MHA MacIntyre is part of MHA Association and Morison with a preliminary report expected at the is that we are investing in order to attract International (5) Chantrey Vellacott is part of DFK International. end of January. more large listed clients. I hope the CC will Source: International accounting Bulletin

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RSM Tenon’s Filley says he doesn’t interest to push audit work to the point ernment committee looks into large cor - expect any major changes coming out of when it is done uneconomically.” porates such as Starbucks, Amazon and the CC. Despite, KPMG and E&Y noting a Google, questions are being asked about “It’s potentially a bit of a missed opportu- decrease in fee pressure, mid-tier leaders whether the Big Four have a conflict of nity,” he says. “The CC asked us for some see a very competitive pricing market per- interest as they help their corporate clients written feedback; we responded by asking sisting. “Price is not the only factor, but it’s with planning, as well as offering advice to if we could present to them, which we did, an important factor – lot of firms are anx- government on tax issues and raising tax. so we have been involved in the process ious to maintain revenues and win market While the blame for tolerating tax avoid- a bit, but it was more us reaching out to shares, so margins are being squeezed. ance is put on HMRC and the tax authori- them, rather than them to us.” There’s no doubt about that,” Barnes says. ties, professional services firms are run - Grant Thornton is also looking for a ning a reputational risk. Varley says: “We Easing fee pressure? boost in its audit revenues in the current provide our clients with advice based on Intense fee pressure has been an increasing fiscal year as the firm has successfully ten- government policy and I think the govern- issue in the audit market, however Big Four dered for work coming out of the govern - ment has to get the balance right between firm leaders say they see a slight easing of ment’s Audit Commission, which is being creating a fiscal policy that’s attractive to that pressure. scrapped and the work distributed to the corporations, but also making sure that “I think in terms of fee pressure the mar- private sector. corporations are aware of the long-term, ket has stabilised in the past few months,” Barnes says: “In order to get this work and what their tax position will be.” Varley says. “Clients are now increasingly we have spent a lot of time going through Speaking about reputation and risk Var- looking for value from their auditor rath- the tendering process, making sure that ley says at the moment there appears to er than fee reduction. We have had some we’re really well placed to win a lot of be an overall feeling that business is not instances in the past months where clients that work. We know the market very well doing enough and is not socially responsi- were willing to pay higher fees if we can and we’ve spent a lot of time thinking it ble enough. “We had a big UK-wide con - be clear on the value we can create and the through.” ference for all our partners recently, and extra assurance we can bring. There has Mazars has also successfully tendered what we all committed to is doing more been significant price pressure in the recent for some of the Audit Commission’s work, to contribute to society,” he says. “For year, but that seems to have ironed itself which according to Verity has enabled the whatever reason, society feels businesses out now.” firm to open an office in Durham in order mis-stepped. Regardless of laws and regu- Varley also says there are more audits to accommodate the public sector audit lations, society has its own views. I think coming out to tender. “We are seeing an team, which moved over from the Audit businesses need to team up together to give increasing list of clients who are moving Commission. “The contract started on society more than just financial return.” ahead of any regulation change from the 1 November 2012 and, in income terms, Varley also says a clear government tax EU. They are rethinking what they want the contract is worth between £3.5m and policy helps with attracting companies from their audit partner.” £4m,” he says. “We believe that will add to from around the world to set up their head- Collins says KPMG has had a good year our already good level of organic growth.” quarters in the UK. in audit and won some new engagements. “We have done a lot of work in assist - “I think fee pressure is starting to ease off Tax crackdown ing clients move their headquarters into, slightly. That doesn’t mean it is becoming Recently corporate tax avoidance has or back to, the UK, he says. “This really easy, but I think clients and audit commit- increasingly been in the public eye and plays into our international strategy and tees don’t want a bad audit. It’s not in the the potential involvement of firms as tax the importance of emerging markets. We audit committees’, the firms’ or the clients’ advisors has not gone unnoticed. As a gov- are going around different countries sup- ported by the government trying to con - ■■ UK vince companies to move their base to the UK top 10 networks post BDO UK and PKF UK merger in EARLY 2013 UK.” Fee income 9 (2%) Powell says he sees two big challenges 8 (2%) 10 (1%) 1 PwC* (1) 2,411.0 7 (3%) in tax: the first is the deals market is slow 6 (4%) 2 Deloitte* (2) 2,099.0 and the second area is the debate around 5 (4%) 3 KPMG* 1,851.0 tax planning. 1 (25%) 4 Ernst & Young*(3) 1,631.0 “We think we’ve got a strong position 5 Grant Thornton International* 417.1 on that through the controls we’ve put in 6 BDO* 386.1 4 (18%) place over the past five years, as regards the advice we give,” he says. “Also the way 7 Nexia International* 252.9 2 (22%) we behave as a firm. If you look through 8 RSM International* 231.5 3 (19%) our annual reports, we’re the only firm to 9 Baker Tilly International* 170.4 disclose how much tax we raise and pay 10 Moore Stephens International* 129.1 to the Exchequer in the UK, and also the Source: IAB affected tax rate of the partners.

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make sure NO segments are black! if there are more than four, you will have to manually apply the colour Country survey uk International Accounting Bulletin

“This is because people assume firms like the transactions market has been somewhat a lot of investigation into system readiness ours must have some great tax schemes, quiet. “We have historically low numbers for fraud and in cyber security, and forensics but as we do pay our taxes we decided to of transactions at the moment, but in the works in all these areas.” disclose our taxes.” middle-market the transactions market is Powell says PwC has also invested in KPMG’s Collins say the firm recognised slightly more resilient than in the upper end,” climate change and sustainability services. a long time ago that there is a proper debate he says. “We’ve invested in that business a lot over about the morality of taxpaying. “There are “I sense things are starting to turn a bit in the years, and we’re now at over 100 peo- laws in place to regulate the paying of tax terms of deals and hopefully towards the ple. That investment has been recognised and I think a lot of the debate and anger at end of 2013 we will start to see some more.” and people are starting to see that there are the moment should be aimed at the legisla- Varley says E&Y has had more work help- a group of experts that can provide the ser- tion,” he says. ing clients do de-investments and carve-outs vices they’re looking for,” he says. “Don’t forget that taxpayers have a duty instead of big transactions work. “Despite the recession, sustainability to pay their taxation. We adopt tax prin- “We have helped clients do carve-outs and remains at the top of the agenda. There’s ciples, and have done for many years. We the conducting of auctions and sales into a huge amount of interest in ‘how do you don’t give advice on transactions that have India and China especially. What we are not account for sustainability?’ and how to dem- no substance apart from avoiding tax. Our seeing is the mega-mergers of 2005/06/07 onstrate to the outside world, through your tax practice is aimed at helping clients with and it continues to be a challenging market.” accounts, what your sustainability strategy their tax affairs in the context of business is.” and not simply managing their tax affairs.” Risk advisory E&Y and KPMG also emphasise the Barnes believes the increased pressure on Powell says increased regulatory compli- increase in work for the financial services tax avoidance might result in some regula- ance demands have helped with some of the sector and helping it comply with new rules. tory intervention. “I think there’s a lot of firm’s advisory offering. E&Y’s Varley says: “I think, for advisory, talk about it recently in the press and I think “There’s been a lot of focus on regulatory or this year is going to be another good one, in the corridors of Whitehall about doing performance issues and focus coming out of especially in three areas. First, financial ser- something about tax avoidance,” he says. the new Bribery Act,” he says. vices – giving clients advise on regulatory “There may be changes arising from there, “There’s been a lot of work preparing the compliance changes, risk, and risk consult- but we don’t yet know what they will be.” systems to make sure organisations are ing. Secondly, the c-suite continues to be Away from the public spotlight, tax ser- organised for these kinds of issues. Also, to concerned about the amount of risk being vices have been a mixed bag, as low levels some extent, there have been accusations of taken on as many companies are finding it of transactions and investment have led to inappropriate trading, which necessitates harder to create profits and getting the risk- some work reduction. Barnes says in general an extensive review. There has been quite profit ratio right is increasingly challenging.

Major concerns for the profession

“I think reputation is the number one concern for the profession. The financial markets have had a hard time over the last four or five years and the profession has a fundamental role to play in the stability of capital markets. The profession as well provides for, and is an important part of, the UK economy and a significant employer. And, I think one of the things that would be good is if we were able to communicate the good work we do in supporting the UK’s growth agenda and therefore building the profession’s reputation.” BDO UK managing partner Simon Michaels “I think one of the major challenges we all face is how to help our clients. Everyone was expecting austerity will be for a year or two – a short sharp shock and that normal business would resume as soon as possible. It doesn’t look that way though and austerity is becoming a new norm. Let’s say the UK economy is slowly healing. We have to make sure we assist UK plc to accelerate.” Ernst & Young UK and Ireland chairman and managing partner Steve Varley “The major concern will be reputation and the future of audit reporting and issues of taxation. From a commercial perspective I think the margin pressure will continue to increase as firms compete for business in an economy that isnot growing very rapidly. And I think this could lead to more consolidation. Like the PKF and BDO merger, which I believe was mainly driven by the lack of organic growth .” Grant Thornton UK chief executive Scott Barnes “The biggest challenge is making sure that we take advantage of the opportunities that are there in the market. It’s too easy to assume the market is going to be flat and difficult, when in fact it’s producing great opportunities, especially in overseas growth. We’ve got to be ready and willing to invest.” PwC UK chairman and senior partner Ian Powell

“One is helping the economy grow and the other is restoring trust into professional services and in business.” KPMG UK chairman and senior partner Simon Collins

20 y December 2012 www.InternationalAccountingBulletin.com International Accounting Bulletin uk country survey

■■ UK Leading accounting firms, networks and associations: who’s who

Firm Contact Details Region Head/ Contact AGN International Tel: +44 (0) 208 947 4888; Fax: +44 (0)20 8947 3477; Email: [email protected]; Website: www.agn.org Nick Blake

Alliott Group Tel: +44 (0)203 330 111; Fax: 0870 870 2652; Email: [email protected]; W ebsite: www.alliottgroup.net James Hickey

Baker Tilly International Tel: +44 (0)20 3201 8000; Fax: n/a; Email: [email protected]; Website: www.bakertilly.co.uk Laurence Longe

BDO Tel: +44 (0)20 7486 5888, Fax: +44 (0)20 7487 3686, Email: [email protected], Website: www.bdo.co.uk Simon Michaels

Crowe Horwarth Tel: +44 (0) 207 842 7100; Fax: n/a; Email: [email protected]; Website:www.crowehorwath.net/uk Andrew Pianca

DFK International Tel: +44 (0)207 436 6722; Fax: +44 (0)207 436 6606; Email: [email protected]; Website: www.dfk.com Martin Sharp

ECOVIS International Tel: +44 20 7495 2244; Fax: +44 20 7499 9442; Email: [email protected]; W ebsite: www.ecovis.com Christopher Jenkins Eura Audit International Tel: +33 1 53 93 94 60; Fax : +33 1 42 89 46 56; Email [email protected]; Website: www.euraaudit.org Yves Marguerat

GMN International Tel: +01 818-525 2185, Fax: +01 818-566-6571, E-mail: [email protected]; W ebsite: www.gmni.com Michael Wilford

Grant Thornton International Tel:+44 (0)20 7383 5100; Fax: +44(0)20 7383 4715; E-mail: [email protected]; Website: www. Scott Barnes grantthornton.co.uk HLB International Tel: +44 (0)20 7881 1100; Fax: +44 (0)20 7881 1109; Email: [email protected]; Web: www.hlbi.com Sandra Dalmeijer IAPA Tel: +44(0)1252 720810; Fax: +44(0)1252 720830; Email: [email protected]; W ebsite: www.iapa.net Susan Humphry

INPACT International Tel: +44 (0)20 7388 2641; Fax: n/a; Email: [email protected]; Website: www.inpactgroup.com Stephen Jacobs

Integra International Tel: +49 30 8938890; Fax: +49 30 89388999; Email: [email protected]; Susanne Martius Website: www.integra-international.net Kreston International Tel: +44 (0)1245 449266; Fax: +44 (0)1245 462882; Email: [email protected]; Website: www.kreston.com Jon Lisby

K S International Tel +44 (0)20 7566 4000; Fax +44 (0)20 7566 4010; Email [email protected]; Website: www.ksi.org Martin Burchmore Mazars Tel: +44(0)20 7063 4000; Fax: +44(0)20 7063 4001; Email: [email protected]; W ebsite: www.mazars. Phil Verity co.uk MGI Tel: +44 (0)1932 853 393; Fax: +44 (0)1932 854 323; Email: [email protected]; Website: www.mgiworld.com Jonathan Farrow Moore Stephens International Tel: +44 (0) 20 7334 9191; Fax: +44 (0) 20 7248 3408; Email: [email protected]; W ebsite: www. Nick Hilton moorestephens.co.uk Morison International Tel: +44 (0)207 638 4005; Fax: +44 (0)207 638 4006; Email: [email protected]; Website: www. Liza Robbins morisoninternational.com MSI Global Alliance Tel: +44 (0)20 7583 7000; Fax: +44 (0)20 7583 7577; Email: [email protected]; Website: www.msiglobal.org Donal Watkin

Nexia International Tel: +44 (0) 20 7436 1114; Fax: n/a; Email: [email protected]; Website: www.nexia.com Kevin Arnold

PKF International Tel: +44 (0) 20 7065 0000; Fax:+44 (0) 207 0650; Email: [email protected]; Website: ww.pkf.co.uk Martin Goodchild Praxity Tel: +44(0)020 8774 4020; Fax +44(0)020 8774 4029; Email: [email protected]; W ebsite www.praxity.com Græme Gordon

PrimeGlobal Tel: +33 1 40 02 09 44; Fax n/a; Email: www.primeglobal.net; Website www.praxity.com Lydie Jubin

PwC Tel: +44 (0)20 7583 5000; Fax: +44 (0)20 7212 4409; Email: [email protected]; W ebsite: www.pwc.co.uk Ian Powell

RSM Tenon Tel: +44 (0) 20 7535 1400; Fax: n/a; Email: [email protected]; Website: www.rsmtenon.com Chris Merry

UHY International Tel: +44(0)20 7216 4600; Fax +44 (0)20 7767 2600; Email: [email protected]; Website: www.uhy-uk.com Howard Spencer

Source: International Accounting Bulletin

www.InternationalAccountingBulletin.com December 2012 y 21 Country survey uk International Accounting Bulletin

And, thirdly, many clients are starting to spend in the market and there is a bit of overcapacity money on our performance improvement busi- out there. ness. “Since we announced the merger we have had “A few years ago we were doing a lot of cost a lot more people contacting us and ask to join Group Editor: Fred Crawley Tel: +44 (0)20 7406 6704 reductions work, but we are finding more and the firm because they see BDO as something Email: [email protected]

more clients looking to grow organically, look- that is going places.” Deputy Editor: Ana Gyorkos ing at new products, and ways to grow their Varley says E&Y has no redundancies Tel: +44 (0)20 7406 6707 business and new markets introduction.” planned at the moment. Email: [email protected] KPMG’s Collins expects to see continued “We review supply and demand and we’re Survey Researcher/Reporter: Carlos Martin Tornero Tel: +44 (0)20 7406 6706 difficult times ahead for clients and the firm very conscious of getting the margin right,” he Email: [email protected]

will be looking to help clients anticipate that, says. “We are also increasingly looking at driv- Contributors: Nicola Maher, David Hayes and this will include entering into high-growth ing inclusion. We have more female partners Group Publisher: Andy Cook markets and how to go there safely. then any of the Big Four and we have a chal- Tel: +44 (0)20 7406 6561 “I think we will also arrive at the point in, lenging goal that at least 30% of our new UK Email: [email protected] let’s say 6 to 12 months, where companies are partners will be women by 2015,” he says. Chief Sub-editor: Nick Midgley Sub-editor: Kev Walsh going to start to look at the future a bit more “We also have to have a bigger representation confidently and we need to be prepared for that from black and other minority groups among Sales & Marketing Director: Sarah Wootton Tel: +44 (0)20 7406 6541 and have a good culture for growth ready.” our partnership.” Email: [email protected]

For BDO UK the greatest growth area in Powell says that female recruitment at PwC Campaign Solutions Manager: Keri Farrell advisory has been outsourcing, which grew is good. “We’ve got a lot of programmes inside Tel: +44 (0)20 7406 6548 Email: [email protected] 67% last year. “That is largely on the back of the firm to promote gender diversity. From our international footprint,” says Michaels. 1 January we’ll have three women on the board. Subscription Enquiries: Jeannie Lam Tel: +44 (0)20 7406 6579 Within the firm we have a women’s leadership Email: [email protected] People and priorities development programme, with board members Among interviewed firm leaders, staff cuts are mentoring women in the organisation. For more information on VRL, visit our website at www.internationalaccountingbulletin.com only expected at KPMG and Mazars, with “But honestly I want to see things change For more information on accessing the rest committing to existing staff numbers. more quickly and there is a long pipeline International Accounting Bulletin content online, including a five-year archive, please However, they also state business efficiency is between recruitment and bringing them into a telephone +44 (0)20 406 6579 or email being reviewed regularly. Michaels says once leadership position,” Powell adds. [email protected] the merger with PKF is finalised, BDO UK It has been an eventful year for firms in London Office does not expect to see any redundancies. the UK and there are no signs that regulatory 40-42 Hatton Garden, London EC1N 8EE, United Kingdom “The firm will have around 3,500 people demands, public perception issues, hard eco- Tel: +44 (0)20 7936 6400 and we are looking to continue to invest in key nomic times and battle for growth are going to Fax: +44 (0)20 7406 5601 areas, he says. “There are a lot talented people get any easier in the next 12 months. < Asia Office ■■ UK 20 Maxwell Road #04-02J, Maxwell House Firm movements Singapore 069113 NETWORK/ASSOCIATION FIRM ADDITIONS, MERGERS & ACQUISITIONS Tel: +65 6383 4688 Fax: +65 6383 5433 Alliott Group Lost: Alliott Wingham (Fareham); Charles Burrows (Edinburgh) Email: [email protected] DFK International Added: Duncan Sheard Glass (Liverpool) Financial News Publishing Ltd, 2012 IAPA Lost: One firm Target Accounting from IAPA (London); 11 firms from UK200Group (London, Registered in the UK No 6931627 Bristol, Derby, Chelmsford, Manchester, Webybridge); Added: 2 firms Abbott Moore (Silsoe); ISSN 0265-0223 Blue Spire South from UK200Group (Chicester) Unauthorised photocopying is illegal. The contents of this publication, either in whole or part, may not INPACT International Lost: Griffins (London), Mark J Rees (Leicester); Added: Henry Murray & Co (Lurgan Craigavon, be reproduced, stored in a data retrieval system or transmitted by any form or means, electronic, Northern Ireland) mechanical, photocopying, recording or otherwise, without the prior permission of the publishers. Integra International Lost: SP Macaffery (Omagh, Northern Ireland); Herald Trust Company (Jersey) MGI Added: Muras Baker Jones (Wolverhampton) Morison International Added: Monahans became part of the MHA Association (Swindon, Trowbridge, Glastonbury, Chippenham, Bath) Baker Tilly International Acquisition: Richardson Groves (Bath), Charlton Williamson Partnership (Newcastle) , Stephen Hay & Associates (Edinburgh) Grant Thornton International Acquisition: Thomas May (Leicester) HLB International Acquisition: Rogers Evans (Bristol); Merger: Banham Graham (Norwich) Kreston International Added: Simpson Forsyth (Scotland) Mazars Acquired: Citrus4Benefits (Exeter) and Surf & Consult (London) UHY International Added: UHY WKH Partnership , Letchworth , Royston and Cambridge

Source: International Accounting Bulletin

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