November 2013 Issue 531 www.InternationalAccountingBulletin.com

What price the priceless? How to account for natural capital

● Booz deal puts PwC on path to rebuilding advisory business ● Big data insight can deliver strategy ● New measures and mergers in Australia ● Regulation and fee pressure in South Africa Give your students a business perspective of the world of accounting. Give your students access to content they can trust. Give your students the edge. Subscribe to

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A subscription to The Accountant is the ideal accompaniment to an accountancy course of study. Including exclusive features and interviews with major figures in the accountancy sector, The Accountant will help your students to understand the real-world implications of the theory they are learning, and help improve their employability in a competitive jobs market. A weekly newswire gives you regular updates of all the big stories, while IP access means students can view our content anywhere with access to the student portal.

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ConTenTs Give your students a business news 02-03 Advice versus assurance n KPMG launches data and analytics fund. n Booz deal puts PwC on path to perspective of the world of rebuilding advisory business. BearingPoint, EquaTerra, PTRM, Drivers the firm only strengthens the quality of audit Jonas, Übermind and Optimum Solutions are and the standard of service they provide. CommenT 04 just some of the advisory businesses acquired An increase in advisory investment at the Big accounting. by the four global accounting giants in recent Four is a likely response to the slowdown in 04: AubreY JoAChIm years. To add to the list, PwC announced in growth, audit fee pressure and an increase Former president of the Chartered Institute of Management Accountants October it is in discussions to acquire global in regulatory compliance, which seems to Aubrey Joachim shares his expertise on consultancy Booz & Company, which would have halted audit services growth around Give your students access to big data and how accountants can use it to their advantage. add around $1.4bn to the firm’s annual the world. advisory revenues. The culture of ‘more for less’ has become content they can trust. FeATures 05-08 Hopes of strong, maybe even double-digit the mantra in many countries and it appears organic growth appear to have been swept firms are increasingly resorting to advisory o5: CorporATe reporTInG away with more pragmatic business views in work for those much-needed fees to support BDO UK senior audit partner James recent years. growth at their large international business. Give your students roberts explains how quantity is triumphing over quality in corporate The Big Four appear to be more or less Advisory investments are deemed to be reporting. fearless of the effects advisory acquisitions worth the risk for firm leaders as regulation the edge. Subscribe to o6-08: nATurAL CApITAL might have on their business models despite, in the market is far from decided. As natural resources become scarce, only a decade ago, the Sarbanes-Oxley reg- businesses may need to incorporate nature in their balance sheets. ulation leading to a mass disposal of advi- IAb Awards

The Accountant xxxxx sory capabilities of three of the Big Four Many of you have been phoning and email- firms. Since then, all firms have to some ing to enquire about the IAB Awards 2014, CounTrY surveYs 09-20 extent rebuilt their advisory capabilities or however due to some hiccups with the spon- A subscription to The Accountant is the ideal accompaniment to an accountancy course of study. Including strengthened what was left of the old ones, sorship we are having to move the Awards 09-13: AusTrALIA exclusive features and interviews with major figures in the accountancy sector, The Accountant will help A change of government, industry but debates about whether to restrict the to the second half of the year. We will update consolidation and regulatory develop- offering of non-audit services by audit firms you on the changes as soon as we have some ments have made for an interesting 12 your students to understand the real-world implications of the theory they are learning, and help improve months in the Australian accounting are still very much active. news from the sponsorship teams. The IAB their employability in a competitive jobs market. A weekly newswire gives you regular updates of all the big market. paul Golden reports. The EU is currently discussing such meas- team has put a lot of effort in getting the 14-20: souTh AFrICA ures and potentially creating an additional awards off the ground two years ago and we stories, while IP access means students can view our content anywhere with access to the student portal. As opportunities open up for South ‘blacklist of non-audit services’ and several appreciate all your support and it is my hope African firms across the continent, regulation and fee pressure are slowing countries around the world have raised the that we can offer you a great event sometime domestic growth. vincent huck and issue and questioned the potential conflict in the autumn of 2014. Jonathan minter report. of interest that could arise with providing In the next issue of IAB we will reveal Subscribe to The Accountant for: SIGN UP FOR THE FREE NEWSWIRE advice to an audit client. our Global Accountancy Power 50, a list of Despite such concerns, advisory has the top global influencers of the profession. • IP access to our content. So your students can access our Get free weekly updates and free content. almost started to overtake assurance rev- Thank you all who have voted in the public content campus-wide with one login editorial Advisory board enues in many Big Four firms. Globally, vote round including an algorithm that kept Sign up here: Kevin mcGrath, Crowe Horwath International CEO Deloitte is currently the only firm with high- spamming us with votes making us reach • Content you can trust. We have 125 years of experience http://www.vrl-financial-news.com/system- Kevin Arnold, Nexia International CEO er advisory revenues than assurance, but over one million votes all together (please be Geoff barnes, Baker Tilly International delivering accountancy news. pages/headernav/free-news.aspx president and CEO in Australia, for example, PwC’s and EY’s assured those votes will be removed). • Truly global analysis. We cover a range of stories from around Graeme Gordon, Praxity executive director assurance revenues only account for 31% The full list will be unveiled on stephen Jacobs, INPACT International president and 35% of overall revenues respectively. 13 December. Jon Lisby, Kreston International the world, so your students get a wide perspective of the sector. executive director The Big Four also vigorously argue that non- Ana Gyorkos James mendelssohn, MSI Global Alliance, executive chairman audit services and having a board skill set at [email protected] Christian mouillon, Ernst & Young global vice- chair, assurance ed nusbaum, Grant Thornton International CEO michael reiss von Filski, Geneva Group DON’T mISS OUT. Subscribe to The Accountant today. International CEO Liza robbins, Morison International CEO Contact our subscriptions team on +44(0)20 7563 5688 martin van roekel, BDO International CEO Jean stephens, RSM International CEO or email us at [email protected] to find out more. robert Tautges, HLB International CEO pauline wallace, PwC head of public policy and regulatory affairs

www.InternationalAccountingBulletin.com November 2013 y 1 www.vrl-financial-news.com news round-up International Accounting Bulletin

IAB onLIne – november news round-up

Top 5 articles GLobAL disappeared.” leveraged entity operating in a risky EY US to pay $99m to Lehman KpmG launches data and The report also revealed that on and volatile industry; and Lehman’s Brothers investors analytics fund 8 October Baker Tilly UK acquired bankruptcy was not caused by any the client base of RSM Tenon PSL (a accounting issues.” PwC and global consultancy Booz KPMG has launched its own subsidiary of RSM Tenon which was The Lehman Brother collapse has & Co. to merge London-based global investment fund, KPMG Capital. The fund will not included in the pre-pack deal) for been widely credited as the starting RSM Tenon’s shareholders lose invest primarily in data and analytics £80,000. point of the global financial crisis out businesses via strategic acquisitions, “The jury is now out,” Jenner said. that the world is still struggling “Baker Tilly will have a lot of issues to with. After the collapse, investors UK parliament urges government technology partnerships and other address, and I should hope that they filed a lawsuit against a number to adopt natural capital data and analytics capabilities. thought about it and have done their of those involved with the bank, accounting It will also work to develop technology consultancy in sectors due diligence before making their including EY, Lehman’s auditor PKF Cape Town joins Grant such as health care, financial services, move.” between 2001 and 2008. Thornton International with energy and telecommunications. Among the issues that need In January 2013 the UK merger KPMG UK chairman Simon Collins addressing is the integration of the Financial Reporting Council said it most retweeted article said: “Technology isn’t following the new staff and offices. “They will have was taking no action against EY UK, old rules – innovation is happening to do some surgery to consolidate and in June 2012 the firm was also PwC and global consultancy Booz in universities, in small informal offices into one another and face cleared by the UK Accountancy and & Co. to merge businesses and through curious properties and staff issues,” Jenner Actuarial Board. read in 171 countries individuals. For a major company said. “There will be a fallout, because to harness this we have to be more Baker Tilly UK doesn’t need the europe UK 27% agile – co-investing, sponsoring administration staff, nor do they ImF recommends independent US 11% and partnering at early stages need the partners.” audit of ukrainian banks Malaysia 9% and encouraging technology Jenner says that as a result of An International Monetary Singapore 8% entrepreneurs to be bold. ” the acquisition Baker Tilly’s average Fund (IMF) mission to Ukraine Australia 5% profit distributed to partners will go has recommended authorities Other 40% uK down significantly. “And the higher conduct an independent audit of rsm Tenon’s shareholders lose this figure is, the more profitable the the country’s banks to increase out to Lloyds banking Group business,” he said. confidence in the sector. A report by RSM Tenon’s Between 17 and 29 October administrators Deloitte has us an IMF mission led by Nikolay revealed that while RSM Tenon’s eY us settles up with Lehman Gueorgiuev visited the country creditor Lloyds Banking Group will brothers investors to hold discussions for the 2013 receive £29m ($46.7m) of the £86m EY US has agreed to pay $99m to Article IV Consultation and the owed, there will be no return to former Lehman Brothers investors first Post-Program Monitoring shareholders. who had accused the auditor of Review. Gueorgiuev said, The report revealed that Baker helping Lehman misstate its overall, Ukraine’s economy was Tilly UK acquired RSM Tenon for an financial records before the bank’s showing signs of improving, but aggregate value of £30m, comprising collapse in 2008. considerable challenges remained. Join our online community £1m in cash for RSM Tenon’s shares, The firm said it denied all To meet these, Gueorgiuev made £22m to settle bank debt and £7m liability, but was settling the case a number of recommendations, working capital adjustment. “to put this matter behind us” in a including “the use of independent LinkedIn Group Andrew Jenner from Kato statement. Additionally, the firm bank audits to ascertain asset World Accounting Intelligence Consultancy said: “Lloyds cut their said “Lehman’s audited financial quality and the adequacy of loan losses and if they hadn’t come down statements clearly portrayed classification, provisioning, and to this the business would have Lehman as what it was – a highly collateral”. < Twitter WAI_News movers & shAKers

Facebook page KpmG has appointed a global effective on 1 January 2014. to 31 december 2014, by which World Accounting Islamic finance leadership team Berson is chief executive officer time he will have worked in Intelligence to support its growing Islamic of BDO USA, and previously the role for five years. The finance practice. The team is led worked as BDO USA’s Atlantic firm said its partnership board by samer hijazi of KpmG uK, and regional business line leader for has asked Chipman to stay on scan our Qr code for quick features six other partners from assurance services. He has been for another year as the board smartphone access to IAB the middle east, malaysia and a member of BDO’s board begins a succession process in south Africa. The firm said the of directors since 2009 2014 to find and appoint his team is intended to aid closer and has served as the successor. coordination of service teams board’s presiding in the development of Islamic member since 2010. Alliott Group has finance products and services. elected Ken Lee as the stephen Chipman’s association’s Asia-Pacific Wayne Berson has been (pictured) term as chairman. Ken Lee heads up appointed chairman of the global chief executive of Grant Alliott Group’s Chinese member board of BDO International, Thornton us has been extended firm Lee & Lee Associates.

2 y November 2013 www.InternationalAccountingBulletin.com International Accounting Bulletin AnALYsIs/FIrm movemenTs news

AdvIsorY Booz deal puts PwC on path to rebuilding advisory business

ong gone are the days when the largest However, the collapse of Arthur Ander- create a standout professional services accounting firm corridors were domi- son in the wake of the Enron scandal sent organisation that delivers first-class quality nated by accountants and auditors. shock waves through the profession. The services to a broad range of stakeholders. In Today, advisors are taking up more collapse was followed by the introduction particular, it would give CEOs the opportu- L of Sarbanes-Oxley which imposed a ban nity to work with a global consulting team and more office space at top-tier firms. PwC announced at the end of October on providing IT system advisory services to that could provide services from strategy that it is to merge with global consultancy audit clients. This lead the Big Four, except development right through to execution.” Booz&Company, which is likely to boost Deloitte, to sell of their mainly IT-based The deal comes at a time when firms are PwC’s advisory fees by $1.4bn annually. advisory businesses. As a result, in 2002 struggling to grow their business via tradi- The deal is still pending approval from PwC sold its advisory business to technol- tional service lines such as assurance and Booz & Company’s 300 partners, as well ogy giant IBM for just under $4bn. Since most of the Big Four have been making sig- as regulatory approval, but, if finalised, it’s then, things have changed and instead of nificant investments worldwide which are likely to boost PwC’s global revenues and system advisory, firms have started to look boosting their advisory capabilities. perhaps enable it to recoup the title of larg- at offering management consulting and Despite the business opportunities, the est global accounting firm from Deloitte focused on areas such as forensics, social large firms are still in the spotlight due to which, this year for second time in four media and big data-related services. their size and many have questioned the years, overtook PwC in the race to be the Booz & Company has 3,000 staff in 57 conflict of interest that could arise from largest firm by fee income, mainly due to offices worldwide and specialises in man- having a large audit and advisory practice Deloitte’s advisory business. agement consulting. under one roof. In the EU, for example, For some, PwC’s announcement felt like PwC global chairman Dennis Nally said: the Parliament, Commission and Council a blast from the past as the Big Four already “We believe this proposed combination of are currently looking into imposing more had strong advisory practices over a decade Booz & Company with our existing assur- restrictions on firms and services they can ago. ance, advisory and tax capabilities would provide to audit clients. < FirmMovements

Grant Thornton Cape Town and PKF in Chester, Liverpool, manchester, Houston-based firm Margolis, Phipps advisory services.

Cape Town have merged, effective warrington and widnes. The firm & Wright (MP&W). The acquisition is BKR International has admitted the

from 1 January 2014. As part of the specialises in accounting and expected to be completed on Chinese firm Jinghua CPAs Company

merger, PKF Cape Town will bring advisory services. 2 December. As part of the deal, all and Spanish firm Gesem to its ZAR52m ($5m) in revenue, nine of MP&W’s 100 employees and 14 HLB International has added association. Beijing-based Jinghua’s partners and 120 staff to Grant leaders are to be offered roles at Tanzanian firm Mekonsult and Italian five partners and 43 staff offer Thornton Cape Town, bringing McGladrey, which will continue to use firm Studio IFF Inturri Frangipane accounting, audit and consultation the firm’s revenue to R172m, with MP&W’s existing Houston offices. Ferrandi to its network. services from its three offices, all in 26 partners and 318 staff. This is nexia International has added a Beijing. Alicante-based Gesem has the third PKF office to join Grant brazilian firm partwork Associados firm in egypt and saudi Arabia nine partners and a staff of 16, and Thornton International in South has joined association Geneva to its network. middle east for its services include tax, accounting, Africa, following mergers with PKF’s Group International (GGI). It has Consultation, based in Cairo, has audit and financial assistance. representatives in Johannesburg and five partners and more than 100 four partners and 80 professional George. professional staff and its addition staff. Al Tala CpA in saudi Arabia AGn International has added gives GGI seven firms in brazil. Kreston International has added uK has 27 staff in offices in riyadh hilson Fagerlund & Keyse from firm mitchell Charlesworth to its RSM International’s US member firm and Jeddah, offering audit and new Zealand to its network. based network. mitchell Charlesworth has McGladrey has agreed to acquire assurance, tax, zakat, outsourcing, in Christchurch, hFK counts five 17 partners and 140 staff in offices substantially all of the assets of risk management and business partners and 34 staff.

www.InternationalAccountingBulletin.com November 2013 y 3 CommenT AubreY JoAChIm International Accounting Bulletin

Big data insight can deliver strategy Former president of the Chartered Institute of Management Accountants Aubrey Joachim shares his expertise on big data and how accountants can use it to their advantage

ig data and analytics have been what’s happening. the buzzwords of the past few But even this is falling below expecta- years, and there’s a whole new tions. Tomorrow’s organisations expect industry emerging around their finance professionals to provide B predictive insights that will enable them. Since the emergence of big data, decision-makers to develop strategy more or less everyone has started to and deliver strategic outcomes. use it – more or less everyone else has World-class finance functions see to. Companies use analytics to seg- their finance professionals as business ment their marketing, scientists to partners, getting significantly more identify correlations between lifestyle involved in organisational strategy, and disease, governments to foil terror- from a proactive and predictive stand- ist attacks, not-for-profits to identify point. potential donors, and banks to arbi- Getting to grips with big data and trage tiny differences in market prices. business analytics will provide finance Understanding and interpreting professionals with the ideal platform data is part of the role of accountants. to achieve a higher standing and rec- The new technology of data capture, ognition as truly value-adding business storage and analysis should be a gift to the and statistical tools. In today’s dynamic busi- partners. In this context, finance has not rec- accounting profession. Analytics are not ness environment, business managers need ognised its latent potential. only exciting in their own right: they prom- much more insight if they are to deliver the The finance function has the prerogative ise to reinvigorate the finance function’s role. strategic outcomes for their organisations of cutting across all data sources across the They present accountants with a formidable and keep ahead of the competition. organisation. Yet very few finance profes- opportunity to shape business strategy. The information expectations of business sionals have exploited this position to gain Finance professionals have traditionally managers offer a significant opportunity for and share predictive insights in respect of the been the producers of management infor- finance professionals to demonstrate their organisation’s performance. mation in respect of organisational perfor- capabilities. However, they need to look Now is the time to get involved before mance. However, this information has most- beyond the single-plane financial perspective the opportunity is taken away from them. ly been of a financial nature and providing a they’ve been focused on for so long. Finance professionals and accountants historical view of performance. This context It must be recognised that the financial in particular must recognise that they too of information provision falls typically into outcome of any organisation is only a con- have a very powerful toolkit which can the definition of analysis, which is a histori- sequence of whatever happens in the organi- complement the features offered by business cal view of what has happened in compari- sation in the context of both internal and analytics. son to what was planned to happen. external circumstances. What they should recognise is they must Today these internal and external circum- be open to the idea of transforming them- variance analysis stances are reflected as vast volumes of data. selves by looking and thinking outside the Accountants term this as variance analysis. It’s only the application of business analytic box. Big data and business analytics is an This information is only single-plane and skills, competencies, tools and techniques opportunity that shouldn’t be missed. delves into the detail of what happened in that can unlock significantly more business And it is not only accountants in prac- financial outcome terms, sometimes not even intelligence but also translate today’s big tise who can, should, or are harnessing the answering the ‘why’. data into predictive insights. potential of big data. Several of the large Being able to answer the ‘why’ requires What are the opportunities finance profes- accounting firms have made significant framing the single-dimension financial data sionals can explore in the context of big data investments toward acquiring analytics skills against other multiple data sets such as cus- and business analytics? as part of their advisory offering. tomer, market, economic data and many For a start, they must realise that merely Additionally, as the role of the auditor and more. This type of multidimensional com- looking back at what happened is insuf- the need for a more forward looking view parison of data can only be done using busi- ficient. They must be able to contribute increases, big data might play a significant ness analytics skills, management accounting to providing at least a dynamic view of role in future developments. <

4 y November 2013 www.InternationalAccountingBulletin.com International Accounting Bulletin CorporATe reporTInG FeATure

In the beginning God’s report was shorter

BDO UK senior audit partner James Roberts speaks to Jonathan minter about how quantity is triumphing over quality in corporate reporting and how a key challenges for the profession is to reverse this

n recent years there’s been much talk generally accept it and move on. about cutting clutter and complexity Now people want to know the in annual reports from all sides and actuarial assumptions involved, industry stakeholders. In the UK espe- the return on investment from I underlying assets of the pen- cially, corporate reporting has been a key issue on regulators’ and firms’ agendas. sions scheme, and what varia- For BDO partner James Roberts, a Bib- tions there would be in a profit lical comparison proves the ideal way to and loss account should there show an increasing problem with the length be variations in underlying of corporate reports. He points out that assumptions. As a result there UK regional bus company The Go Ahead is a lot of input data as well as a Group’s last annual corporate governance lot of output data.” statement was longer than the entire Book Because of all this, accounts of Genesis, which describes how God cre- are getting longer and more ated the world and everything in it. complicated, and Roberts adds Roberts argues that corporate reports that the accounting language have become unnecessarily long and com- and their format are only add- plicated, increasingly so over the past 20 ing to the complexity. years, as a growing number of stakeholders There is also currently an “alphabet stew” annual reports because of a few companies request more information, and improving IT of bodies issuing regulations for companies, perceived to be behaving irresponsibly, is systems allow companies to do so. and in some cases this is more complicated using a sledgehammer to crack a nut. Part of this has come from the change in that it needs to be for the real world, he says. It’s also an example of an increasing trend who the accounts are meant for, and Rob- Despite all these problems, Roberts argues in “the EU and the UK government of using erts says we have moved from a world where strongly in favour of keeping single gener- reporting as a tool of government policy, stakeholders included the lenders and the al-purpose corporate reports, pointing out and as a tool that’s a bit awkward”. investors, to a world where the stakeholders that “the last thing a company wants is to Despite suggesting some methods of alle- include the local community, the tax depart- produce 22 different reports for 22 different viating the growing length and complexity ment (HMRC), the government, environ - interest groups.” of reports, other problems will take longer to mentalists, and society in general. Looking at ways of improving reporting, resolve, and will require regulatory updates. This puts pressure on the breadth of Roberts suggests “there are eight or nine lit- In the UK, Roberts notes: “The Financial reporting because, for example, oil compa- tle things that could make it more readable Reporting Council is talking about cutting nies and local communities might place dif- and enable people to understand the story.” clutter, and its heart is in the right place, ferent emphasis on the importance of carbon Some of these are simply using a more though I would like to see some more con- emissions, for example. intuitive order, and attempting to create a crete proposals.” As a result, Roberts says: “If we’re going single story and theme throughout, “rath- He adds that integrated reporting has also to continue with dual-purpose financial er than have the chairman’s statement, brought up some important debates on who statements in the long term, we need to have the director’s report and a chief executive reports are for, and adds that IFRS looking a clear understanding of what’s going to be report, all broadly repeating one another”. at accounting principles should also help the in them, because when they become so long, To this end, Roberts created a sample situation. Although technology may also it puts pressure on them and they stop being report for a fake company, Terrapinium provide a way of alleviating the need to print of value to individual interest groups.” On Group, which complied with all UK laws off entire reports, “we’re in this awkward top of this, there’s a growing “mistrust of apart from directors’ remunerations, to space between technology being developed business” exacerbated by the financial crisis, demonstrate how corporate reports could enough so that you can almost select your and the ensuing financial scandals. be structured in a much simpler fashion. own report based on your criteria, and hav- As a result, people are less trusting of Directors’ remuneration is another exam- ing to print off 600 pages,” he says. auditors. Roberts says: “A few years ago ple of corporate reporting becoming longer, Corporate reporting is on a journey, Rob- you’d come up with an answer of what your according to Roberts, who says requiring all erts concludes, and though technology may pension liability ought to be, people would companies to publish executive pay in their soon catch up, “we are not there yet.”<

www.InternationalAccountingBulletin.com November 2013 y 5 FeATure nATurAL CApITAL International Accounting Bulletin

What price the priceless?

As natural resources become scarce, businesses may need to incorporate nature in their balance sheets and financial statements by giving a price to natural assets such as air, ancient woodlands or natural habitats. vincent huck looks at the latest trend in natural capital accounting

egend has it that the Chagga tribe, activities, but also to make these activities he says. “The same ideas were discussed at which lives on the slopes of Kili - more profitable. both conferences, but at the original con - manjaro, believed the mountain was Or as the World Forum on Natural Capi- ference there were no businesses present, sacred. tal programme director Jonathan Hughes whereas last year plenty of leading busi - L explains: “Are we using natural resources nesses attended.” This belief was rooted in the fact that when they tried to climb the mountain to in a way that the renewing part of these At the moment, NCA is at a debate stage get to the shining precious stone at the top, resources can renew themselves quickly with many initiatives independent of each they would feel ill and dizzy. And if they enough? We are running a natural capital other trying to bring ideas into practice. did make it to the top, the shining precious debt that we won’t be able to pay back.” “Through the Natural Capital Commit- stone would have turned into water by the Natural capital has been discussed, debat- tee, the UK is looking at developing NCA at time they came back down again. ed, written about, criticised and promoted state level, and therefore is one of the leaders Of course we now know that altitude for the past 30 years, but mostly behind in the debate,” says Association of Certified was the cause of their illness, and what they closed doors and in academic circles. Chartered Accountant (ACCA) sustainabil- thought to be shining precious stones was ity advisor Gordon Hewitt. “But a lot has in fact snow. This legend is a good allegory widening debate also been done elsewhere through initiatives for our knowledge of, and relationship with, In recent years the debate has widened to such as the Wealth Accounting and the Valu- nature, and it links to a more current debate a global audience, due partly to the ris - ation of Ecosystem Services (WAVES).” about natural capital, and natural capital ing importance given to ethics in business WAVES is a global partnership launched accounting (NCA). practice, but also because businesses have in 2010 with Botswana, Colombia, Costa Natural capital refers to the stock of capi- now perceived that a shortage of natural Rica, Madagascar and the Philippines as tal derived from natural resources. In other resources is an existing threat and a tremen- the initial core implementing countries. The words, it refers to the elements of nature dous risk to the survival of their activity. As partnership now counts 65 countries. which directly benefit or underpin human KPMG UK lead specialist in natural capital Since its inception WAVES has tested well-being. NCA, in the words of the Insti- Stephanie Hime explains: “Natural capital the feasibility of NCA across five countries. tute of Chartered Accountants of England has moved from a reputational issue to one The implementation phase in those coun- and Wales (ICAEW) head of sustainability of operational significance for businesses.” tries has now started and is expected to last Richard Spencer, is “a new discipline which Spencer says this shift in businesses’ per- four years. highlights the impact of business activities ception was very clearly apparent at the “Australia is also very active on the NCA on the natural world”. Rio+20 United Nations Conference on Sus- front,” Spencer says. “It’s the only country At the heart of the debate is the ques - tainable Development last year. which has adopted an accounting standard tion of how to account for a company’s “The main difference between Rio+20 with regards to natural capital.” impact on nature in order to protect the and the original Rio conference in 1992 In 2007, Australia’s Bureau of Mete - natural resources which are essential to its is the number of businesses that attended,” orology set up the Water Accounting

6 y November 2013 www.InternationalAccountingBulletin.com International Accounting Bulletin nATurAL CApITAL FeATure

Development Committee, which two years to be best suited to help the process. later became the Water Accounting Stand- As Climate Disclosure Standards Board ards Board (WASB). (CDSB) executive director Lois Guthrie says: The exposure draft of the first Austral- “Accountants have a 100-year-plus history ian Water Accounting Standard (AWAS 1) of accounting for money and things that was published in 2010, followed a year later businesses need to flourish. by the publication of the AWAS 2 exposure “Although accountants focused on money, draft. Both standards were finalised in we now know it’s not the only thing com- 2012. panies needs to flourish. They have to look Another major initiative in the field of at things such as ecosystems, biodiversity, NCA was launched in 2012 when The water, healthy soil, timber, medicine, fuel.” Economics of Ecosystems & Biodiversity This represents a challenge for business- for Business Coalition (TEEB for Busi- es as NCA is still at a development stage, ness) was formed in Singapore. Among the and there’s no single universally accepted founding organisations and supporters are way of incorporating natural capital into a the ICAEW, the Prince of Wales’s Account- business’s accounts. ing for Sustainability Project, the Interna- “There are no universal standards at the tional Union for Conservation of Nature, moment,” says ACCA’s Hewitt, “so differ- the World Business Council for Sustain- ent groups and organisations are looking able Development (WBCSD), The Global at ways of doing things, and accountants Richard Spencer Reporting Initiative and the World Bank. with their skills and experience should get involved in this type of thinking.” natural and social capital valuation For KPMG’s Hime, there will be two natural assets is only one of the options dis- TEEB for Business aims at supporting the ways of including natural capital in a com- cussed, it has become the main controver- development of methods for natural and pany’s account. “One is to use environmen- sial question around NCA. social capital valuation in business. And tal economics modelling to estimate the “There is some debate about the finan- herein lies the main issue around NCA: it is cost of impact and dependencies,” she says. cial valuation because some say it leads to widely accepted that natural capital should “And the other is to look at current account- the commoditisation of nature and others appear in a company or a state’s accounts, ing rules and apply them with natural capi- believe that some things are just priceless for but how, and in which form, is still unclear. tal in mind.” spiritual or historical reasons,” Hewitt says. For many, this is where accountants have The latter is preferred by Guthrie, who “All those arguments are valid, but I an important role to play. The debate has believes accountants have the necessary think it’s more dangerous not to try and reached a turning point where ideas have to tools to engage with natural capital. She quantify natural capital in monetary be put into practice, and accountants appear says they should follow a four-step meth- terms, because what we are trying to do is odology. “First, natural capital has to be incorporate it in economic decisions, and characterised,” she says. “Whether it’s an it’s very hard to do that if you don’t have a asset, a liability, an option or a conditional comparable figure.” promise, unless you characterise, it’s very The main argument for those in favour difficult to know where to place them in the of putting a price tag on natural assets is system of accounting.” that money is a language that businesses The second step is to measure and understand. account depending on the characterisa- “Monetary valuation serves a purpose as tion that has been chosen. This is a tricky being a language to understand the relative part that divides most stakeholders. Some magnitude of different outcomes,” Guthrie believe that natural capital should be given at the CDSB says. “We don’t have any other a monetary valuation – in other words put- language available at the moment.” ting a price tag on priceless ecosystems and Hughes from the World Forum on Nat- natural resources. ural Capital agrees, and even though he But another way to account for the extent says putting a value on natural assets will of a business’s impact on nature would be always be approximate, he adds “it gives an to look at quantities such as litres or met- understanding of the importance and value ric tons. “You need an underlining unit of these assets in a way that was invisible which represents the extent of the impact,” before, and that can now help businesses Guthrie says. “And the unit itself can be as to make decisions on how to manage those informative as the financial value of that assets”. same unit.” The third step, according to Guthrie, is Jonathan Hughes Even though putting a financial value on the reporting which derives directly from the

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first two steps: characterisation, financial statement.” and measuring and accounting. Another challenge, she says, “If you look at it in terms of is that there are so many dif- financial value or quantitative ferent frameworks being devel- value, these are figures that oped at the moment it creates can appear in a balance sheet,” scepticism as the message is ICAEW’s Spencer explains. refined. “But if you look at it in terms of With different actors looking quality, it will be in the narra- at different ways to account for tive part of your reporting.” natural capital, and no organi- Despite agreeing that finan- sation taking the lead in coordi- cial valuation of natural assets nating those efforts into build- can be controversial, Hughes is ing a single universally recog- against the qualitative narrative nised framework, it seems NCA approach. still has a long way to go before “You can’t just include a cou- it becomes standard practice. ple of projects in your final But at the end of Novem- report and that’s your cor- ber the first World Forum on porate social responsibility Natural Capital will take place ticked,” he says. “There needs in Edinburgh. Hughes, as part to be a rooted systematic mech- of the organising committee, anism by which you explain explains the primary goal of your relationship as a company the forum is to highlight the with the environment in which critical obstacles and start to you operate. It’s a much more agree on common elements for rigorous approach than telling a standard. the nice story.” Lois Guthrie “In a nutshell, we want the Hughes believes this rigorous forum to be the turning point approach will be a great tool from rhetoric to reality,” he against ‘greenwashing’, the term referring consumer behaviour, or to change the busi- says. “And the really exciting thing about to PR work used to promote the perception ness model?” the forum is that it will bring together that an organisation’s products, aims and An important consensus behind the idea governments, NGOs, academics, business- policies are environmentally friendly. of NCA is that it is not only about nature es, accountants and conservationist.” “We are talking about an objective natu- preservation, but also about enhancing ral capital accounting approach where it’s businesses’ profits. milestone much more difficult to spin the findings “We have always known that we had lost Guthrie says that even though the forum because, as we move towards common the ecological value,” Hughes says. “But hasn’t taken place yet it already has been standards and proper auditing of the results, what we failed to understand is that we lost described as a milestone. it will be real figures and much harder to get the economic value as well.” “It will be the opportunity to start estab- away with greenwash,” he says. lishing networks and agreements,” she says. He’s quick to remind everyone that NCA risk management and savings While natural capital makes its way is not a threat to businesses but an opportu- ACCA’s Hewitt agrees and believes more through a wider audience and installs itself nity. “It will ensure a stable supply of natu- companies should start considering natural as a necessity for business survival, Hughes ral resources to run a business and minimise capital as they will benefit from better risk suggests it will slowly become “a new mar- price volatility,” he says. “But it’s not that if management and cost savings. ket for firms to get involved in, there will you do NCA you suddenly become sustain- For Hime at KPMG, the purpose of NCA be a need in the future for this service to able. It will only enable businesses to make should be the starting point of the debate. be provided so it makes sense for firms to more informed decisions.” She says the main challenge will be the choice understand this concept”. This idea goes hand-in-hand with the of language. “There are several definitions There is no doubt that in the dangerous CDSB’s Guthrie’s fourth step, which is the of natural capital,” she says. “And each act of valuing or pricing our environment, purpose. “To what use will this information uses language that need defining too. The accountants will have the tough responsi- be put? Who uses it and what will they do main challenge at the moment is that we are bility of keeping the balance between price with it?” she asks. still in the process of getting the debate out and value. Spencer agrees: “Scaling and valuing of the academic world and putting the But in a world increasingly looking anx- is great, but what are you going to do ideas into practice. It’s obvious accountants iously at the effects our actions are having about it? Do we want to use this value to have a role to play in this process because on our world, the march forward of NCA design new regulations, or is it to change they ultimately govern what goes in the would seem to be unstoppable<

8 y November 2013 www.InternationalAccountingBulletin.com International Accounting Bulletin AusTrALIA CounTrY surveY

New measures and mergers down under A change of government, industry consolidation and regulatory developments have made for an interesting 12 months in the Australian accounting market. paul Golden reports

peaking at the 2013 IMF and World improving their lock-up days and workflow However, he expects further consolidation Bank annual meetings, the new Aus- throughout,” Blacklaw says. “We anticipate in the mid-tier market with KPMG, EY tralian Treasurer Joe Hockey stated there will be more mergers over the next few and PwC following Deloitte’s strategy in that, as an open economy with a years as firms seek to differentiate and oth- Australia by acquiring second- and third- S ers bulk-up to accommodate their invest- tier practices and developing a strong large natural resources sector and a freely floating currency, Australia has a long ment in order to receive economies of scale history of living with external volatility. and improved ROI.” n AusTrALIA The accounting industry has exhibited “I wouldn’t be surprised if there’s a little top 20 fIrms – fee dAtA similar levels of unpredictability recently, more consolidation in the middle tier, but according to many firm leaders interviewed we think much of the M&A will be driv- Fee income by International Accounting Bulletin. en by firms acquiring new capability in rank name (A$) Growth For example, BDO Australia national advisory areas,” says Robert Quant, chief 1 PwC* 1,470.0 –1% chairman Helen Argiris refers to partners executive, Grant Thornton Australia, while 2 EY* 1,120.0 0% “jumping from firm to firm”. Stephen Roger, BDO’s Argiris believes a lack of succession Asia-Pacific regional executive director planning will see the larger firms become 3 KPMG* 1,113.0 –1% BKR International, says there is “an identity even bigger and that smaller firms will start 4 Deloitte* 1,092.0 –1% crisis in the second tier of the profession” as grouping together, using structures where 5 Crowe Horwath 344.1 –3% a result of recent consolidation, while Greg they share their premises, back office and International Hayes, director of Morison International infrastructure and where members are 6 Grant Thornton Australia 223.0 –4% specialised and get referrals from others. member firm Hayes Knight reckons mid- 7 RSM Bird Cameron 140.0 4% tier firms are “in a bit of a feeding frenzy”. Neil Wickenden, partner at HLB Interna- tional Australian member firm HLB Mann 8 Baker Tilly Pitcher Partners 97.1 4% Last year’s IAB country report referred to Melbourne mergers and acquisitions creating a “power Judd observes that mergers have had a 9 BDO East Coast Partnership 79.6 5% shift”, although this doesn’t always produce slightly unsettling effect on the profession, the expected result, as Mark O’Connor, and that merged firms may have found their 10 Hayes Knight (1) 35.4 12% partner in MSI member firm Cutcher & profitability impacted while bedding down 11 Hall Chadwick Sydney (2) 35.3 11% Neale explains. “Increased merger activ- their ‘new’ practices. 12 Moore Stephens – 35.1 13% ity and consolidation of regional practices “There’s no doubt [further] mergers are on Melbourne into network firms will create some chal - the cards with firms looking to stay in touch 13 HLB Mann Judd Sydney 26.7 0% with the top 10,” says Ian Stone, chairman lenges for smaller firms,” he says “particu- 14 Baker Tilly Pitcher Partners 25.7 12% larly those that may need, but cannot access, Nexia Australia. “These mergers are more Brisbane resources to complement their own.” likely to be local than driven by internation- 15 Bentleys Brisbane (3) 22.4 6% However, O’Connor also anticipates fur- al network changes. 16 Baker Tilly Pitcher Partners 21.2 3% ther consolidation due to increasing compe- “There’s still some movement by partners Sydney in those firms who may be unhappy with tition between firms to provide a wide range 17 Prosperity Advisors Group 15.7 –4% of services, including those not traditionally the new merged firms and this can cause (4) offered by firms outside the Big Four. disruption if two or three partners decide to 18 Baker Tilly Pitcher Partners 10.6 2% Some potential retirees have decided to leave. I also see succession issues in smaller Adelaide stay on for a few more years to get their practices as ‘baby boomer’ owners wish to 19 Gooding Partners (5) 10.0 26% find suitable replacements who can afford practice into better shape for a potential 20 UHY Haines Norton Perth 9.6 9% future sale, says Alec Blacklaw, director of large goodwill payments.” (e) IAB estimate; (1) Hayes Knight is a member firm of Morison International, McKinley Plowman & Associates and MSI According to Marco Carlei, chairman (2) Hall Chadwick is a member firm of AGN International, (3) Bentleys is a member firm of Kreston International, (4) Prosperity Advisors Group is a member area representative for Asia-Pacific. of Moore Stephens Australia, the full firm of IAPA (5) Gooding Partners is a member firm of DFK International. “Other mid-tier firms have focused on impact of the 2012 mergers is yet to be felt. Source: International Accounting Bulletin

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consulting offering. our taxation advisors can more confident- firms don’t have depth of capability around David Tomasi, association chairman at ly advise clients on how best to structure more specialised or complex matters. There UHY Haines Norton, describes audit as a their affairs in order to meet their taxation are only a limited number of firms deliver- major driver for consolidation with regu- obligations.” ing business advisory (including succession latory changes over the past decade – and HLB’s Wickenden says an apparent planning) on a comprehensive basis. increased review by regulators – impacting improvement in consumer sentiment may “However, superannuation advice is a capacity within smaller firms. be attributable to factors other than the huge growth market and while there are an Mergers have had a destabilising effect on change in government, such as the long increasing number of competitors, market the mid-tier, and the profession generally, period of low interest rates and the accom- growth is outstripping advice growth.” claims John Brazzale, managing partner at panying deleveraging of household debt, At MSI, Blacklaw says demand is strong- Baker Tilly Pitcher Partners, who reckons the relatively strong Australian dollar, est for value-added services such as business there will probably be more consolidation the sustained relatively low level of unem- improvement, strategic planning, intergen- as a number of global firms without repre- ployment and the rising stock market and erational business transfer and succession sentation in various states endeavour to fill housing market. planning/management, while O’Connor the gaps. Nigel Lafferty, partner at Alliott Group explains wealth management has been a September’s change in government is member SLS Accounting is more downbeat, strong driver for his business. expected to deliver enhanced regulatory suggesting an initial spurt of consumer “Services representing compliance and certainty, which may help improve eco- spending post-election was short-lived, advisory in business structures, investment nomic confidence, according to Nigel Banks, although he also expects some “sensi - and retirement planning have been sources director of Kreston International member ble and positive policy” to be enacted in of growth, says O’Connor. “Competition firm Bentleys NSW. Banks says: “In early 2014 and 2015 “which will assist business for compliance services is building with November, Joe Hockey outlined the govern- investment and also assist exporters.” many low-cost/low-fee options emerging to ment’s intentions in relation to 92 of the 96 When asked what services are in greatest offer competition for the traditional compli- tax-related measures announced by former demand and how much competition there is ance role filled by public accountants.” governments over the past 12 years which for them, Morison’s Hayes refers to moder- Grant Thornton’s Quant agrees that cli- have not been enacted. By December, he ate levels of competition for tax advisory. ents are increasingly focusing on profit hopes to announce those changes that will “Mid-size firms are well placed as they are improvement and consolidation. “There not be enacted and those that will find their able to deliver these services more cost effec- are also structural changes in the economy way into tax law. The changes will mean tively than the Big Four, and typically small led by changing technology, economic and n AusTrALIA Networks – fee dAtA Fee split (%)

Corporate Fee income Growth Audit & Tax management Corporate recovery/ Litigation rank name (A$m) rate (%) Accounting services consulting finance Insolvency support other Year-end 1 PwC* 1,470.0 –1% 31 24 - - - 45 Jun-13 2 EY* 1,120.0 0% 43 30 - - - - 27 Jun-13 3 KPMG* 1,113.0 –1% 35 19 - - - - 46 Jun-13 4 Deloitte* 1,092.0 –1% ------May-13 5 Crowe Horwath International* 344.1 –3% 64 6 - 2 - - 28 Jun-13 6 BDO* 226.5 8% 28 46 8 5 11 2 - Jun-13 7 Grant Thornton International* 223.0 –4% 27 39 8 6 14 2 5 Jun-13 8 Baker Tilly International* 161.7 6% 33 32 10 3 12 - 9 Jun-13 9 RSM* 140.0 4% 59 12 11 2 11 - 5 Jun-13 10 Moore Stephens International* 122.5 –9% 63 15 - 2 4 - 16 Jun-13 11 HLB International* 90.8 0% 71 11 - 2 6 - 10 Jun-13 12 Nexia International* 87.3 5% 69 18 6 2 2 2 3 Jun-13 13 Kreston International* 87.1 –5% 33 31 4 1 25 - 6 Oct-12 14 UHY International* (1) 37.8 0% 53 41 5 - - 1 - Jun-13 15 PKF International* 15.3 –87% 57 42 - - - 1 - Jun-13 16 ECOVIS International* 4.6 11% 5 60 35 - - - - Jun-13 17 Reanda International* 3.2 15% 36 33 9 - - - 22 Jun-13 Total revenue/growth 6,339.0 –2%

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. (e)=IAB estimate (1) UHY is represented by the association UHY Haines Norton in Australia. Source: International Accounting Bulletin

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competitive pressures. In particular, we are Lack of talent and interest bullish about our recovery and reconstruc- tion capabilities, business risk, indirect tax It has previously been suggested that view shared by David Tomasi, who says: and consulting offerings which focus on migration among young professionals “Providers are shrinking as regulation profit improvement.” could leave the accounting industry in increases and the brain drain goes to com- Clients are still searching for competi- Australia with a skills shortage. However, peting industries. It’s my belief that expe- tive prices, which results in firms looking at Stephen Roger says lack of interest in audit rienced professionals will become scarcer ways to improve service at a lower cost plat- is perhaps more of a concern. over the next 10 years or so, as the current form, observes Nexia’s Stone. “This could “In common with other parts of the crop moves towards retirement.” be through using new technology. There is world there are fewer people looking to get While accepting it’s not easy to get good also further interest in outsourcing some involved in the audit aspect of the profes- people, John Brazzale believes redundan- parts of service lines to countries such as sion and more interested in international cies in the Big Four have freed up some India or the Philippines.” tax and expatriate transfer pricing,” Roger good talent. Traditional service lines are still required, says. “Fewer young accountants want to However, Tim Davidson is concerned but clients expect a proactive service, mainly register as company auditors because the by salary demands and the shortage consulting which includes strategy, change qualification regime is extremely onerous. of registered auditors among small to management and profit improvement adds The decline in registrations has levelled medium-level practices. He says: “Suc- Carlei at Moore Stephens, who states clients off, but we have a lot of older auditors cession planning is still a huge issue at are willing to entertain approaches from who will be leaving the profession over this end of the market. There is a real other firms that have these capabilities. the next decade.” shortage of people who want to become AT BDO, Argiris describes consulting Kim Hutchinson reckons the industry equity partners in firms, and the ‘goodwill as the key growth service in 2013 and faces a challenge in terms of attracting practices’ are finding it increasingly dif- tax compliance and business advisory as and retaining quality staff in an environ- ficult to attract new partners and meet the the biggest fee contributors. She says: ment of increased regulation and risk, a retirement needs of exiting partners.” < “Transaction-related work took a bit of a dive due to economic conditions and diligence work in advance of an expected According to Lafferty at Alliott Group, uncertainty in the political arena. This upturn in the volume of IPOs in 2014. “We general business services have been in seems to be settling now, particularly with are receiving approaches from investment demand over the past 12 months and work- the change in government and renewed banks to encourage clients who meet the outs are in vogue. “Demand for mergers confidence in the economy and business criteria to complete ‘sophisticated investor’ and acquisitions and due diligence gener- arena.” forms so they can be kept on file and contact- ally has fallen, although as economic condi- Roger at BKR refers to an increase in due ed when these IPOs are issued,” Roger says. tions improve there have been small signs of

n AusTrALIA AssoCIAtIoNs –fee dAtA Fee split (%)

Corporate Fee income Growth Audit & Tax management Corporate recovery/ Litigation rank name (A$m) rate (%) accounting services consulting finance insolvency support other Year-end 1 Praxity* (1) 63.6 –12% 61 12 6 4 3 - 14 n/a 2 AGN* (2) 57.0 5% 32 1 - 3 64 - - Jun-13 3 PrimeGlobal* 47.1 9% 49 26 8 2 - 1 14 May-13 4 DFK International* 45.8 12% 43 39 12 1 - - 5 Sep-12 5 BKR International* 41.2 –2% 53 32 6 - 9 - - Jun-13 6 Morison International* 35.4 12% 42 21 21 16 - - - Jun-13 7 IAPA* 33.9 0% 45 24 6 - - - 25 Jun-13 8 MGI* 30.8 23% ------Jun-13 9 Alliott Group* 26.5 3% 67 19 6 1 2 2 3 Dec-12 10 GMN International* 24.7 5% 55 33 9 1 - 1 1 Jun-12 11 Integra International* 17.2 0% 50 35 15 - - - - Sep-13 12 MSI Global Alliance* 16.7 18% 59 23 17 - - - 1 Jun-12 13 KS International* 16.4 –5% 75 10 8 5 - - 2 Jun-13 14 INPACT Asia Pacific* 1.9 10% 67 18 2 5 - - 8 Dec-12 Total revenue/growth 458.1 4%

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) Praxity’s 2013 figures do not include Mazars’ results, (2) AGN International is represented in Australia by Hall Chadwick. Source: International Accounting Bulletin

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pick-up in this area.” demand is from clients who want advisory prospects for the accounting profession in The top 10 accounting firms in Australia services with their accountant playing a Australia as a continuation of tough times had a tough past 12 months with the major- more hands-on role in their business,” he with ongoing pressure on fees and salary ity reporting a decline in their revenue, says says. “This would include wealth manage- demands and the proliferation of cloud- Geoff Kidd, international liaison partner, ment advice, private office or outsourced based accounting applications which is mov- Crowe Horwath Australasia. solutions, through to developing a strategic ing compliance work from the accountant “Tax and business advisory are the fastest or succession planning solution for their to the client. “The audit profession is also growing areas and all businesses are mov- business.” struggling with ongoing fee pressure and ing strongly into the advisory space, Kidd Competition is robust across most areas, unrealistic fee quotes, says Davidson. “Tax says. “Merger and acquisition activity has particularly as the Big Four push into more advisory business is still growing, as is finan- been subdued, so corporate finance out- of the middle market. That is the view of cial planning. Value-added services such comes have been patchy. There’s an expec- Kim Hutchinson, national chairman of as business planning are also in demand, tation that the change in government will RSM Bird Cameron, who adds that demand but this is limited by clients’ ability to improve business confidence, which in turn is stronger in business consulting, specialist engage these services due to their own cost will increase business activity and demand tax areas and self-managed superannuation. pressures.” for advisory services.” On the downside, he mentions some decline The use of outsourcing is increasing as According to David Carpenter, Cutcher in turnaround and insolvency work. cost pressures and the availability of suit - & Neale partner, the most obvious fall in Hutchinson says: “There’s been an impact able staff continues to be an issue, he con- service has been around transactional- on our firm from the Big Four bidding for tinues. “Outsourcing services located in based services. “Not as many new products clients in the traditional mid-tier space, as India, Vietnam and the Philippines are in or projects are getting off the ground, there- there’s been a strong level of fee competition strong demand, although the profession, as by reducing the need for advisory services,” in the audit area and some corporate-relat- a whole, is still struggling to come to terms he says. “Mergers and acquisition activity ed services, particularly for middle-market with the benefits, security of data etc.” remains strong, though.” clients who have not previously been a focus Baker Tilly’s Brazzale highlights com - Kreston’s Banks says his clients are for the Big Four.” pliance work as another area in decline looking for a strong and meaningful rela- Tim Davidson, director of PrimeGlobal as clients take work in-house, while tionship with their advisor. “The greatest member Fortunity describes the short-term Nexia’s Stone says reduced demand for

n AusTrALIA Networks – stAff dAtA

Total staff Growth partners professional staff Administrative staff offices rank name 2013 2012 rate (%) 2013 2012 2013 2012 2013 2012 2013 2012 1 PwC* 5,447 5,713 –5% 428 450 - - - - 10 10

2 Deloitte* 5,240 5,306 –1% 534 520 3,742 3,805 964 981 16 16

3 KPMG* 5,103 5,340 –4% - 400 - 3,798 - 1,142 13 13

4 EY* 4,900 4,900 0% 412 405 - - - - 6 6

5 Crowe Horwath International* 2,101 2,265 –7% 232 237 1,201 1,307 668 721 80 80

6 Grant Thornton International* 1,327 1,391 –5% 138 139 931 977 258 275 6 8

7 BDO* 1,302 1,295 1% 157 156 957 984 188 155 11 12

8 Baker Tilly International* 936 926 1% 82 85 687 684 167 157 5 5

9 RSM* 827 817 1% 83 85 591 584 153 148 28 28

10 Moore Stephens International* 714 886 –19% 92 113 501 613 121 160 14 18

11 Kreston International* 611 592 3% 89 86 403 414 119 92 26 29

12 HLB International* 573 550 4% 83 77 369 362 121 111 12 11

13 Nexia International* 513 532 –4% 78 74 344 369 91 89 8 8

14 UHY International* (1) 250 252 –1% 36 35 173 179 41 38 9 10

15 PKF International* 84 175 –52% 19 30 48 120 17 25 4 5

16 ECOVIS International* 25 25 0% 3 3 19 19 3 3 1 1

17 Reanda International* 25 19 32% 8 8 8 8 9 3 2 2

Totals 29,978 30,984 –1 2,474 2,903 9,974 14,223 2,920 4,100 251 262

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. (e) = IAB estimate (1) UHY is represented by the association UHY Haines Norton in Australia. Source: International Accounting Bulletin

12 y November 2013 www.InternationalAccountingBulletin.com International Accounting Bulletin AusTrALIA CounTrY surveY

transactional services, corporate finance “Smaller firms are feeling price compres- ment, real estate, power and utilities, oil and M&A also impacts the high-level tax sion,” Hayes says, “but are more nimble and gas, and media, telecommunications advice often involved in transactional work. and able to cope with change. As a general and technology. He suggests that even with an economy comment, the profession is struggling to She describes the likely long-term impact showing signs of slowing, insolvency work achieve organic growth.” of the change of government as hard to has been surprisingly slow. According to Carlei at Moore Stephens, define, although in the short term she Pressure on margins for compliance and the profession is suffering from “indiges- expects the new administration to improve audit services is driven by clients who are tion” with too many practices, an ageing stability in financial markets. now less willing to pay for the services they partner population and a skill base not BDO’s Argiris refers to greater focus on don’t see as value-adding, “and some irra- meeting client expectations. Asia-Pacific for growth – particularly China tionally low pricing by many of our com - “The profession is a cottage industry with and India – and says inbound opportuni- petitors who seem to be buying work for the majority of firms’ revenue under A$3m ties will also create greater opportunities for whatever reason,” suggests Grant Thorn - ($2.82m) and consisting of three partners or professional firms. ton’s Quant. fewer,” Carlei says. “At least half of these She says: “The top 100 firms will con - Demand for year-end-only preparation practices consist of partners who are baby tinue to move aggressively into new service of financial statements is also falling, adds boomers who more often than not resist areas outside the realm of straight audit MSI representative Blacklaw. “Clients want change. There should be further consolida- and tax advice, including wealth manage- more proactive and regular CEO and CFO- tion as there are too many firms providing ment (particularly self-managed super fund type support from their accountants, and compliance-only service where clients are advice), real estate advisory, digital consult- are prepared to pay for it,” he adds. demanding a valued-added service offering.” ing and data analytics. Hayes at Morisons describes the health He says the consolidators’ model is “We may see accounting law combinations of the accounting profession in Australia flawed and may pose a succession issue for acting as incubators for start-up businesses as relatively good, even though a chang - practices. “The profession will experience and will see more specialist boutiques, ing business model is causing pressures for significant changes over the next 10 years focused on areas such as commercialisation some firms. “The situation is not consistent with new players entering the market, such of intellectual property,” she adds. “There across all segments of the market,” he says. as insurance and wealth management com- will also be an increased number of firms “The large firms are feeling the pressure of panies,” he adds. that have outsourced all their back office fee compression and some significant areas A spokesperson for EY Australia sug - functions.” of work are contracting (mining, govern- gests the firm is optimistic about business Baker Tilly’s Brazzale expects an increase ment contracts and a reduced amount of opportunities over the next 12 months and in corporate transactions and investment by M&A work, although the latter is showing beyond, particularly in the areas of finan- clients in their businesses and other assets some signs of life). cial services, mining and metals, govern- towards the end of next year.<

n AusTrALIA AssoCIAtIoNs – stAff dAtA

Total staff Growth partners professional staff Administrative staff offices rank name 2013 2012 rate (%) 2013 2012 2013 2012 2013 2012 2013 2012 1 Praxity* (1) 406 447 –9% 57 54 265 322 84 71 5 5

2 PrimeGlobal* 336 297 13% 47 45 210 188 79 64 12 11

3 BKR International* 316 295 7% 51 41 216 214 37 36 21 16

4 DFK International* 289 294 –2% 39 37 186 192 64 65 16 16

5 MGI* 258 160 61% 33 24 176 104 49 32 10 9

6 IAPA* 215 227 –5% 30 29 98 97 87 101 9 9

7 Alliott Group* 202 183 10% 22 18 138 125 42 40 4 4

8 Morison International* 191 175 9% 28 24 136 123 27 28 6 6

9 GMN International* 183 180 2% 24 25 125 122 34 33 9 9

10 AGN International* (2) 180 171 5% 15 15 133 138 32 29 4 4

11 MSI Global Alliance* 133 118 13% 20 19 83 78 30 21 5 5

12 Integra International* 129 129 0% 19 19 84 84 26 26 4 4

13 K S International* 97 101 –4% 17 18 60 70 20 13 3 3

14 INPACT Asia Pacific* 17 17 0% 5 5 10 10 2 2 2 2

Totals 2,952 2,794 1 407 373 1,920 1,867 613 561 110 103

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) Praxity’s 2013 figures do not include Mazars’ results (2) AGN International is represented in Australia by Hall Chadwick. Source: International Accounting Bulletin

www.InternationalAccountingBulletin.com November 2013 y 13 Project4:Layout 1 20/11/13 14:10 Page 1

COUNTRY SURVEY SOUTH AFRICA International Accounting Bulletin

Face of the profession twenty years on As opportunities open up for South African firms across the continent, regulation and fee pressure are slowing domestic growth. Vincent Huck and Jonathan Minter report

I SOUTH AFRICA At a glance

REVENUE

Largest by revenue: PwC, ZAR 4,013m Smallest by revenue: CPA Associates International, ZAR 11.4m Highest growth rate: Mazars, 22% Lowest growth rate: GMN International, –50%

STAFF

Largest workforce: PwC, 4,876 Smallest workforce: CPA Associates International, 30 Most professionals: PwC, 3,816 Most partners: PwC, 283 Most admin staff: PwC, 777 Most offices: PwC, 22

ECONOMIC INDICATORS

GDP: ZAR 3,155.2bn GDP growth: 2.5% GDP per capita (PPP): 11,375.48 Inflation (CPI): 5.6% Current Account Balance: –6.26% Budget Balance: –4.8% Unemployment rate: 25.2% Population: 51,197,000

IAB SURVEY INDICATORS

Revenue per employee: ZAR 730,107 Staff density: 2,311

Notes: Totals apply to IAB surveyed data only. This includes firms that belong to global networks and associations

Source: International Accounting Bulletin, IMF

14 S November 2013 www.InternationalAccountingBulletin.com International Accounting Bulletin souTh AFrICA CounTrY surveY

ext year, South Africa will organise professionals who believe they are at a Moses Kgosana says that the firm’s growth its fifth general election since the competitive disadvantage compared to the comes largely from the consultancy and end of the Apartheid regime and rest of the world. advisory services. celebrate 20 years of democracy. Despite a healthy and stable economy Kgosana says that the firm’s audit service N with a 2.5% growth in GDP in 2012, In 20 years, the rainbow nation, as the line has remained flat, and he attributes this democratic South Africa has come to surveyed firm leaders describe the market lack of results to two factors: regulation be known, has pushed very progressive as a challenging one. PwC Southern and fee pressures. social and political reforms based on Africa chief executive officer Suresh Kana Because of the Black Economic human rights, freedom as the highest good, explains: “Labour strikes and mining Empowerment Act (BEE) which favours equality, and the tolerance of cultural, uprising have dampened business sentiment small black firms for public assignments, ethnic and religious difference. And in 1996 a bit. The labour strikes in particular have Kgosana says KPMG lost a lot of the country adopted a new constitution increased the negative sentiment in certain government audit work. “The only way which is believed to be one of the most industries, particularly in terms of how for big firms to win public sector work is progressive in the world. people perceive long-term investment.” to partner with small black firms,” he says. However South African businesses “But in terms of audit, the small black firms have been slower to pick-up on the mostly in the black are able to do it on their own, so we lost the transformations, as black professionals Nevertheless, most South African surveyed government work.” are still under-represented in businesses. networks reported in the black, apart for A change to the 2008 Companies Act Throughout this report ‘black’ refers to the PKF and HLB who lost firms and saw their has also had an impact on audit. The new generic South African term which includes revenues shrink. The average growth for regulation changed the audit requirements a number of ethnic groups: black, coloured surveyed networks this year reached 6%. for companies and made audits mandatory (mixed-descent), Indians, Asiatics and Among the Big Four, only KPMG for fewer companies. RSM Betty and others. The accounting profession is no managed double-digit growth with Dickson managing partner Brian Eaton exception in that matter. ZAR2,942.4m ($291.1m) in annual says: “As a result a lot of the smaller clients The heavily regulated framework in revenues in the year to 30 June 2013, up didn’t need audit.” which South African accounting firms 10% on the previous fiscal year. Kgosana says that KPMG still managed have to evolve is a source of concern for KPMG South Africa chief executive to win more clients than they lost, but

n souTh AFrICA Networks – fee dAtA Fee split (%)

Corporate Fee income Growth Audit & Tax management Corporate recovery/ Litigation rank name (ZArm) rate Accounting services consulting finance Insolvency support other Year-end 1 PwC* 4,013.0 4% 51 10 39 - - - - Jun-13 2 Deloitte* 3,434.0 4% 45 9 29 3 - - 14 May-13 3 KPMG* 2,942.4 10% 41 11 43 4 - - - Aug-13 4 EY* 2,270.6 8% 38 12 46 4 - - - Jun-13 5 Grant Thornton 481.4 15% 64 11 11 5 - 1 8 Sep-13 International* 6 BDO* 380.6 0% 59 13 6 5 - - 17 Sep-13 7 Mazars 376.0 22% 79 10 - 3 - - 8 Aug-13 8 Nexia International* 214.9 12% 64 12 10 1 1 - 13 Jun-13 9 Moore Stephens 202.4 17% 65 11 9 3 - - 12 Dec-13 International* 10 PKF International* 174.5 –45% 78 8 4 1 2 - 7 Dec-12 11 RSM* 117.9 3% 68 13 4 - - - 15 Jun-13 12 Baker Tilly International* 104.6 6% 79 7 5 - - - 9 Feb-13 13 Crowe Horwath 89.8 –2% 53 13 11 2 - 11 9 Feb-13 International 14 Kreston International* 79.0 - 79 - 15 - - - 6 Oct-13 15 HLB International* 26.6 –27% 71 12 9 2 - 1 5 Dec-12 Total revenue/growth 14,907.8 6%

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 November 2013 y 15 CounTrY surveY souTh AFrICA International Accounting Bulletin

then the fee pressure was instrumental in If tax is the service line offering the most was mostly small transactions which prohibiting growth in audit. opportunities for the future, advisory is happened outside South Africa. “A lot of “We had to give 5% to 10% discounts to where firms have seen most of their growth the transactions and due diligences we have our clients,” he says. in the past year, especially in the public been involved with have been businesses in Big Four firms lowering their fees had a sector. “As a big firm, if you partner with which investors want to invest in the rest of snowball effect on the mid-tier. “The overall a small black firm and transfer skill and Africa,” he says. market is not increasing and any firm that knowledge, you get a lot of government Kgosana at KPMG says the transaction is trying to increase market share has to advisory work,” KPMG’s Kgosana says. market has been quiet. “There haven’t become more competitive and consequently “There is a lot of money coming been a lot of deals in South Africa, but we have seen greater competition from the into South Africa for projects and there’s been quite a bit of activity helping Big Four firms,” Eaton explains. therefore the government is looking our clients to set up in other African This analysis is shared by Grant for public-private partnerships,” countries. It’s picking up but hasn’t been Thornton Johannesburg chief executive Hannington says at Grant Thornton. very active so far.” officer Andrew Hannington: “They [the “The interest from foreign investors Big Four] are lowballing because they is encouraging good governance and regulation are losing public sector work, so they are good financial management on the Regulation is another topic which brings looking at the private sector for growth.” part of the government, and that is mixed feelings to the profession. On the one “The problem is that the Big Four has paying off,” Hannington adds. hand, interviewed firm leaders told IAB excess capacity so they can lower their they were proud of the strong regulatory prices,” Grant Thornton South Africa risk advisory and corporate legal environment in South Africa, and RSM’s national chairman Deepak Nagar says. Eaton says that RSM Betty and Dickson Eaton describes the country as “top of the grew considerably in risk advisory services pile” when it comes to compliance. Advisory and tax and in corporate legal services. “Our legal South Africa requires all listed companies Contrary to audit, firms have seen a department grew by 60% to 70% in the on the Johannesburg stock exchange to lot of opportunities and growth in previous year,” he says. produce an integrated report. “Integrated advisory and tax. A lot of the work in legal services came reporting is a relatively young initiative Hannington says that because the G20 from the transaction market where RSM on the global stage,” PwC’s Kana says. put tax at the top of the agenda, it has Betty and Dickson has seen a lot of activity. “But not in South Africa; companies have generated a lot of demand from their clients. “We have seen an increase in activity in embraced it more here than in the rest of “It’s an area where we see a lot of pressure on the transaction market,” Eaton says, “both the world. The IIRC framework is coming our clients from the G20 and the regulators,” from foreign companies coming to South out soon and the South African contingent he says. “Our clients are looking for Africa in order to secure businesses and represented on that committee has made assistance, particularly in international tax mergers between South African companies.” significant contributions because we are and transfer pricing. So we are recruiting PwC’s Kana agrees that the transaction ahead of the curve.” specialists in both those areas.” market has got a lot busier, but says it On the other hand Kana reiterates a

n souTh AFrICA AssoCIAtIoNs – fee dAtA Fee split (%)

Corporate Fee income Growth Audit & Tax management Corporate recovery/ Litigation rank name (ZArm) rate Accounting services consulting finance Insolvency support other Year-end 1 Morison International* (1) 520.0 11% 80 3 2 1 - - 14 Dec-12 2 Praxity 376.0 22% 79 10 - 3 - - 8 Aug-13 3 Primeglobal* 68.8 6% 51 17 6 2 18 - 6 May-13 4 IAPA* 60.6 18% 53 22 10 - - - 15 N/A 5 MSI Global Alliance* 52.6 0% 71 11 5 - - - 13 Jan-13 6 BKR* 52.2 –4% 72 17 7 - - - 4 Feb-13 7 MGI* 51.9 –38% ------Jun-13 8 GMN International* 36.6 –50% 64 20 12 - - - 4 Dec-12 9 Integra International* 34.7 0% 50 25 10 5 10 - - Sep-13 10 CPA Associates International* 11.4 5% 69 11 9 - - - 11 Feb-13 Total revenue/growth 1,264.8 5%

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) Morison International is represented in South Africa by SizweNtsalubaGobodo. Source: International Accounting Bulletin

16 y November 2013 www.InternationalAccountingBulletin.com International Accounting Bulletin souTh AFrICA CounTrY surveY

common complaint from South African single entity to regulate the South African responsibilities of those that prepare accountants: “There is a feeling of profession. “We currently have an unfair financial statements and the auditor of over-regulation.” disadvantage as chartered accounting those statements. It is in this context that the South African professionals as we’re regulated, while This has been known for a while, and the Minister of Finance Pravin Gordhan has there are whole sections of the accounting mid-tier firms have been preparing for it as commissioned a tax review committee to profession who aren’t,” he says. best they can. According to Nagar at Grant look at all the tax laws in the country and At PwC, Kana adds that the IRBA’s code Thornton: “It requires a whole rethink, to try to simplify tax laws and reduce the is based on the International Federation and potentially a whole remodelling, of our cost of compliance for small and medium of Accountants, which the South African business.” To this end lawyers and technical -sized businesses. The committee’s findings Institute of Chartered Accountants (SAICA) staff have been brought in to ensure all new are expected next year. has also based its code on, meaning it legislation is complied with. shouldn’t require new standards to come in regulatory board for most of SAICA’s 35,000 members. disposals It is also in this context that Gordhan is Overall, Kana argues in favour of at least Hannington adds that Grant Thornton currently reviewing a World Bank proposal looking into the regulation, pointing out the South Africa may need to dispose of to extend the coverage of the Independent benefits of consistency of standards and the some business units as well, and that the Regulatory Board for Auditors (IRBA) from need for a good ethical framework. However legislation could negatively impact revenue its current jurisdiction of 4,500 auditors, he warns: “The challenge which hasn’t been growth over the next 12 months. to the wider accounting profession, which resolved yet is how the regulation is going There is a concern that the extension of numbers around 50,000. to work. Balance is important as you don’t 90(2) may not be appropriate for clients, Although the debate about this move want over-regulation.” according to Eaton at RSM, who asks if it is still at an early stage, there isn’t much actually adds value for companies or just resistance on the part of the profession to Conflict of interest creates more burden, noting: “I’m not sure the idea of a single South African regulator. Of more concern is the possibility of their voice has been heard and they don’t And most interviewed firm leaders have extending the Companies Act Section have the avenues to express their concerns.” been involved in discussions with the World 90(2) to non-listed companies in 2014, When IAB reported on this topic last Bank on this topic. which prevents firms from providing audits year, Nexia SA B&T director Bashier Adam Hannington, for example, says Grant to clients if they also perform certain spoke of problems with interpretation Thornton South Africa would “welcome” a other services in an effort to separate around the legislation, and according to

n souTh AFrICA Networks – stAff dAtA

Total staff Growth partners professional staff Administrative staff offices rank name 2013 2012 rate 2013 2012 2013 2012 2013 2012 2013 2012 1 PwC* 4,876 4,683 4% 283 285 3,816 3,625 777 773 22 19

2 Deloitte* 3,837 3,777 2% 269 258 2,926 2,995 657 524 9 9

3 KPMG* 3,312 3,130 6% 253 257 2,492 2,319 567 554 11 11

4 EY* 2,524 2,244 12% 158 163 1,885 1,630 481 451 10 10

5 Grant Thornton International* 912 871 5% 97 66 606 606 209 199 10 7

6 Mazars * 746 716 4% 67 46 515 496 164 174 9 8

7 BDO* 628 731 –14% 48 65 437 521 143 145 4 4

8 Moore Stephens International* 562 533 5% 42 34 452 408 68 91 14 10

9 PKF International* 516 1,057 –51% 37 66 362 798 117 193 4 8

10 Nexia International* 457 523 –13% 42 38 321 351 94 99 12 11

11 Kreston International* 303 - N/A 23 - 204 - 76 - 4 -

12 RSM* 297 293 1% 25 26 216 209 56 58 4 4

13 Baker Tilly International* 264 262 1% 18 18 196 194 50 50 3 3

14 Crowe Horwath International* 168 198 –15% 24 24 102 134 42 40 2 2

15 HLB International* 62 81 –23% 5 6 45 51 12 24 1 2

Totals 19,464 19,099 2% 1,391 1,352 14,575 14,337 3,513 3,375 119 108

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 November 2013 y 17 CounTrY surveY souTh AFrICA International Accounting Bulletin

Eaton, this is still an issue in the country. somewhat different. In 2003 the BEE For Kgosana at KPMG the challenges are He adds that the potential change both “is Act was passed in an effort to redress not in the retention of staff, but in recruiting and isn’t” appropriate for the SME market the inequalities of Apartheid by giving specialised professionals for its consulting in South Africa, and that RSM has prepared previously disadvantaged groups of South business. “We have an abundance of staff for the provisions, meaning it shouldn’t African citizens economic privileges for the audit side of the practice,” he says. have a “significant” impact on the firm. previously unavailable to them. This “but for the specialist areas of our consulting Although the changes to legislation will includes measures such as employment business we have had to recruit foreigners.” mostly affect the mid-tier firms, which deal preference and skills developments. At RSM Betty and Dickson, Eaton with SMEs, KPMG’s Kgosana still worries Partly thanks to BEE, the number of describes a lack of maths graduates. it will eventually impact the Big Four as well. black accountants in South Africa continues However, in general, there is a consensus He warns of how it is creeping in slowly, to rise, and Kana says 46-48% of PwC’s that recruitment is not a real problem, and that it could ultimately force firms, annual intake is black, while Kgosana says despite the fact the staff numbers remained even KPMG, to stop being multidisciplinary. 40% of KPMG’s accountants are black, and virtually flat in the country. He also claims that regulators are the figure continues to increase. If BEE has had an impact in recruitment unhappy with the fact that audit firms and helped some black accountants to are able to do tax and consulting, despite retention problems advance their careers, it also had an impact the fact that KPMG don’t do so for their The BEE has had an unintended on the structure of the market itself. Black audit clients. However he says this is consequence, though, according to Nagar firms have gained significance in the market just a minority view, adding “it’s still a at Grant Thornton, who believes black and are growing fast. “There are now five or long way off, as it’s not happening in the accountants are hard to retain. “Black six credible black firms that are becoming EU and the US.” students are hard to keep hold of. They significant and taking market share,” are highly sought after, highly marketable, Kgosana says. “SizweNtsalubaGobodo mandatory rotation commanding good salaries from the big is the biggest, but firms like Nkonki Although South Africa is viewed as a leader corporations in the public and private sector and Sekela are not far behind and they in certain areas of regulation and reporting, and we simply cannot match those levels of are growing fast.” there’s still a fear that events outside Africa salaries,” he says. could affect the country – specifically But the BEE is not the only reason behind Confidence mandatory rotation. Kgosana states that the challenges of staff retention. Grant Despite some challenges, interviewed firm KPMG “does not believe audit rotation Thornton’s Hannington describes staff leaders agree that most firms managed to will help with audit quality at all – quite the retention as a real problem. It’s not possible make the most of their environment and contrary.” However he worries that, as the to limit the liability of assurance work in they admit they are confident about the idea of audit reform gains traction in the EU, South Africa, which Hannington suggests coming months and the mid-term future. it could filter through to Africa. is leading to the majority of graduates Firm leaders agree that the main concern Because of the country’s history, the wanting to go overseas, and many wanting for the future is regulation. First, from staffing situation in South Africa is to go into commerce. within the country with the ongoing talks

n souTh AFrICA AssoCIAtIoNs – stAff dAtA

Total staff Growth partners professional staff Administrative staff offices rank name 2013 2012 rate 2013 2012 2013 2012 2013 2012 2013 2012 1 Morison International* (1) 907 895 1% 51 55 738 748 118 92 12 11

2 Praxity 746 716 4% 67 46 515 496 164 174 9 8

3 Primeglobal* 200 198 1% 17 13 136 143 47 42 3 3

4 BKR* 153 154 –1% 11 13 114 119 28 22 3 3

5 MGI* 143 200 –29% 15 19 12 14 116 167 2 3

6 MSI Global Alliance* 134 117 15% 11 8 83 86 40 23 3 3

7 Integra International* 128 128 0% 8 8 82 82 38 38 5 5

8 IAPA* 125 115 9% 12 11 29 9 84 95 3 3

9 GMN International* 121 335 –64% 14 32 84 241 23 62 9 16

10 CPA Associates International* 30 28 7% 3 2 24- 23 3 3 1 1

Totals 2,687 2,886 –7% 209 207 1,817 1,961 661 718 50 56

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) Morison International is represented in South Africa by SizweNtsalubaGobodo. Source: International Accounting Bulletin

18 y November 2013 www.InternationalAccountingBulletin.com International Accounting Bulletin souTh AFrICA CounTrY surveY

about reforming the way the profession is in a position to bestow on South Africa the that 20 years into their democracy South regulated, but they are also aware of what greatest possible gift – a more human face.” Africa has lived up to Biko’s word and the is happening in Europe. “We need to watch Without being oblivious to the challenges country is now ready to share its experience what’s happening in the EU around audit and issues the country is facing, it seems with the rest of the continent. < reform,” Kgosana says. “This will hit us and we had better be prepared.” In terms of opportunities firm leaders n souTh AFrICA point out that South Africa is ideally placed top fIrms: fee dAtA geographically, politically and economically rank Fee income (ZArm) Growth rate (%) to make the most of the opportunities in 1 PwC 4,013.0 4 the entire continent. Infrastructure is a 2 Deloitte 3,434.0 4 particular sector which firm leaders expect to see bloom in the coming years in Africa. 3 KPMG 2,942.4 10 “As a megatrend, global business is 4 EY 1,399.8 13 looking at Africa as a huge opportunity,” 5 SizweNtsalubaGobodo (1) 520.0 11 Kana says. “The average African age is very 6 Grant Thornton Johannesburg 235 74 young and to have a young population is 7 BDO 380.6 0 a tremendous opportunity. Young people 8 Mazars 376.0 22 want to live in cities and cities need every 9 SAB&T Incorporated (2) 153.6 26 bit of infrastructure you can think of.” 10 RSM 117.9 3 He adds that it was estimated that by 2030 there will be 440 cities with over a 11 Nkonki (3) 79.0 million inhabitants in Africa. 12 PKF Durban 77.4 12 Kgonasa agrees and reveals KPMG’s 13 Baker Tilly Greenwoods 55.6 12 strategy for the coming month is to expand 14 Horwath Leveton Boner (4) 49.7 20 its services to neighbouring countries. 15 LDP (5) 42.3 0 The South African accounting profession 16 Logista (6) 32.4 9 expressing interest in the rest of Africa 17 Baker Tilly SVG 25.1 6 might be a symbolic turning point in the continent’s history. 18 Baker Tilly Morrison Murray 24.0 4 Anti-apartheid activist Steven Biko, who 19 Boake incorporated (7) 19.9 0 died after being arrested by the regime’s Notes: (1) SizweNtsalubaGobodo is a member of Morison International; (2) SAB&T Incorporated is a member of Nexia International; (3) Nkonki is a member of Kreston International; (4) Horwath Leveton Boner is a member of Crowe Horwath International. (5) LDP is a member of Prime Global; (6) Logista is a member of BKR International; police, once wrote: “In time, we shall be (7) Boake Incorporated is a member of BKR International. Source: International Accounting Bulletin.

n souTh AFrICA

FIrm movemenTs

neTworK/AssoCIATIon FIrm AddITIons, merGers & ACQuIsITIons

bdo merged: Grant Thornton Pretoria (Jan. 12). Demerged: Grant Thornton Pretoria (Dec. 12)

eY Acquired: Resolve Group (PTY) and Resolve Encounter Consulting (PTY) and Converse Consulting and Management Services (PTY) (Johannesburg) deloitte Acquired: Venmyn Rand Proprietary and Monitor Company Group (Johannesburg, Gauteng)

Gmn International Lost: Enslins (Bethlehem and Harrismith), GBG (Somerset East), HRV (Bloemfontein), Meredith Harington (Cape Town)

Grant Thornton International merger: PKF Johannesburg, PKF George, Rebahale Johannesburg, TIS/Fintis Johanesburg Sold share in Grant Thornton Capital hLb International Lost: HLB Marx Gore (Cape Town)

Kreston International Added: Nkonki (Johannesburg), Saxonwold (Johannesburg)

mazars Added: Grant Thornton East London, Alan H. English & Co Durban, PKF Bloemfontein, PKF Kathu, PKF Pretoria.

pKF International Limited Lost: PKF Johannesburg; PKF Gauteng (Pretoria); PKF Bloemfontein; PKF Incorporated (George)

pwC Acquired: Crest Accounting (East London, Eastern Cape Province), Sentinel (Witbank and Middelburg, Mpumalanga Province), Woest Malan Wenhold (Rustenburg, North West Province), WB Solutions (Johannesburg, Gauteng Province), Iliad Africa Trading (Johannesburg, Gauteng Province).

Source: International Accounting Bulletin

www.InternationalAccountingBulletin.com November 2013 y 19 CounTrY surveY souTh AFrICA International Accounting Bulletin

Connect to Wealth Through Intelligence

 The risks of being a forensic auditor

Lawrence Moepi, director of forensic services editor: Ana Gyorkos Tel: +44 (0)20 7406 6707 at SizweNtsalubaGobodo, South Africa’s larg- Email: [email protected] est mid-tier firm, was shot dead outside the deputy editor/editor of the Accountant: firm’s Johannesburg office on 18 October, in Carlos Martin Tornero what is believed to be a pre-planned murder. Tel: +44 (0)20 7406 6706 Email: [email protected] South African media reported that it is believed the 41-year-old father of two was fol- reporter: Jonathan Minter Tel: +44 (0)20 7406 6705 lowed to his workplace by four men in a car, Email: [email protected]

and was shot as he got out of his car. Noth - reporter: Vincent Huck ing was stolen. South African police are still Tel: +44 (0)20 7406 6709 looking for the suspects and investigating the Email: [email protected] reason for Moepi’s murder. Group publisher: Andy Cook Tel: +44 (0)20 7406 6561 At the time of the murder, Moepi was work- Email: [email protected] ing on several investigations for Public Pro - Contributors: Paul Golden tector Thuli Madonsela, including a report on Independent Electoral Commission (IEC) Chief subeditor: Nick Midgley subeditor: Kev Walsh chairman Pansy Tlakula, accused of improper conduct in the multimillion-rand leasing of the sales & marketing director: Sarah Wootton Tel: +44 (0)20 7406 6541 IEC headquarters building in Pretoria. Email: [email protected] Independent Regulatory Board for Auditors Moepi was also involved in the investigation Campaign solutions manager: Keri Farrell of corruption allegations against Congress of CEO Bernard Agulhas also said that Moepi’s Tel: +44 (0)20 7406 6548 Email: [email protected] South African Trade Unions (Cosatu) general murder was indicative of the dangerous envi- secretary Zwelinzima Vavi at the time of his ronment to which South African auditors are subscription enquiries: Sharon Howley Tel: +44 (0)20 7406 6615 death. He was reportedly leading the investi- confronted. Email: [email protected] gation into the sale of Cosatu’s old building in “Clearly, from our experience there is contin- Braamfontein, which Vavi has been accused of uing and increasing interference with the work For more information on Timetric, visit our website at vrl.timetric.com mishandling. The South African Sunday Inde- of auditors and investigators,” he told Business pendent newspaper reported that the findings Day TV. “We have had reports from auditors For more information on accessing International Accounting Bulletin content of the investigation were to be published this of similar threats to their lives.” online, including a five-year archive, please month, but Moepi’s death made it impossible Moepi is the second South African auditor to telephone +44 (0)20 406 6579 or email [email protected] to do so and the publication would be delayed. be murdered in little over then a year. In June Throughout his career as a forensic auditor, 2012, Andile Matshaya, an internal auditor London office Moepi was involved in a number of high-profile in the national department of transport, was 40-42 Hatton Garden, London EC1N 8EB, United Kingdom investigations including the fraud trial of for- founded dead in his bed. The police said he had Tel: +44 (0)20 7936 6400 mer Directorate of Special Operations official been strangled, and his family and colleagues Fax: +44 (0)20 7406 5601 Geoffrey Ledwaba, and the ‘South Africa arms believe his murder was related to his work. Asia office deal scandal’ which carried allegations of cor- KPMG Africa senior partner and KPMG 20 Maxwell Road #04-02J, Maxwell House ruption at the highest levels of the state. South Africa chief executive Moses Kgosana Singapore 069113 Before joining SizweNtsalubaGobodo, told International Accounting Bulletin: “Law- Tel: +65 6383 4688 About WealthInsight Moepi worked as an auditor for PwC South rence’s murder is shocking. It is a difficult Fax: +65 6383 5433 Email: [email protected] Africa forensic services. situation for forensic teams; it is not safe. For WealthInsight provides detailed data and insightful analysis on We work with and provide solutions for: His murder was received with shock by the example, our forensic team is very careful in Financial News Publishing Ltd, 2013 the world’s High Net Worth Individuals (HNWIs) and wealth  Wealth Managers profession, and highlighted the dangerous the assignments they choose and where they Registered in the UK No 6931627 sector. With decades of experience providing business  Private Banks environment in which South African auditors have meetings. Many forensic professionals ISSN 0265-0223 Unauthorised photocopying is illegal. The contents information, WealthInsight helps organisations make informed  work. think twice about how they go about their of this publication, either in whole or part, may not Family Offices be reproduced, stored in a data retrieval system decisions and win new business.  Association of Public Accounts Committees work; especially in the big assignments, the or transmitted by any form or means, electronic, Technology Providers mechanical, photocopying, recording or otherwise,  Professional Services – Consultants, Accountants, of South Africa chairman Sipho Makama told first question is ‘am I safe?’” without the prior permission of the publishers. AtA WealthInsight’s core is our proprietary HNWI South African newspaper the Daily Dispatch Following Moepi’s death, SizweNtsa - Lawyers, Real Estate Professionals Database of the world’s wealthiest individuals. Around that Moepi’s murder was just the tip of the ice- lubaGobodo executive chairman Nonkululeko  Fund Managers, Asset Managers, this database we have built a number of valuable research berg of threats directed at forensic auditors. Gobodo said in a statement: “All of our staff Venture Capitalists “It is a bigger threat to those still alive, and are extremely shocked and saddened by the based products and services that make WealthInsight much  Non-profits and Educational Institutions this might lead to the industry losing qual - news. Lawrence was an inspirational leader, more than just a rich contact list. ity auditors because they fear for their lives,” and his insight, wisdom and talent will be Makama told the Dispatch. “The public is not sorely missed. Our thoughts and prayers go aware of the murky and dangerous environ- out to his family during this extremely difficult ment forensic auditors operate in.” time.” < For more information contact us at [email protected] T: +44 (0)207 406 6553

20 y November 2013 www.InternationalAccountingBulletin.com Connect to Wealth Through Intelligence

About WealthInsight WealthInsight provides detailed data and insightful analysis on We work with and provide solutions for: the world’s High Net Worth Individuals (HNWIs) and wealth  Wealth Managers sector. With decades of experience providing business  Private Banks information, WealthInsight helps organisations make informed  Family Offices decisions and win new business.  Technology Providers  Professional Services – Consultants, Accountants, AtA WealthInsight’s core is our proprietary HNWI Lawyers, Real Estate Professionals Database of the world’s wealthiest individuals. Around  Fund Managers, Asset Managers, this database we have built a number of valuable research Venture Capitalists based products and services that make WealthInsight much  Non-profits and Educational Institutions more than just a rich contact list.

For more information contact us at [email protected] T: +44 (0)207 406 6553 International Accounting Intelligence

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