July 2014 Issue 539 www.InternationalAccountingBulletin.com
Opportunities and threats
in the Asia-Pacific region
●●SEC and EY settle over audit independence lobbying breach ●●IAB Awards finalists unveiled ●●Uschi Schreiber exclusive interview ●●South Korea country survey
IAB 539.indd 1 25/07/2014 10:12:04 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 The Accountant
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IAB 539.indd 2 25/07/2014 10:12:04 International Accounting Bulletin COUNTRYEDITOR’S SURVEY LETTER
CONTENTS
Give your students a business NEWS 02-06 Leaders with a difference ■■ PCAOB finds former PwC partner guilty of audit standards violation perspective of the world of ■■ SEC and EY settle for $4m over auditor independence lobbying I’ve been doing this job for almost five years are important to the industry is that they ■■ IAB Awards 2014 finalists unveiled and I should think the number of global serve as role models, which, for sure, she is. accounting. female executives I’ve interviewed during Her personality, and the story of her career this time is probably around a couple of so far, have the potential to go far in inspir- COMMENT 07 dozen. In comparison, the number of male ing women within the network, within Give your students access to leaders I’ve spoken to probably runs to a other firms and beyond. As I left our meet- O7: JULIAN FROST couple of hundred. So when the oppor- ing I thought about her words of advice to What does the global technology race tunity came along to meet and interview young people – “think big” – and how often mean for the profession? content they can trust. EY’s newly appointed vice-chair and global do many of us forget to do that? Especially markets leader Uschi Schreiber I was very as we so often get caught up with day-to- curious to meet her. The network, often day routines of our lives. FEATURES 08-11 shy of publicity for its senior leadership, Give your students O8-09: MALCOLM WARD has fast-tracked Schreiber’s career, who A different view on associations The former Grant Thornton International after a successful career in the Australian This month’s issue also features an inter- Asia-Pacific regional leader talks to Ana government sector decided to join the global view with Malcolm Ward who went from the edge. Subscribe to Gyorkos about his new role running the fifth-largest global association professional services giant’s Oceania firm. running Grant Thornton International’s 10-11: USCHI SCHREIBER Meeting Schreiber gave me first-hand expe- Asia-Pacific practice to becoming chief The Accountant The EY global vice-chair describes her rience of diversity within a large network executive of the fifth-largest association, career and future aspirations to Ana Gyorkos and showcased its importance. Her back- AGN International. Ward admits to initial ground is far removed from accounting; she scepticism about the association model, A subscription to The Accountant is the ideal accompaniment to an accountancy course of study. Including studied social work and special education but says he sees an opportunity to build COUNTRY SURVEYS 10-20 in Germany and later moved to Australia an alternative to the network model. He exclusive features and interviews with major figures in the accountancy sector, The Accountant will help and went on to build a successful career in believes he can build an organisation, which your students to understand the real-world implications of the theory they are learning, and help improve 12-16: ASIA-PACIFIC public sector leadership. Not your typical across the board offers a high-quality and Vincent Huck examines the opportunities Big Four global leader without mentioning efficient service to clients for a reasonable and threats available in the region their employability in a competitive jobs market. A weekly newswire gives you regular updates of all the big the fact that she’s female? At our meeting price. A bit like an EasyJet of the accounting stories, while IP access means students can view our content anywhere with access to the student portal. 16-20: SOUTH KOREA she spoke not only about business growth world perhaps? Read the full interview on Despite a blocked audit market the South and the strategy of the network, but also pages 8 and 9. Korean profession is looking to increase advisory services for international how important the role of the network is to I would also like to take the opportunity businesses says Vincent Huck wider communities and taking a proactive to congratulate all the finalists of the Inter- Subscribe to The Accountant for: role in light of global mega trends (read the national Accounting Bulletin Awards 2014 SIGN UP FOR THE FREE NEWSWIRE full interview on page 10 and 11). While (see the full list on page 6) and offer the best • IP access to our content. So your students can access our Get free weekly updates and free content. women have slowly begun to be appointed of luck on 16 September when the winners content campus-wide with one login to global leadership positions within profes- will be announced at the IAB Industry Sign up here: Editorial Advisory Board sional services, it’s still unusual to find an Forum in London. Kevin McGrath, Crowe Horwath • Content you can trust. We have 125 years of experience http://www.vrl-financial-news.com/system- International CEO outspoken leader looking to drive and influ- delivering accountancy news. Kevin Arnold, Nexia International CEO ence change not only within the network, pages/headernav/free-news.aspx Geoff Barnes, Baker Tilly International president and CEO but also beyond. Ana Gyorkos • Truly global analysis. We cover a range of stories from around Graeme Gordon, Praxity executive director Another reason why people like Schreiber [email protected] the world, so your students get a wide perspective of the sector. Stephen Jacobs, INPACT International president Jon Lisby, Kreston International executive director James Mendelssohn, MSI Global Alliance, executive chairman Christian Mouillon, EY gobal vice- chair, assurance Ed Nusbaum, Grant Thornton International CEO DON’T mISS OUT. Subscribe to The Accountant today. Michael Reiss von Filski, Geneva Group International CEO Contact our subscriptions team on +44(0)20 7563 5688 Liza Robbins, Morison International CEO Martin van Roekel, BDO International CEO or email us at [email protected] to find out more. Jean Stephens, RSM International CEO Robert Tautges, HLB International CEO Pauline Wallace, PwC head of public policy and regulatory affairs www.vrl-financial-news.com www.InternationalAccountingBulletin.com July 2014 y 1
IAB 539.indd 1 25/07/2014 10:12:05 NEWS ROUND-UP International Accounting Bulletin
IAB ONLINE – JULY NEWS ROUND-UP
Top 5 articles US adequately assessing whether an initial period of eight years EY finalises merger with KPMG PCAOB finds former PwC such accounting treatment and aims at delivering 15 to 20 complied with generally accepted projects a year. Denmark partner guilty of audit standards violation accounting principles, the PCAOB GLOBAL EY appoints over 600 partners The Public Company Accounting statement continued. Oversight Board (PCAOB) has EY appoints 675 partners globally UK issued a disciplinary order against globally KPMG UK invests £20m in big IAB Awards 2014 finalists named former PwC partner Randall Stone EY has promoted 675 of its staff for violating PCAOB rules and data analytics across the network’s member firms KPMG UK will invest £20m in a KPMG UK invests £20m in big data standards. to the role of partners and brought partnership with Imperial College analytics The order bars Stone from its total staff count to 190,000 London (ICL) to create a centre of associating with a registered globally. advanced business analytics. UK’s anti-money laundering public accounting firm for a The number of partners’ The KPMG Centre for Advanced minimum period of three years, promotions is the highest ever in regime can be improved: CCAB Business Analytics will develop after which he can appeal to have the network’s history and EY added new approaches, analytical Most retweeted article the bar lifted. Stone has also been that 26% of the new partners are methods and tools for using fined $50,000. women. IAB Awards 2014 finalists named big data to help UK businesses The order concludes the PCAOB The Americas saw the highest solve issues such as fraud disciplinary proceeding started number of promotions with 295 Read in 164 countries or understanding consumer in December 2012 which looked new partners appointed, including UK 32% behaviour. The centre will focus into PwC’s 2007 audit of medical 88 women. US 10% on five areas: analysis of business device manufacturer ArthroCare In the European, Middle Eastern Malaysia 8% capital, growth opportunities, Corporation. and Africa region the number of Germany 7% people, operations and resilience. promotions increased by 46% India 7% Stone was the partner in charge The dean of ICL Business School compared to 2013, up to 237 Rest of the world 36% of the audit and the PCAOB said in a Professor Anand Anandalingam statement: “The board found that said that for businesses to promotions, including 48 women. Stone ignored or failed to properly compete in a globalised economy In Asia-Pacific, 115 people were evaluate numerous indicators that they need a full understanding promoted (35 women), while in should have alerted him to the of markets, customers, products, Japan 28 new partners (8 women) possibility that ArthroCare was regulations, competitors, were appointed. improperly recognising revenue on employees and much more. Across service lines, the largest its 2007 sales of medical devices “The KPMG Centre for Advanced volume of new partner numbers to DiscoCare, Inc.” Business Analytics aims to address was in assurance at 37% (253) of Stone failed to exercise these challenges by looking at all promotions, followed by tax due professional care and how we can translate complicated with 27% (183), advisory with 24% scepticism when, among other information and turn it into (159), and transaction advisory Join our online community things, he agreed with the potential solutions,” he explained. services with 10% (64). There company’s proposed accounting The partnership between KPMG were 2% (16) of promotions within for the acquisition without UK and ICL has been agreed for business support. < LinkedIn Group World Accounting Intelligence MOVERS & SHAKERS
Twitter Crowe Horwath US has appointed extensive consulting experience Nagoya, Japan, which provides WAI_News James Powers as chief executive in international business and assurance services, IPO support officer of the network’s US taxes, particularly in advising and consulting services. Facebook page operations, effective 1 April multinational companies across World Accounting Deloitte has appointed Zahi Zeini Intelligence 2015. Powers is currently serving a broad range of industries to lead the firm’s Bahrain practice, as the managing partner of the in establishing their China effective from 1 August. Zeini is firm’s Indianapolis office. investment projects Scan our QR code for quick an audit and advisory partner with smartphone access to IAB PwC appointed Nora Wu as vice- PrimeGlobal has elected more than 20 years’ experience chairwoman and global human Tomoyuki Shinkai and George in the Middle East. In his new capital leader, effective from 1 Venardos to its Asia-Pacific role, he succeeds Roger Nasr who July. Wu is currently PwC Shanghai and Oceania board of directors. has taken on the regional role of office senior partner and Central Shinkai is managing partner risk and reputation leadership as China markets leader. She at Cosmos & Co, a PrimeGlobal a member of the Deloitte Middle trained as a tax partner and has member firm headquartered in East management team. <
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IAB 539.indd 2 25/07/2014 10:12:07 International Accounting Bulletin ANALYSIS NEWS
LEGAL SEC and EY settle for $4m over auditor independence lobbying breach The Securities and Exchange Commis - legislative advisory services. ued. sion (SEC) has charged EY with violations Along with the fine, the SEC censured EY In response to the settlement, EY said in a of auditor independence rules, which has and ordered the firm to cease and desist from statement: “Auditor independence is of par- resulted in a settlement costing EY $4.07m. any future violations of the auditor inde - amount importance to EY. EY takes great The SEC found that EY’s subsidiary Wash- pendence rules. care to ensure our services for audit clients ington Council EY (WCEY) lobbied congres- “Auditor independence is critical to the conform to all applicable SEC and PCAOB sional staff on behalf of two audit clients integrity of the financial reporting process. rules. which is “impermissible” under the SEC’s When an auditor acts as an advocate for its We regret these instances that arose many auditor independence rules. audit client, that independence is compro- years ago and are pleased to put this matter Within the scope of the settlement between mised,” associate director in the SEC’s divi- behind us. In 2012, EY voluntarily decided both parties, EY agreed to pay $4.07m in sion of enforcement Scott Friestad said. to cease performing lobbying work for SEC monetary sanctions, consisting of a penalty According to the SEC, EY’s WCEY registrant audit clients.” of $2.48m, disgorgement of $1.24m and approached congressional staff multiple In detail, the SEC found EY guilty of vio- prejudgment interest of $0.35m. times by letter, meeting or through third par- lations of Rule 2-02(b)(1) of Regulation S-X, The SEC said it took into consideration ties in order to urge and support legislation Section 13(a) of the Securities Exchange Act EY’s cooperation with the SEC staff during in the business interests of an audit client. and Rule 13a-1, and of improper profession- the investigation and remedial acts under- “Ernst & Young engaged in lobbying activ- al conduct pursuant to Exchange Act Sec- taken by the firm, such as the issuing of ities that constituted improper advocacy and tion 4C(a)(2) and Rule 102(e)(1)(ii) of the new guidance in June 2012 restricting such clearly violated the rules,” Friestad contin- Commission’s Rules of Practice. < FirmMovements
KPMG and EY in Denmark announced management consultancy. Sparks. D&P is headquartered in profit and renewable energy sectors. they “reached an agreement on all New York and offers services in outstanding issues associated with HLB International has added six valuation, dispute consulting, M&A MSI Global Alliance (MSI) has their respective Danish practices” member firms to its network. HLB and restructuring and has more added Swiss accounting firm and that KPMG’s Danish practice International new member firms than 1,000 employees. Caminada Treuhand AG Zurich to will become part of EY from 1 July. are: Wint, based in Stockholm, As a result of the acquisition D&P’s the association. The Zurich-based The two firms first signed a merger Sweden; Guadamuz Ruedam restructuring advisory practice now firm offers accounting, auditing, agreement in November 2013. Prior Martinez & Cia, based in Managua, has 200 professionals worldwide. corporate and tax consulting to the merger EY Denmark was Nicaragua; Revik, based in Sarajevo, The division will be led by RSM services to small and medium-sized ranked as the fifth-largest firm Bosnia-Herzegovina; Trejos, Egan FGS restructuring and insolvency businesses and private individuals. in the country and the merger will & Asociados, based in Panama partners Declan Taite, Pearse Farrell Caminada joins MSI with five more than double its size, probably City, Panama; COGEP, based in and Anne O’Dwyer. partners and a team of more than making it the second-largest. Saint-Doulchard, France and Geneva Group International (GGI) 25 staff. EY Denmark last reported fee Bisheswar, Seebarran & Co, based in has added Argentinean firm Chinni income of DKK615m ($111.8m), Georgetown, Guyana. PKF International has added Irish Seleme Bugner & Asociados to its while KPMG, ranked as the third- firm FPM to its network. FPM which PrimeGlobal has admitted five association. largest firm, earned DKK1,546m rebranded as PKF-FPM has seven member firms to its association. The The Neuquén-based firm has three in fees. partners and 70 staff. PKF-FPM new additions are: Porte Brown, partners and 15 staff specialising in specialises in corporate finance, Nexia International has admitted based in Greater Chicago, US; S.J. audit, tax and consulting. member firms in Lithuania and Grand Financial and Tax Advisory, GGI also added Australian firm tax, restructuring and business Senegal. based in Beijing, China; Suzhou Hua Cummings Flavel McCormack to its succession. Lithuanian firm Jungtine Auditoriu Ming United CPA, based in Jiangsu, association. Based in Melbourne, The firm has four offices in Northern Kontora is based in Vilnius. The firm China; DMC Assocaites, based in Cummings Flavel McCormack has Ireland and Ireland and is PKF employs 43 professionals and offers Nairobi, Kenya and PIM & Co. based in nine executive directors and 55 International’s second member firm audit, accounting and consultancy Kampala, Uganda. professionals. in Ireland. services to small and medium-sized Cummings Flavel McCormack businesses as well as public sector Global advisory firm Duff & specialises in audit and assurance, Abacus Worldwide has added US clients. Phelps (D&P) has acquired the business compliance, tax and firm Graham & Company to its RMA Senegal is based in Dakar. Its restructuring and insolvency advisory services for national and association. Based in Colorado, services include audit, accountancy, division of RSM International Irish international clients from the Graham & Company specialises in tax, litigation support and member firm RSM Farrell Grant pharmaceutical, transport, non- international taxation.
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IAB 539.indd 3 25/07/2014 10:12:07 NEWS ANALYSIS
OVERSIGHT PCAOB chairman welcomes “win-win” oversight agreement with China The Public Company Accounting Over- Accountant Doty said: “I believe, since I registered audit firms, and its Chinese coun- sight Board (PCAOB) chairman James came on the scene in 2011, that this is win- terparts signed an agreement in May last year, Doty hopes the first inspection of a PCAOB- win for both of us. We both have an interest which covered only cross-border enforce- registered Mainland Chinese audit firm in investor protection, related to market con- ment cooperation, but not inspections. could be conducted before the end of the fidence and the integrity of audits.” If finally signed, the inspection agreement year, following the meetings of the US- Doty noted that the upsurge in Chinese with China would add to the 44 internation- China Strategic and Economic Dialogue held initial public offerings, as well as the desire al deals already in place which have allowed in Beijing on 9-10 July to see its securities accepted in other markets carrying out inspections of registered non- Discussions about cross-border audit around the world, intensifies this mutual US firms since the PCAOB started its inter- oversight, a topic included in the agenda need to “seize this opportunity and move national programme in 2004. by the US Treasury Department, continued forward”. Last week the PCAOB and the Danish with meetings between the PCAOB and both “This is a nine-year effort by people Business Authority agreed to a mutual over- China’s Securities Regulatory Commission involved in both nations,” Doty told The sight framework. Doty added further pro- and Ministry of Finance, bringing progress Accountant. “It’s been worth the effort, espe- gress has been made in negotiations with reg- to the negotiating table. cially if it comes to fruition. That would also ulators in new jurisdictions. “The PCAOB is Expressing his own views for Interna- benefit investors in China and the US.” close to signing protocols with Belgium, Italy, tional Accounting Bulletin’s sister title The The PCAOB, which has 46 Chinese- Luxemburg and Portugal,” Doty said. <
OVERSIGHT Improve anti-money laundering says survey While the UK has one of the most effective practice of modern slavery and organised the launch event of the CCAB survey and anti-money laundering regimes (AMLR), crime, he continued. “Money laundering BDO partner Angela Foyle said it was as yet there’s room for improvement, a survey by hurts real people and communities.” unclear how much of this information will be the Consultative Committee of Accountancy The survey revealed that while accountants publicly available. Bodies (CCAB) has found. are increasingly seen as gatekeepers of finan- “One version of the rule would be that this The survey revealed that participants had cial probity, there’s little awareness of how information would only be available to regu- a positive perception of the UK’s AMLR and accountancy practices contribute to tackling lators,” she explained. “Meaning that prac- perceived it as among the best regimes glob- serious financial crime. “None of the regu- titioners like me wouldn’t be able to access ally. However, participants said the regime latory, law enforcement or wider business it, and this is invaluable information to help could be improved with better communica- participants were able to cite concrete exam- people like me in their decision-making.” tion and cooperation between stakeholders. ples of how the accountancy profession has Foyle also expressed some concerns about The survey entitled Coming out in the engaged effectively,” the survey read. the creation of a level playing field at Europe- Wash: views on the UK’s Anti-Money Laun- However participant said professional an level with jurisdictions which do not share dering Regime was conducted by Brunswick institutes, member bodies and regulated the same level of enforcement. Insight on behalf of CCAB and based on firms take their responsibilities and obliga- “At the EU they are treating the whole interviews with 31 senior opinion leaders tion seriously. And practitioners tend to view of Europe as if we have the same level of from the media, the wider business commu- implementation of the regime as a social duty enforcement,” she said. “But some countries nity, supervisory and regulatory bodies, law rather than a business benefit, according to don’t have regimes as sophisticated as the enforcement agencies and senior nominated the survey. UK’s and there’s a risk information would fall money laundering officers from large and The survey come less than a week after the into the wrong hand when sharing informa- small accounting firms across the UK. EU Permanent Representatives Committee tion from one country to another.” CCAB chairman and Northern Ireland agreed on behalf of the Council of the EU The sharing of information between finan- Department of Justice director of safer com- a negotiating mandate on new rules to fight cial intelligence units is essential in the AML munities Anthony Harbinson said: “Money money laundering and terrorist financing. fight, she continued, but there are some con- laundering is a serious global issue, if you fail The proposed new rules, commonly known cerns as to how it needs to be done. to comply [with the AMLR] people will die, as the Fourth Money Laundering Direc - The trialogue negotiations between the money laundering is not only a white collar tive (4th AML), would require unrestricted Council, the European Parliament and the crime. It’s a crime that has strong link with access to beneficial ownership information European Commission on the 4th AML will the funding of terrorism activities, with the for competent authorities. Panel member at start in the autumn. <
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IAB 539.indd 4 25/07/2014 10:12:07 International Accounting Bulletin NOMINATIONS AWARDS
IAB Awards 2014 finalists unveiled International Accounting Bulletin announces this year’s finalist for the 2014 IAB Awards. The winners across 13 categories will be named on 16 September in London
inalists have been announced for this NETWORK OF THE YEAR year’s IAB Awards, drawn from what judges called a “very strong and diverse ■■ BDO ■■ Grant Thornton International set of submissions” sent during the F ■■ PwC nomination period. ■■ RSM International The winners will now be selected by an independent panel of judges including Jane RISING STAR NETWORK Howard, head of accounting and actuarial ■■ AUREN liability at Wragge & Co; Sue Almond, tech- ■■ TGS Global nical director of the Association of Chartered ASSOCIATION OF THE YEAR Certified Accountants; Ian Ball, chairman of the Chartered Institute of Public Finance and ■■ BKR International Accountancy; and International Accounting ■■ INPACT Bulletin editor Ana Gyorkos. ■■ Praxity Results will be kept closely under wraps RISING STAR ASSOCIATION until the official announcement at the awards ceremony held on 16 September in London. ■■ ANTEA ■■ Alliot Group In addition to the awards detailed here, ■■ Praxity the ceremony will include the presentation of IAB’s Young Accountant of the Year, Person- AUDIT INNOVATION OF THE YEAR ality of the Year and Lifetime Achievement In this category we decided only one nomination deserved to be shortlisted and we will awards. announce the winner on the night of the awards. The IAB Awards will be hosted as part of a half-day International Accounting Bulletin ADVISORY FIRM OF THE YEAR Forum featuring sessions on recent M&A In this category we decided only one nomination deserved to be shortlisted and we will trends in the industry and cyber security, announce the winner on the night of the awards.. as well as a senior executives round table EMPLOYER OF THE YEAR discussion. The event is sponsored by headline sponsor ■■ Grant Thornton International Aon, as well as Intuit Quickbooks, Star, Xero ■■ Plante Moran and Caseware. < ■■ WithumSmith+Brown SUSTAINABLE FIRM OF THE YEAR
■■ Crowe Horwath International ■■ Moores Rowland Indonesia ■■ KPMG ■■ PwC UK ■■ Moss Adams
SOCIAL MEDIA NETWORKING CHAMPION OF THE YEAR: Single firm award: Global firm award:
■■ Baker Tilly Malaysia ■■ KPMG ■■ Ebner Stolz■ ■■ Mazars (Nexia International member firm)
IT VENDOR
■■ Energy Consulting (HLB Russian Group) ■■ Receipt Bank ■■ Xero
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IAB 539.indd 5 25/07/2014 10:12:09 NEWS ANALYSIS RUSSELL GOLDEN International Accounting Bulletin
FASB chairman calls for multilateral standard-setting cooperation The Financial Accounting Standards Board chairman Russell Golden shares his personal views with Carlos Martin Tornero at the US Institute of Management Accountants’ annual conference held this month in Minneapolis
International Accounting Bulletin: One year capital markets. agree on leases. Why is that? Is it a worrying ago, at a conference in California, you quoted sign for ongoing convergence projects? IAB Would it have been in the best interests Reginald Jones, former chairman of General : Golden: First of all, we have, and we continue Electric, who cautioned that the then newly of your capital markets to adopt IFRS? to have, a lot of meetings about how we can created Financial Accounting Standards Board Golden: That’s a decision the commissioners work through to come up with an improved (FASB) wouldn’t be met with universal sup- are charged with. FASB’s mission is to try to common solution on leases. At this point we port. You also said FASB’s work wouldn’t earn improve financial reporting and work with have a disagreement on the income state- you the top award for popularity. Why did you our international counterparts to make it as ment, but we agree that all leases should be still want to become FASB chairman and what common as we can. depicted in the balance sheet. We’ve agreed criticism was Jones was referring to? IAB:It seems the incorporation is not now an with the short-term exception. With respect Russell Golden: I’m committed to the mission option at all. The other option is convergence to small-ticket leases, the IASB agreed to have of improving financial reporting and educating of the two set of standards. How does this a carve-out for small-ticket leases and the stakeholders about financial reporting. When I work with other standard-setters evolving? FASB agreed we need to research this question was quoting Reginald, it was right at the begin- further. So I don’t think we have a disagree- ning of the FASB and he talked about how, Golden: I think we are doing really well at ment; we’re continuing to research whether because we were going to facilitate change, expanding and improving our relation - or not that is something that could or should we might be faced with a level of criticism. But ships with the members of the International be allowed for in the US. With respect to the I’m still committed to the mission of improv- Accounting Standards Board (IASB). And income statement, we’re still trying to work ing financial reporting for our capital markets. constantly working with other standard- through what is the best possible solution, setters within Europe and Asia. We have a understanding what investors need and what IAB: That was domestic criticism, but I imag- good relationship with the Accounting Stand- preparers can do. ine Reginald Jones couldn’t have predicted any ards Board of Japan. And I think what we all sort of criticism from abroad for not incorpo- IAB: Is there room for improvement regarding need is to work together so we understand rating IFRS into US GAAP. convergence projects. Some say it’s not going what are the best possible improvements all at the speed it should be? Golden: I think we try to serve the investor of us can make. community by requiring standards that pro- Golden: Well, I think revenue recognition was IAB:Yet SEC chairman Mary Jo White said vide information they need to make relevant a great achievement for both boards. I’m still recently that the decision on IFRS incorpora- decisions. We try to work with the internation- confident that we’ll come up with a common tion is still pending. Is the future still open? al community so that the improvements we are solution for leases. And I think the best thing making here can also be made internationally. Golden: I would refer you to the SEC and her we can do is to really understand what the And we also understand the improvements speech. various investors think we can do to serve that international bodies are making to see if those investors. they can become improvements here. So we’re IAB: Warren Allen, president of the Interna- IAB: Are you worried the US might be getting committed to making things better and closer tional Federation of Accountants, told us that a bit isolated if financial reporting standards today. emerging economies don’t really think about this debate about US GAAP or IFRS. They are not converged, given the fact that a major- IAB: Do you see any criticism from abroad just adopt IFRS as a prerequisite for their ity of countries use IFRS? because the US has not adopted IFRS yet? development. Is US GAAP missing opportu- Golden: Again, the best thing we can all do is Golden: There are always different perspec- nities on the international stage? try to work together and improve common tives. No matter what you are working on, Golden: I do recognise that emerging econo- solutions around the world. whether we are talking about convergence of mies are accepting IFRS. But that’s the choice IAB: Is another “Norwalk agreement” leases or revenue recognition, we are trying to they are making in the best interest of their between the FASB and the IASB needed to do what is in the best interests of the capital capital mark ets. reactivate the work between the world’s two markets. To try to make things better and more main standard-setters? common around the globe. IAB: But wouldn’t you like them, maybe, to adopt something more similar to the US Golden: I think it’s important to have an IAB:Two years ago the Securities and GAAP? understanding of the various standard-setters Exchange Commission (SEC) was about to throughout the world as to how and what make a decision on whether or not to incor- Golden: I would like the various international needs to be improved – and what’s the best porate IFRS into US GAAP. What would have standard-setters to work together to come up way to move forward. I don’t think it’s only been your choice back then? with improved solutions that can produce between the FASB and the IASB; I think common results around the world. Golden: I was supportive of the SEC continu- it’s broader to other standard-setters in the ing to study what is in the best interests of our IAB: FASB and IASB haven’t been able to world. <
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IAB 539.indd 6 25/07/2014 10:12:09 International Accounting Bulletin JULIAN FROST COMMENT
The global technology race: What does it mean for our profession? BDO global head of technology Julian Frost shares his views on the fast-evolving technology landscape and the role the profession has to play to best advise clients
he world in which we operate is Similarly, it showed changing. The global economic how, as professionals in upswing, being driven in part by the sector, we are regu- thriving digital economies around larly confronted with T unconventional and the world, is opening up tremendous oppor- tunities for ambitious businesses, particu- yet-to-be-proven busi- larly those within the tech sector. As these ness models, as well companies seize growth opportunities, they as a seemingly endless need advisors who are able to help them flurry of “first-ever” anticipate the services and expertise they deals. Take the Lon - need – not only now but also in the future don-based King Digital – and whose networks have the depth and Entertainment, maker expertise to help them navigate the com- of Candy Crush Saga, plexities of global markets. the popular mobile However, with the pace of innovation and game. King was initial- change in the tech sector unlike any other ly valued at $7.1bn, the and as the Open Web increasingly serves up most talked about IPO free access to swathes of advice regardless since Twitter’s initial of geography or time of day, what are the offering last Novem- opportunities and implications for our pro- ber. Despite the fact the fession? How can we ensure we are at the company owns more forefront of professional services counsel than 180 games, there and continue to help guide our clients in the were fears it will prove technology sector through this increasingly to be a one-hit wonder complex and rapidly changing operating and perform poorly on environment? the equity markets. As trusted advisors, we more important for advisors to be able to In my view, there are three integral must build a deep understanding of the mar- have access to a broad and deep network elements: exceptional expertise, the best tal- ketplace – whether regularly reading market – one with a strong infrastructure that ena- ent and a strong global infrastructure. Let data reports, following company news or bles them to deliver the same level of service me explain what I mean. drawing on the experience and insights of the world over. First, best-in-class expertise is key. As our colleagues – in order to give informed Technology is breaking down barriers the tech sector becomes ever more sophis- guidance to our clients. and making the world a smaller and easier ticated, competitive and internationalised, Secondly, if expertise is fundamental then place in which to operate. At the same time, professional services firms need not just a so too is attracting and retaining the very the Open Web is serving up free access to finger on the pulse but a firm grip on the best talent. The war for talent has been a swathes of advice, regardless of timing, latest innovations, trends and deal activity long-trodden battleground for firms seek- day or night. The best advisors have a solid – how else will we be able to understand the ing highly skilled and highly knowledgeable global infrastructure, with the tools and markets our clients are operating in? Just experts – and the tech sector, with its relent- process, coupled with the local knowledge last month BDO’s inaugural TECHtalk less innovation, is perhaps an even more and flexibility to deliver high-quality work report, a comprehensive analysis of global contested space. – this applies to all forms of advisory and deal activity within the tech sector, high - Firms need to invest in their people and in particular auditing, where scrutiny has lighted the complex nature of the industry. talent. At BDO our objective is to provide never been greater. It revealed a surprising plummet in global an environment where talented people can As the digital economy continues to tech IPOs in the first half of the year as fears develop their careers and contribute to expand, it’s inevitable that companies will of a new tech bubble and geopolitical unrest building the business. At the same time we increasingly want and need advice and prompted a nosedive in tech shares, which give them the freedom and flexibility to get expertise within this sector. It’s now up to few could have predicted at the start of service right for their clients. professional service firms to ensure we keep the year. Finally, in my opinion, it’s never been pace. <
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IAB 539.indd 7 25/07/2014 10:12:10 FEATURE MALCOLM WARD International Accounting Bulletin
Ward takes on the association challenge Former Grant Thornton International Asia-Pacific regional leader Malcolm Ward has swapped the large and fast-growing mid-tier network for running the fifth-largest global association, AGN International. He tells Ana Gyorkos about his career, the move to running an association and expectations for the future
t’s not often that a large mid-tier or Big Four network region- AGN International factsheet al leader decides to leave the big leagues and takes up lead- ership of an association. Malcolm Ward, formerly Grant Global revenue: $1.6bn (year to 31 October 2013) IThornton International Asia-Pacific leader has done just that Global staff: 11,835 as he takes on the leadership of the fifth-largest global association, IAB World Survey rank: Fifth-largest association AGN International. Revenue by region: North America: $697.4m; Latin America: Ward qualified in the early 90s at Touche Ross, now known as $28.8m; Europe: $724.9m; Africa/Middle East: $22.9m; Asia-Pacific: Deloitte, in London. During the raft of mergers in the industry $193.1m in the early 90s he decided to consider his options and in 1992 Source: IAB World Survey 2014 moved to Grant Thornton UK, which according to him was a “great combination of a smaller firm with fewer reporting lines, more agile, but quality work and people”. and work there and you see the quality and scale of the work being Ward speaks to International Accounting Bulletin about his done with your own eyes, you generate a level of understanding that career so far, the switch from network to association and plans for you simply don’t have sitting in London, or when you fly in and fly the future of AGN, which he takes over from Nicolas Blake, who out of a place. was the chief executive for the past 18 years. IAB: What have you taken away from working in Asia? IAB editor Ana Gyorkos: What was your early career at Grant Ward: The experience at first hand showed me how things are ThorntonK U like?■ ■ ■ ■ ■ ■ changing in a way that is completely unstoppable. There are over Ward: I started off in special investigations, which meant I was doing three billion people in Asia. For each and every American there are a bit of due diligence, forensics and a little bit of capital markets 10 Asian people, and it’s a young population, ambitious, energetic work. Once I made partner I moved back into assurance and I and entrepreneurial and increasingly educated and economically headed up London assurance and tax. From there I ended up on the active. The scale of this is unstoppable. In the West we can get a bit firm’s national leadership board, and heading the London office and arrogant about stuff, with negative stereotypes – for example, about South East region the chaos to get anything done in India or cheap shoddy goods made in China. But that view is blinkered and outdated. Certainly there IAB: How did the move to Asia come about? ■ ■ are huge issues in emerging countries, but the momentum is unbe- Ward: The Grant Thornton UK firm got a new chief execu - lievable and very many businesses across Asia are run by very highly tive in 2008, Scott Barnes, and that was a good time for me to qualified, educated and motivated people, upholding international think again about my career and what exactly I wanted to be standards, with huge and increasing wealth and resources at their doing. There was a good opportunity out in India at the time as, disposal. within the Grant Thornton International network, the US firm took over supporting the development of China operations, while IAB: How did the move away from Grant Thornton Inter- Grant Thornton UK was to assist in India. I was asked to go to national come about and consequently the position at AGN? India and I spent most of 2009 over there. It was a great experi - Ward: Despite an amazing time in Hong Kong, we had to ence and I got to do a lot of work with the Grant Thornton firm move back to the UK, mainly because of my children’s educa - there. As exciting as living in India was, it was not the best solution tion. The return brought me to another change point. I love the for a young family and an opportunity in Hong Kong came up. profession and I have another 10 years at least that I want to There was a restructuring that Grant Thornton Interna - work. I really had to think about how I wanted to use that time. tional wanted to do in Hong Kong and we ended up living Having seen what’s going on in the world, it’s clearer to me than there from 2010 until the end of 2013. Out of Hong Kong I ever that the need to be connected and able internationally is here to headed up the Grant Thornton International Asia-Pacific prac - stay, and is increasing in importance. And having experienced the tice – everything from Pakistan all the way through to New business models of networks from inside, I thought there is another Zealand. It was a really great experience where I learned a lot. way of doing this and I think we can have a leaner business model When I led the London office I thought I had an international that’s more relevant to the needs of the vast majority of clients. perspective, but I really didn’t have a clue about what the profession Markets are polarising around us. Lean, low-cost models are gain- was like in emerging markets for example. Living and working in a ing power – think EasyJet, Southwest Airlines, Aldi etc. You don’t large cosmopolitan city like London you are inclined to think you’re always need a high-cost, Rolls-Royce business model to go down at the centre of what matters, but when you go somewhere like India to the shops, and meet clients’ needs. In fact, you usually don’t.
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IAB 539.indd 8 25/07/2014 10:12:10 International Accounting Bulletin MALCOLM WARD FEATURE
enjoyed about our profession. I think many very able professionals feel this and want something else – simpler, leaner, focused on cli- ent’s needs – running their own business, their own way. There is no ambiguity with my members about who owns their business. If an AGN member firm wants to do something to realise value, while my first wish is to make that within AGN, there’s no problem with the branding, proprietary methodologies etc, and I am actually here to help not hinder. I think at this point we haven’t really done a good job at getting across the association message. For example, the fact that we can be leaner about cost does not equate to poor standards or poor client service. And I think we need to be a lot clearer on the value of the association model. There are many improvements we need to make at AGN still, but we really have a solid international structure and well developed regions behind us.
IAB: What are your priorities in your role as chief executive? Ward: Put simply, I want my members’ businesses to be more valu- able because they are part of AGN. I see that as the mission, which I want to achieve in three ways. First, we need an organisation of quality where standards and customer service are at the heart of what we do and we are known for those two values. Secondly, rev- And just as I was thinking about it all the AGN opportunity came enues – there’s a lot we can do by joining up some of our expertise up and I thought what is this organisation all about? Researching across the globe and supporting our members to bring it to market it and meeting some of the people, I soon came to realise there more commercially and deliver great service to clients. Happy cli- were some substantial and high-quality firms within the association. ents and increased revenues are good news. And thirdly, services Nick Blake and his team did a fantastic job building the foundations, that contribute value to members’ businesses – there are a whole and knowing what I know from my time in Asia and dealing with bunch of things we can do to leverage our scale globally and enable large firms, this is a one-off opportunity to take the experience of members to do valuable things they can’t easily do by themselves. the past 20-plus years and apply it to a new business model. To build AGN already has some great technical communities, but we can on someone else’s great work and take it to the next level. extend this into the whole area of practice growth and develop - ment. For example, we can extend globally AGN North America’s IAB: How do you feel about the change from network to association?■ practice financial benchmarking, which is way ahead of anything Ward: My own feeling is the larger networks spend a lot of money I’ve seen before. on brand, marketing, PR and things that are good for the brand, but are not necessarily directly relevant to client service. I think IAB: Would you consider merging or joining up with another■ there’s also a lot of duplication in global methodologies and association? quality control. Good firms have those things locally anyway. Ward: Never say never. Scale is important as is global coverage, but Of course standards vary internationally, but if you have we’re not lacking in either. The international board and I are really the right professionals in good firms, local standards prop - clear on what we want to achieve and stacking up numbers for num- erly applied are fine for the vast majority of client needs bers sake isn’t it. We want to focus on our sweet spot firms and what out there. I don’t want to be negative about the larger net - is commercially important to those members and their clients. For works, which I am certain have some great people doing great us it is much more about developing a really compelling offering jobs, and who contribute to the profession and public interest. that makes the right potential members realise there is really some- But I think there’s a remoteness from much of what client service thing about AGN that brings value, and the potential of a better and is all about. I think you can take an organisation like AGN, if you more profitable practice, and great client service. really know how to run professional services, and can do an awful lot of valuable and surprising things, but on a far leaner cost base. IAB: How would you characterise the competitiveness of the mar- I’ve heard the associations and some of the smaller networks ket for getting and retaining member firms? How do you get and referred to as simple phone books, and lacking in substance and keep the right members? ■ ■ ■ ■ quality. So, to be blunt, when AGN came up I was sceptical, but Ward: I think it’s fiercely competitive, but that is the reality of on meeting the people I soon came to realise how connected the today’s profession that all our members face. They rightly expect members are, the stature of some of the professionals within those us to work hard in a lean business model. Getting and retaining the firms, and how advanced certain features of AGN were in reality. right members needs to be about a compelling value proposition, as I’m not going to sit down and say we are cheaper than others, but I IAB: What opportunities do you see in running an association? do want to be able to say we are better. It may be that our fees will Ward: The giant firms and larger mid-tier firms are getting so big be higher than even some of the smaller networks, but the issue and institutionalised they are drifting far away from what I’ve so needs to be value not just cost. <
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IAB 539.indd 9 25/07/2014 10:12:12 FEATURE USCHI SCHREIBER International Accounting Bulletin
Global leader and a role model for women EY global vice-chair and markets leader Uschi Schreiber tells Ana Gyorkos how EY’s tagline of building a better working world is far from just a branding exercise. She talks of a values and beliefs-driven business looking to make a change while growing its market share
any organisations, accounting or with driving change in the not, say they are committed to “8,000-people organisation more women in leadership posi- with a Aus$12bn (US$11.3bn) tions and generally a more diverse budget and 200 hospitals M under its wing”. workforce. However, real action in the form of appointments to senior roles is still hard According to Australian to come by across industries, businesses and media Schreiber started the government. However, one interesting role role at the time when Queens- model is making her voice heard among land Health was described as a professional services firms and beyond. “highly tumultuous organisa- EY’s newly appointed global vice-chair and tion” and she stuck at the chal- global markets leader Uschi Schreiber. With lenging role until 2008 and was, her charismatic presence and at ease man- at the time, the longest-serving ner, Schreiber says she’s always looked at health chief in Australia. the bigger picture and likes “driving trans- Scriber left the director- formational change”. What makes her suc- general position in 2008 after cess story at EY even more impressive is her being headhunted by EY Oce- start, which is somewhat unconventional ania to start building a govern- for a Big Four firm global leader. Schreiber, ment and public sector practice who grew up in Germany and later moved in the region. to Australia, started her career as a graduate “I became a deputy chief in social work and special education and her executive within two years first set of jobs were in direct health service of joining the firm and then delivery in psychiatry and disability. took the public sector practice She says her initial work evolved mainly global.” and explains that being one of few women around getting people out of institutions and And this year Mark Weinberger, the firm’s is something that’s followed her for most of back into society. global chief executive, promoted Schreiber her career. “In most careers you always start in a to global markets leader. “I didn’t find it such a change at all, smaller space and what interested me was She adds that, to some, her career path because in government I was at the top of driving change on a large scale,” she says. might seem “disjointed”, but says there are my profession as director-general of a large “Having worked on a hands-on level initially “some strong themes” there as, for example, agency, and in many meetings I chaired as in my career, I was then interested in what her quest to make organisations work better, the senior executive in government I’d be the happens at policy level. How do you actually working with people, driving transforma- only woman. So moving into EY was from influence change at a much greater level and tional change and growing businesses. the gender perspective almost better. There bring about systematic change.” For some the move from public to private were actually quite a few female partners After her first few jobs in health service sector is a big change, but Schreiber says when I first joined the firm in Sydney.” Schreiber moved to education. “Then I that for her it was about leadership which is Schreiber has excelled as an exceptional worked in the non-government sector, really similar in both sectors. At EY she has now leader and influencer of policy, and when driving changes particularly in Australia taken her leadership global and says: “I asked about her skill of making people lis- around working with migrants,” she says. have enjoyed all the stages of understanding ten she says: “I’ve never had a big issue with “I then moved to government and worked how you affect change from a local level, to that. I like issues, but I really like working in health care for a number of years. I was global change, and back. I have done every- with people. There are many ways of solving driving strategic policy for a state in Aus- thing you could do in-between. I believe that, a problem; the most exciting thing is not just tralia, which was all about economic, social, as an individual, you can make enormous to do it your way, but to find new solutions environmental and legislative policy. It was change, influencing people’s thinking and with other people. And that’s where diversity around driving large scale reform processes.” take people with you as a leader.” comes in. It’s much more exciting working Prior to joining EY she worked as director- When asked about her first experience of with a team where people don’t always agree.” general of Queensland Health in Australia, the corporate world when she joined EY as “Diversity is vital, especially in the context a role she held from 2005, and was tasked a female leader, she shrugs at the question of some of the biggest challenges of the 21st
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IAB 539.indd 10 25/07/2014 10:12:12 International Accounting Bulletin USCHI SCHREIBER FEATURE
century that governments and society faces, Imparting knowledge such as the shift of geo-economic power from West to East, and North to South, the International Accounting Bulletin asks EY’s Uschi Schreiber’s advice impact of technology on what we do, and to young people across the world. climate-related challenges,” she says. “Governments, now more than ever, need IAB: What advice would you give to young people who want to make a difference? more diversity at the decision making table,” Schreiber adds. Schreiber: I would say think big! Whether your aspirations are to be in government, in “One of the things we have done at EY is business or both, you should think big. On the one hand, these are very challenging times actually to measure how many women in for the planet and the people on it, but, on the other hand, it’s the time when a whole load G20 countries are leading government agen- of new solutions could be developed. cies. And, despite most governments having equal opportunities in place for the past 40 IAB: What advice would you give to the so-called lost generation of young people? years, in most countries it’s still less than 30% of women leading such agencies. And Schreiber: I would say don’t own that label, because as soon as you label yourself as lost, business has the same problem; we don’t you are. The days when most things happen in your teens and 20s are over and people have enough people on boards and at senior have so many ways these days of reinventing themselves and the way employment looks level leadership roles. takes so many forms. I think technology creates so many good opportunities to create busi- “And business in the context of those mega nesses and there are so many ways of finding meaning at the same time finding employ- changes has challenges as well. There’s a ment. I would say don’t own the label and look at the whole range of options. reinventing game and if you want to do that successfully you want diversity. You want the smartest people; people with different impact that it has on communities. The clearly we are. Some of that is getting the experiences – and it’s not just women, but Women in Parliaments Global Forum is to right balance of the services we provide; people from all sorts of backgrounds. Inno- meet again in February next year, while a obviously at the core is the fact we are a pro- vation is the name of the game and that’s a regional Africa meeting took place in Rwan- fessional services firm with an audit practice challenge for business, for government and da earlier this month. at our centre. society,” she says. “But we’re an organisation that transforms Schreiber who is involved in numerous Substance behind the words and reinvents itself all the time, and the way projects and initiatives says the one project Schreiber says for the relatively new motto we, and other organisations, are doing that she feels particularly passionate about is the of EY and part if its corporate identity is is by setting targets for growth. We are very Women in Parliaments Global Forum initia- “not just a marketing ploy, but is really real. clear on where we want to be. We meet as a tive. She says: “There are obviously women “Our motto building a better working leadership team and discuss how to achieve in parliaments across the world, but perhaps world really resonates with me. If you look those goals, and part of that is business per- don’t have a forum to get together to talk at where I’ve been and come from, a lot of formance, part of it is having the right peo- about issues of inequality across the world. my motivation does actually come from ple and keeping them, and values are also a So we at EY worked together with the Euro- building a better working place.” big part of that.” pean Parliament and other partners to co- She says that as an employer of 190,000 host the first event that brought together people across the world the firm has obliga- EY in five years 600 female parliamentarians from across tion to communities. Schreiber says she sees her future at EY and the world earlier this year. “If you look at the convening power that says she feels “excited” about the numerous “It’s a very important initiative to look at an organisation like EY has, because of projects, client work and initiatives she’s the influence and power and also the differ- our deep relationship with business, with involved in. ent approach that female parliamentarians government, with entrepreneurs and so on, For the global network, she says that in bring to the table, driving change in their we clearly have a role to play in addressing five years it’s likely to be a “much larger countries etc.” some of the key issues in society, such as, organisation”. “Clearly it’s about dominat- Schreiber says EY’s contribution to the for example, youth unemployment across ing the parts of the market we are choosing debate, including her role as one of the Europe etc.” to dominate. And I think, in a way, it’s also board members of the organisation, is to While profitability is still the key objective, about developing new services as markets try to facilitate that better working world, which will drive the business forward and and businesses change,” she says. which is the firm’s motto incorporated in its consequently create additional employment, “I think you’re going to see a very distinc- year-old revised corporate identity. Schreiber says the ethos is very much based tive professional services firm called EY She says women bring a different per - on the notion that “people want to be part with hopefully the right balance of services spective to the table and tells the experience of an organisation, which makes a bigger to meet the needs of clients. But also with a of micro-financing in emerging markets contribution”. strong and explicit track record of having where there is a distinct preference to giving “I’m not saying we’re not focusing on translated the mission of building a better women the money because of the broader growing our business and profitability – working world into very concrete action.” <
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IAB 539.indd 11 25/07/2014 10:12:12 COUNTRY SURVEY ASIA-PACIFIC International Accounting Bulletin
Beware the flirtatious lady of many lovers In the fast-paced Asia-Pacific region, there are still good opportunity for accounting firms, but the rise of a new generation and local competition may carry long-term implications for the established market participants. Vincent Huck reports
here are no more worlds to con - complexity. In this economic landscape the optimistic. “We’ve seen a significant uptick quer!” Alexander the Great is said competition is fierce between accounting in emerging markets like Malaysia and by some to have opined tearfully firms to gain and secure market share. Con- China for advisory services, in particular, upon reaching Minor Asia. It was sequently, surveyed networks have seen a management consulting is continuing to “T slight decrease in revenue in 2013, earning a expand,” he says. “We’ve seen very strong too early in mankind’s history to know that even though he had built a very large empire, combined $23.68bn, compared to $23.76bn growth in risk consulting and we’re also see- Alexander’s realm was only a small slice of a in 2012. The decrease is hard to characterise ing a returned increase in transactions and much bigger map. due to local currency fluctuations against the cross-border M&A, each of those are show- There were other worlds in other parts of US dollar. ing more positive signs.” the globe, but there was also more to Asia The Big Four firms led this shrinkage, earn- Among mid-tier firms ranked by Interna- than that seen by Alexander. He reached ing $18.28bn in fees in 2013, down 1.3% tional Accounting Bulletin across Asia-Pacif- what is now the Eastern Punjab and had on 2012. The top four positions remain ic, a number of devcelopments are worth only set eyes on a very small part of what unchanged in 2013, with PwC retaining noticing in the past year. Most notably is the is now referred to as the Asia-Pacific region. its position as market leader and reporting growth of Moore Stephens International Had he carried on with his con - annual revenues of $5.35bn in the year to which reported $486.6m in fee income and quest, Alexander would have found a 31 June 2013, down 1% on the previous climbed the ranking to 10th place, overtak- vast array of worlds ripe for conquer - year. ing Kreston International, Nexia Interna- ing. Due to its immensity, Asia-Pacific KPMG ranked fourth with total fee tional and PKF International. today comprises a diversity of geogra - income of $3.9bn in the year to Septem - This increase in revenue can be attribut- phies, histories, cultures, languages and ber 2013, down 4% on the previous year. ed to the addition of BDO Da Hua to the religions. Because of this, economic markets Nevertheless, Geoff Wilson, chief operat- Moore Stephens International network in in Asia-Pacific vary greatly in maturity and ing officer, Asia Pacific at KPMG remains China, which now operates under the name
■■ ASIA -PACIFIC NETWORKS – FEE DATA Fee split (%)
Corporate Fee income Growth Audit & Tax Management Corporate recovery/ Litigation Rank Name ($m) rate Accounting services consulting finance Insolvency support Other Year-end 1 PwC* (e) 5,348.0 –1% ------Jun-13 2 Deloitte* (e) 4,900.0 0% ------May-13 3 EY* (1) 4,136.0 0% ------Jun-13 4 KPMG* 3,900.0 –4% 51 18 - - - - 31 Sep-13 5 BDO* 1,099.9 5% 68 13 - - - - 19 Sep-13 6 Crowe Horwath International* 746.3 1% 71 7 8 1 - - 13 Dec-13 7 Baker Tilly International* 657.4 3% 48 18 13 3 6 - 12 Jun-13 8 Grant Thornton* 566.6 –2% 50 22 - - - - 28 Sep-13 9 RSM International* 552.8 4% 67 9 13 - - - 11 Dec-13 10 Moore Stephens International* 486.6 102% 74 12 4 1 1 - 8 Dec-13 11 Kreston International* 366.1 7% 44 17 13 2 6 - 18 Oct-13 12 HLB International* 258.8 4% 58 14 2 1 5 - 20 Dec-13 13 Nexia International* 239.8 –20% 65 16 10 1 2 1 5 Jun-13 14 Reanda International* 112.9 22% 68 6 10 0.5 4 0.5 11 Dec-13 15 UHY International* 101.1 1% 66 14 10 1 0.5 0.5 9 Dec-13 16 Mazars* 85.5 0% ------Aug-13 17 ECOVIS International* 43.3 29% 56 28 12 1 - 1 2 N/A Total revenue/growth 23,601.2 0%
Notes: *Disclaimer = Only data from the named member firm or the exclusive member firms within a network/association is included. Data relating to correspondent and non-exclusive member firms is not included. (e) IAB estimates. (1) Data from the IAB 2014 and 2013 World Surveys. Source: International Accounting Bulletin 12 y July 2014 www.InternationalAccountingBulletin.com
IAB 539.indd 12 25/07/2014 10:12:13 International Accounting Bulletin ASIA-PACIFIC COUNTRY SURVEY
of Moore Stephens Da Hua with 25 offices. have marked the past year. As Baker Tilly says this option is still on the table and will “Da Hua’s decision to join Moore Stephens International Asia Pacific regional director be considered in due course. International reflects the global strength and Ben Lloyd says: “In terms of organic growth Elsewhere in the region, the Philippines ambition of our international network, and prospects the last year was quite uneventful.” nearly witnessed what would have been the our invitation to managing partner Liang This explains why a lot of networks biggest merger in the region when Grant Chun to join the Moore Stephens Interna- resolved to adopt an external growth strat- Thornton International Philippines member tional global board recognises the impor- egy. One of the main deals of the past year as firm Punongbayan&Araullo (P&A) and tance of China to our network,” Moore reported in the IAB World Survey happened Deloitte member firm Navarro Amper& Stephens International chairman Rich - in China where RSM China and Crowe Co agreed to merge in January and operate ard Moore explains. “Their appointment Horwath China merged creating a firm of under the Deloitte brand. But the deal fell ensures we will deliver exceptional service 344 partners and 2,600 staff and annual rev- through in March. to international clients working out of and enues of about CNY2.7bn ($457m). P&A chair and chief executive officer investing in China.” The new firm, rebranded as Ruihua, is Maria Victoria Españo said at the time: “We Liang has already made an excellent con- larger by fee income in Mainland China than came to realise that our domestic strategy tribution to the board and to the develop- EY and KPMG, and in the latest IAB China better aligns with the Grant Thornton Inter- ment of Moore Stephens International’s survey ranked as the third-largest network in national global strategy. At Grant Thornton presence in the Greater China area, Moore Mainland China. International, we are able to maintain our continues. “He has attended several regional Ruihua audit partner Zhang Lianqi said entrepreneurial spirit and flexibility and, at conferences around the world where he has for the IAB China survey: “We are in a tran- the same time, work towards common glob- presented and met many representatives of sitional period working on the integration of al goals that we have helped to establish.” our member firms. We are working with our both firms. We will keep the dual member- Grant Thornton Asia-Pacific regional existing member firms throughout Asia and ship for the duration of the transitional peri- head and member firm development Rodger Australasia to build strong ties with Moore od which will last an estimated three years.” Flynn describes the retention of the Philip- Stephens Da Hua and we are already seeing Asked if Ruihua could, at the end of the pines member firm as the main highlight for the growth benefits.” transitional period, leave both RSM Interna- the network in the region in the last year. As But Moore Stephens addition of Da Hua, tional and Crowe Horwath International to a result the regional conference of the net- is only one of many firm movements which create its own international network, Lianqi work will be held in Manila, he says.
■■ ASIA-PACIFIC ASSOCIATIONS – FEE DATA
Fee split (%)
Corporate Fee income Growth Audit & Tax Management Corporate recovery/ Litigation Rank ($m) rate Accounting services consulting finance Insolvency support Other Year-end 1 Praxity* 348.9 11% ------n/a 2 PrimeGlobal* 143.6 14% 66 15 8 2 1 2 6 May-14 3 Morison International* 132.4 0% 63 12 12 5 1 1 6 Dec-13 4 DFK International* 132.4 3% 50 20 13 1 1 1 14 Sep-12 5 BKR International* 108.4 0% 29 62 5 4 - - - Jun-13
6 KS International* 75.2 5% 62 14 13 2 1 0 8 N/A 7 MSI Global Alliance* 70.0 31% 56 26 7 1 1 1 8 Dec-13 8 MGI* 69.9 18% ------Jun-13 9 CPA Associates International* 67.4 0% 61 19 14 2 1 2 1 Mar-14 10 Integra International* 62.3 –14% 50 25 25 - - - - Mar-14 11 IAPA* 61.0 19% ------n/a 12 INPACT Asia Pacific* 41.6 –15% 53 26 12 1 1 1 6 Dec-13 13 GMN International* 40.0 –1% 55 28 14 1 2 Sep-13 14 ANTEA* 9.8 14% 29 15 38 1 15 1 1 Dec-13 15 EuraAudit International* 1.8 56% 88 5 0 0 0 0 7 Dec-13 16 Abacus Worldwide* 1.5 400% 47 25 12 3 0 0 13 Jan-14 17 UC&CS Global* 0.5 0% 10 50 40 - - - - Dec-13
Total revenue/growth 1,366.8 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 July 2014 y 13
IAB 539.indd 13 25/07/2014 10:12:13 COUNTRY SURVEY ASIA-PACIFIC International Accounting Bulletin
Even though it remains the eighth-largest menting a new tax called goods and services and Singapore, where we’ve seen a return of network in the region, overall Grant Thorn- tax (GST) to replace its former sales and initial public offerings, are very strong, but ton International has had a disappointing service tax. The implementation has been the Philippines, Thailand and Malaysia are year in Asia-Pacific, Flynn admits. “Our delayed in the past few years but Flynn says also showing strong growth, and tax is con- revenues went down 2%, although our staff that it is now under way and “there is a sig- tinuing to perform well across most of our went up 7%,” he says. “This comes from the nificant amount of work coming out of the jurisdictions.” impact of the US dollar which has become implementation and it will have further sig- It’s very difficult to pinpoint one country very strong particularly against curren- nificant impacts on all business operations in as there is a lot of diversity, according to cies from emerging markets like India and Malaysia starting in 2015”. Flynn. “There is a source of opportunity in Malaysia, and also Australia. As a lot of businesses are moving from a Malaysia with the introduction of the goods Like elsewhere in the world, audit work in low-cost manufacturing economy to a more and services tax and the associated business Asia-Pacific has been under pressure in the advanced economy there are increasing needs,” he continues. “In the last several past year. “Increased regulation and com- opportunity in advisory as well, Flynn con- months we’ve just signed new member firms petitive pricing have pressured our margins tinues. “We see four areas of opportunities in Myanmar, Cambodia and Afghanistan. as clients expect more for less,” says Flynn. in the advisory market: forensic, outsourcing, On the other hand Papua New Guinea is a At Baker Tilly International, Lloyd financial services and reorganisation. Those place where we are not represented which describes the audit and assurance work as have the greatest opportunity for growth.” we are looking at.” an “ongoing battleground” for accounting At Mazars, Pascal Jauffret, partner and Jauffret says there are three locations firms. He says the pressure comes from two deputy head of Asia-Pacific disagrees slightly. Mazars wants to focus on: Mainland China, sides. “On the one hand you have the larg- For him Asia still remains the manufacturing India and Indonesia. est networks which are trying to get into unit for many international companies from “It’s simply because of the size of these the small and medium enterprises market, around the world, but with the recent surge markets,” he explains. “China has 1.35 which prompts the medium and smaller net- in public opinion for greater corporate social billion inhabitants, India 1.25 billion and works to respond,” he says. “And we have responsibility, accountability and transpar- Indonesia 240 million, so we need to grow to respond on prices, which is unfortunate ency in business, there are opportunities. massively there because we’re not yet in the as what we see is a devaluation of the audit “Western boards are increasingly worried position we ought to be.” and assurance field.” that they might be using a local third party There are another two locations which And on the other hand, he continues, cli- in Asia which is using means and processes are of interest for Mazars, Hong Kong and ents particularly in Asia-Pacific see the audit that could tarnish their reputation,” Jauffret Singapore, but for different reasons, he says. opinion as a piece of paper that allows them explains. “So we have more and more work The interest in these two countries comes to meet their tax return and do some of their in this area because board members want to from Mazars’s organisational structure and banking requirements. “So they don’t really make sure that beyond the traditional finan- ambition in the region. The firm operates in care how much they pay, but they want that cial audit their teams and companies around Asia-Pacific out of an integrated platform piece of paper done as quickly as possible.” the world meet the minimum requirement to which coordinates transnational activities, As a result Baker Tilly International had prevent some kind of scandal.” developments and training. a 14% drop in audit revenue in 2013, he “More and more of our clients want a says. The network also experienced a slight Audit performance coordinated approach to the region” Jauf- decrease in tax, but losses in audit and tax Asked how audit services at Mazars per - fret explains. “It can be coordination of their were balanced by the network’s strong per- formed, Jauffret says it really depends on payroll across four or five countries or an formance in non-audit services. the country. “In Singapore, 55% of our rev- audit approach to the various operations in “Clients are largely moving away from the enue is in audit and the rest is consulting at the region, for example.” compliance functions and moving towards large; in Vietnam and Thailand it would be Therefore Mazars has adopted a coor- advisory work where they are able to get a massively non-assurance services; in Japan dinated approach to its own development, more holistic view of their business and are it is 60% non-assurances services; while in he continues. And for the execution of this prepare to pay a premium,” Lloyd explains. South Korea it accounts for one third of our strategy Singapore and Hong Kong consti- Contrary to Baker Tilly International, at revenues. In Indonesia audit still accounts tute ideal bases to target decision-makers Grant Thornton International tax has been for 70% of our fee incomes,” he summarises. and clients who are operating all over the an interesting area of growth in the past year. Asked what were the best-performing region. “There are different levels of market matu- countries in the region and the future ‘hot “In Hong Kong and Singapore, we don’t rity and complexity throughout the region spots’ in Asia-Pacific, interviewed firm lead- necessarily want to grow in terms of having with regards to the tax systems,” Flynn says. ers answers are rarely similar to one another, a lot of services,” Jauffret continues. “We “Companies are expanding in the region and once again showing the diversity and scope don’t look at it as domestic markets, but to thus the demand in corporate governance of the region. have a strategic approach for those clients and risk mitigation is increasing.” “In advisory China, Japan, Philippines that have a coordinated approach in the He points to Malaysia as a specific coun- and Indonesia are seeing very strong growth region.” try with a lot of opportunities in tax. The so that became quite promising,” KPMG’s Despite opportunities in all service lines Malaysian government is currently imple- Wilson says. “In audit, countries like China, across the region, accounting firms will face
14 y July 2014 www.InternationalAccountingBulletin.com
IAB 539.indd 14 25/07/2014 10:12:14 International Accounting Bulletin ASIA-PACIFIC COUNTRY SURVEY
n ASIA-PACIFIC NETWORKS – STAFF DATA
Total staff Growth Partners Professional staff Administrative staff Offices Rank Name 2014 2013 rate 2014 2013 2014 2013 2014 2013 2014 2013 1 PwC* (1) 46,624 43,690 7% ------
2 Deloitte* (1) 41,125 40187 2% ------
3 KPMG* 32,042 32,690 –2% 1,753 1,732 25,554 26,117 4,735 4,841 n/a n/a
4 EY* (1) 29,893 35,947 –17% ------
5 BDO* 13,976 15,538 –10% 842 919 11,806 13,366 1,328 1,253 129 137
6 Crowe Horwath International* 10,849 10,725 1% 667 665 8,818 8,990 1,364 1,070 237 173
7 RSM International* 10,090 9,073 11% 476 483 8,109 7,219 1,505 1,371 15 15
8 Moore Stephens International* 9,328 4,235 120% 460 328 6,978 3,252 1,890 655 120 87
9 Grant Thornton* 8,339 7,799 7% 554 527 6,589 6,324 1,196 948 72 65
10 Baker Tilly International* 7,384 7,286 1% 390 375 6,165 6,110 830 801 87 85
11 Kreston International* 6,645 6,073 9% 367 332 5,354 4,948 924 793 133 135
12 HLB International* 5,980 5,393 11% 416 401 4,871 4,289 693 703 84 84
13 Nexia International* 4,558 4,971 –8% 347 349 3,455 3,917 756 705 90 95
14 UHY International* 2,349 2,073 13% 187 178 1,914 1,653 248 242 59 60
15 Mazars* 2,271 2,107 8% 71 58 1,963 1,814 238 234 21 21
16 Reanda International* 1,700 2,171 –22% 88 105 1,408 1,812 204 254 47 41
17 ECOVIS International* 753 645 17% 79 61 559 509 115 75 33 26
Totals 233,906 230,603 1% 6,697 6,513 93,543 90,320 16,026 13,945 1,127 1,024
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) Data from IAB World Survey 2014 Source: International Accounting Bulletin
n ASIA-PACIFIC ASSOCIATIONS – STAFF DATA
Total staff Growth Partners Professional staff Administrative staff Offices Rank Name 2014 2013 rate 2014 2013 2014 2013 2014 2013 2014 2013 1 Praxity* 7,205 6,896 4% 307 271 6,172 n/a 726 n/a 66 63
2 PrimeGlobal* 3,059 3,149 –3% 260 314 2,026 2,314 773 521 95 98
3 DFK International* 2,914 3,058 –5% 187 188 2,270 2,497 457 373 68 81
4 Morison International* 2,516 2,551 –1% 183 142 1,967 1,913 366 496 62 51
5 CPA Associates International* 2,134 2,219 –4% 157 162 1,714 1,748 263 309 76 54
6 BKR International* 2,081 1,878 11% 172 154 1,601 1,462 308 262 59 50
7 KS International* 1,652 1,551 7% 142 141 1,185 1,084 325 326 70 67
8 INPACT Asia Pacific* 1,528 1,618 –6% 141 157 1267 1331 120 130 60 59
9 MSI Global Alliance* 1,438 1,202 20% 98 89 1,031 904 309 209 25 27
10 MGI* 1,358 1,176 15% 136 116 745 700 477 360 56 49
11 IAPA* 1,168 1,115 5% 128 116 556 481 484 518 34 36
12 Integra International* 990 929 7% 65 66 806 735 119 128 46 41
13 GMN International* 813 855 –5% 73 74 632 653 108 128 39 35
14 ANTEA* 324 298 9% 25 25 239 228 60 45 16 16
15 EuraAudit International* 305 295 3% 16 14 262 254 27 27 20 19
16 Abacus Worldwide* 91 43 112% 10 3 32 12 49 28 4 1
17 UC&CS Global* 17 17 0% 1 1 14 14 2 2 3 3
Totals 29,593 28,850 3% 2,101 2,033 22,519 16,330 4,973 3,862 799 750
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 July 2014 y 15
IAB 539.indd 15 25/07/2014 10:12:14 COUNTRY SURVEY ASIA-PACIFIC International Accounting Bulletin
tough challenges in the coming year in Asia- Generational change in business or long run, according to Jauffret, is the conse- Pacific. The most important challenges high- accounting practices is going to have a quences of the decision from China to “fos- lighted by interviewed firm leaders has to tremendous impact, according to Lloyd. ter local firms and promote concentration on do with the coming of age of Generation Y “Especially in Asia where you have an older the local market”. which in turns impacts succession planning generation, patriarchs so to speak, who still If Chinese firms like Ruihua or Shinew- and recruitment. hold on to the equity or the decision-making ing were to rise to become international Generation Y is the generation born dur- in a company,” he says. networks and associations on their own, aforetime.” < ing the 80s and 90s, who had constant access As a result there’s an increasing need for other mature markets in Asia-Pacific could to technology in their youth. As generation technical expertise to restructure family encourage the same developments in their Y’s needs, desires and attitudes differ signifi- trusts, and basic management and advisory local markets and this would create tremen- cantly from those of their parents, employers skills to assist in the merger or acquisition dous competition for already established have had to adapt their recruitment process- strategies, he continues. international networks and associations, es to attract talent and upgrade their career Jauffret says that, in the long run, this which are mostly of western origins. offerings to retain young talent. might be create some issue with regards to With this in mind, and as firms look to “Generation Y is very well documented succession planning as regulators are being grow further in Asia-Pacific, firm leaders in the Western economies, but in the Asian slow to react. “Some firms happen to be might want to bear in mind the words of context it is fairly new,” Lloyd says. “And a owned by very limited numbers of people Rudyard Kipling who in his short story The lot of member firms are talking about that at and they will have to pass the baton either Man Who Was: “Asia is not going to be civi- the moment to understand what it all means by grooming a new generation or by selling, lised after the methods of the West. There and how to engage with this generation and I’m not sure regulators have taken that is too much Asia, and she is too old. You and get the best out of them by providing into consideration,” he says. cannot reform a lady of many lovers, and rewarding careers.” Another key trend to look for in the very Asia has been insatiable in her flirtations
■■ ASIA-PACIFIC
FIRM MOVEMENTS
NETWORK/ASSOCIATION FIRM ADDITIONS, MERGERS & ACQUISITIONS
ANTEA Added: Wescourt (Australia), Stanford (Singapore)
Baker Tilly International Baker Tilly Staples Rodway (New Zealand) acquired PKF Martin Jarvie (Wellington); Baker Tilly Singhi (India) merged with Corporate Finance Advisors, (Mumbai, Maharashtra) Mehmood Indress Qamar (Pakistan) opened new office in Afghanistan.
BDO Merger: PKF Business Advisory (Adelaide, Australia) merged with BDO (SA) Pty (Adelaide, Australia), RHB merged with BDO Tauranga (Tauranga, New Zeland) China: 350 PKF partners and staff of PKF China joined BDO LiXin (Beijing, Shenzhen, Wuhan) Added: BDO Consulting (formerly Sylvester Leong & Co.) (Bandar Seri Begawan, Brunei), BDO MZSK & Associates (formerly MZSK & Associates) (Aurangabad, Mumbai, New Delhi, Pune; India), BDO LLC (formerly Itgelt Audit LLC and Amar Incon) (Ulaanbaatar, Mongolia) Lost: BDO China Dahua CPAs (China), BDO Haribhakti (India) BKR International Added: Alas Oplas & Co (Manilla , Philippines), Jinghua CPAs Company (Beijing, China), Chengdu Zhongda CPAs Co (Chengdu, China)
CPA Associates International M&A: Shinwon & Co. (Seoul, South Korea) Crowe Horwath International Crowe Horwath China merged with RSM China CPAs to become Ruihua
DFK International Merger of DFK Oswin Griffiths and DFK Carlton in New Zealand
ECOVIS Added: ECOVIS Clark Jacobs (Sydney, Australia), ECOVIS KGA Limited (Auckland, New Zealand), ECOVIS Taiwan (Taipei City, Taichung City and Yunlin County, Taiwan)
EuraAudit International Added: Lixin International (Singapore)
HLB International Added: Fadnis & Gupte (Indore, India), HLB Atrede (Singapore) INPACT Asia Pacific Lost: Cheng & Co. (Perth, Australia) , Blackmore Virtue Owens (Auckland, New Zealand), Walker Davey (Christchurch, New Zealand), Piyawardena & Associates (Sri Lanka)
Kreston International Added: Daehyun Accounting Corporation (Seoul, South Korea), M/s. R. K. Singhania & Associates (Raipur, India), Jiangsu Gonqin CPAs Co. ( Wuxi, China)
Reanda International Added: Edmund So, Peter Polgar & Associates, Maundrell Accounting (Australia)
RSM International RSM China CPAs merged with Crowe Horwath China to become Ruihua CPAs
MGI Added: Vietnam Auditing & Accounting Consultancy Company (Vietnam), MGI Perth (Australia), Hanmi Accounting Corporation (Korea), Gatmaitan & Associates CPAs (Philippines) Mazars Added: Correspondent firm U Hla Tun & Associates (Yangon, Myanmar)
Moore Stephens International Moore Stephens Da Hua (Beijing) merged with Qingdao Zhenqing (Qingdao) Added: Moore Stephens Da Hua (Beijing, China), Tianjin Shu Lun Pan Zhoglian CPAs (Tianjin, China)
Morison International Added: Junaidy Shoaib Asad Chartered Accountants (Karachi and Lahore, Pakistan) Lost: Abdul Jabbar Certified Accountants & Consultants (Saudi Arabia).
UHY International Lost: UHY Haines Norton (Canberra)
16 y July 2014 www.InternationalAccountingBulletin.com
IAB 539.indd 16 25/07/2014 10:12:16 International Accounting Bulletin SOUTH KOREA COUNTRY SURVEY
Smart Korea moves Despite a blocked audit market the South Korean profession is looking to increase advisory services for international businesses keen to expand into this market. Vincent Huck reports
t was a Dutch bookkeeper, Hendrik Interpretation of the Observations of Hen- fidence, as Lloyd suggests, South Korea Hamel, who in the 17th century first drik Hamel and his Companions published remains an interesting jurisdiction for properly introduced Korea to the rest in the Sungkyun Journal of East Asian accounting networks and associations in the of the world. Hamel who worked for Studies in 2007, Walraven writes: “It is a past year. Surveyed mid-tier firms report- I splendid and sometimes inspiring case study ed a combined KRW212bn ($205.7m) in the Dutch East India Company, gained fame by publishing a journal describing his of intercultural contact. […] A foreign busi- revenue, up 9.7% from the previous year. 13 years of semi-captivity in Korea between nessman about to start working in Korea Surveyed association reported a com - 1653 and 1666. could do worse than reading (a well-edited bined growth of 11% in revenues up to Hamel had set sail for Japan in 1653, and annotated edition of) the Journal with KRW151.4bn ($146.8m). but was shipwrecked on the Korean island this angle in mind by way of preparation. of Cheju and taken into custody to Seoul His familiarity with an episode from Kore- Networks along with the 35 other survivors, where an history that is widely known in Korea In the network rankings, the top seven posi- they lived for 13 years in semi-captivity. In would also provide him with some cultural tions remain unchanged in 2013, while in 1666, he managed to escape to Japan and capital.” the mid-tier table Kreston International returned to The Netherlands. Remarkably, Hamel’s immediate inten- overtook Baker Tilly International with Hamel’s Journal and a Description of the tion in writing his journal was not to satisfy total fee income of KRW18.5bn in the year Kingdom of Korea, 1653-1666 was pub- the European general public’s curiosity for to 31 October 2013, up 59% on the previ- lished shortly after his return and quickly the Far East, but to inform the Dutch East ous year. translated in several European languages as India Company, of possible trade opportu- This growth is mainly due to the network well as Korean. nities in Korea. adding a new member firm in Seoul, Daey- In today’s South Korea, despite a relative- hun Accounting Corporation. Divided nation ly small local market, 50 million inhabit- Baker Tilly International has dropped to A lot has changeed and happened in the ants, the opportunities are still there, but ninth place with fee income of KRW14.8bn Korean peninsula since Hamel’s account Hamel’s successors working in audit and in the year to 31 March 2014, up 3% on the was published. The Kingdom of Korea is accounting have mixed feelings consider- previous year. Baker Tilly Sungto partner today home to two countries, the Demo - ing the challenges brought about by recent Min Jae Lee says: “This growth has come cratic People’s Republic of Korea (North regulatory changes. through the firm’s deep relationships in the Korea) and the Republic of Korea (South Baker Tilly International Asia-Pacific commercial and banking sectors as well as Korea), facing each other in a fratricidal regional director Ben Lloyd says: “Fifteen from its international tax and corporate standoff, itself the legacy of the Cold War years ago, South Korea was quite a con - finance areas.” era. fident and bubbling market while Japan Lee says the past 12 months have been rel- But according to Professor Boudewijn wasn’t quite there. But move along to the atively uneventful in the audit space and his Walraven of Leiden University, Hamel’s beginning of this year and there’s been a firm has only seen marginal growth in this journal still remains an important read for remarkable turnaround in terms of market service line. But he believes this will change any business intending to operate in Korea. sentiment.” in the coming year as the country move In his paper Reluctant Travellers: Shifting Despite loosing some of its market con- towards International Financial Reporting
www.InternationalAccountingBulletin.com July 2014 y 17
IAB 539.indd 17 25/07/2014 10:12:19 COUNTRY SURVEY SOUTH KOREA International Accounting Bulletin
Standards (IFRS) adoption. South Korea suffers from high fee pressure, increase of average audit fee per client,” “The final implementation of the require- Lee says and he doesn’t expect it to drop in he says. ment for the preparation of financial reports the near future. Due to the structure of the local market, under IFRS opens up a new market, as many At Nexia Samduk, partner Hyunsoo it’s tough for mid-tier and smaller firms businesses in South Korea would be looking Kwon says that despite the fee pressure, his to gain market share in the audit sector. at contracting this work out to accounting firm has managed to grow the audit ser - Mazars partner and deputy head of Asia- firms rather than hiring their own certified vice line by 8%. “The increase in revenue Pacific Pascal Jauffret explains that “the public accountants,” Lee says. is mainly attributable to the increase in local market is dominated by a limited num- Like in the rest of the world, audit in the number of audit clients, instead of the ber of conglomerates”.
■■ SOUTH KOREA NETWORKS – FEE DATA Fee split (%)
Corporate Fee income Growth Audit & Tax Management Corporate recovery/ Litigation Rank Name (KRWm) rate Accounting services consulting finance Insolvency support Other Year-end 1 PwC*(e) 402,472.2 -10% ------Mar-14 2 KPMG* 325,321.0 –8% 44 15 13 4 7 - 17 Mar-14 3 Deloitte*(e) 309,890.7 23% 4 EY*(e) 186,448.7 -1 5 BDO* 61,618.0 2% 61 13 26 - - - - Mar-14 6 Nexia International* 34,609.4 8% 58 20 7 5 1 - 9 Jun-13 7 RSM International* 29,144.0 0% 62 12 2 - - - 24 Dec-13 8 Kreston International* 18,525.6 59% 17 23 53 1 1 - 5 Oct-13 9 Baker Tilly International* 14,783.8 3% 42 30 1 9 6 - 12 Mar-14 10 Moore Stephens International* 14,300.0 44% 58 13 12 - 8 - 9 Dec-13 11 PKF International (1) 11,975.9 20% ------Mar-14 12 Grant Thornton* 6,765.0 13% 40 11 5 1 2 1 40 Mar-14 13 ECOVIS International* 6,391.9 13% 55 24 21 - - - - Mar-14 14 HLB International* 5,807.0 0% 68 10 19 2 - - 1 Mar-14 15 Crowe Horwath International* 4,186.3 0% 24 50 21 5 - - - Mar-14 16 Mazars* 3,917.9 1% 78 22 - - - - - Aug-14 Total revenue/growth 1,436,157.5 0%
Notes: *Disclaimer = Only data from the named member firm or the exclusive member firms within a network/association is included. Data relating to correspondent and non-exclusive member firms is not included. (1) PKF International’s fee income is from correspondent firms and non-exclusive member firms .(e Source: International Accounting Bulletin ■■ SOUTH KOREA ASSOCIATIONS – FEE DATA
Fee split (%)
Corporate Fee income Growth Audit & Tax Management Corporate recovery/ Litigation Rank (KRWm) rate Accounting services consulting finance Insolvency support Other Year-end 1 PrimeGlobal* 39,548.3 4% 50 25 7 10 - - 8 May-14 2 Morison International* 25,371.6 3% 59 17 22 1 1 - - Dec-13 3 KS International* 23,823.0 4% 58 20 22 - - - - Mar-13 4 DFK International* 19,324.8 –6% 47 15 5 - - - 33 Mar-13 5 Praxity* 15,541.9 4% 42 28 16 2 - - 11 n/a
6 MGI* 10,693.0 ------Jun-13 7 Integra International* 8,500.0 69% 65 25 10 - - - - Mar-14 8 AGN International* 7,202.3 –8% 35 16 - - - - 49 Oct-13 9 INPACT * 1,350.0 –4% 73 20 7 - - - - Dec-13
Total revenue/growth 151,354.9 11%
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.
18 y July 2014 www.InternationalAccountingBulletin.com
IAB 539.indd 18 25/07/2014 10:12:20 International Accounting Bulletin SOUTH KOREA COUNTRY SURVEY
With an unspoken rule in South Korea services from the Big Four. subsidiaries could select their own auditors that big companies should be audited by Kwon believes mid-tier and smaller and audit firms independently, but under big audit firms, the Big Four dominates the firms will be under further threat in the ISA 600, which comes into effect this year, South Korean market leaving little space audit arena in the coming months as South an auditor for the parent company must to smaller firms. According to the Korea Korea implements International Standard assume responsibility for the audit results Times, which reported figures from the on Auditing 600: Special Considerations of its subsidiaries. market watchdog, the Financial Supervisory – Audits of Group Financial Statements Kwon explains: “Therefore auditors from Service, 96.4% of firms owned by the coun- (Including the Work of Component Audi- the parent company, who are usually from try’s top 10 conglomerates received audit tors) (ISA 600). Up until now, conglomerate the Big Four, tend to pressure their clients
n SOUTH KOREA NETWORKS – STAFF DATA
Total staff Growth Partners Professional staff Administrative staff Offices Rank Name 2014 2013 rate 2014 2013 2014 2013 2014 2013 2014 2013 1 PwC* 3,700 3,700 0% 250 - - - - - 5 5
2 KPMG * 2,355 2,510 –6% 140 140 2,020 2,170 195 200 2 2
3 Deloitte*(e) 2,300 2,200 5% ------
4 EY*(e) 940 950 -1% ------2 2
5 BDO* 538 522 3% 66 63 451 439 21 20 6 6
6 Nexia International* 372 345 8% 42 40 209 190 121 115 6 6
7 RSM International* 316 328 –4% 32 41 136 133 148 154 8 8
8 Moore Stephens International* 195 105 86% 9 4 66 37 120 64 1 1
9 Kreston International* 161 76 112% 16 6 127 57 18 13 6 5
10 Baker Tilly International* 130 132 –2% 12 13 106 105 12 14 3 3
11 PKF International (1) 107 105 2% 15 19 89 33 3 53 1 1
12 ECOVIS International* 68 67 1% 22 21 44 44 2 2 3 3
13 Mazars* 57 59 –3% 3 4 49 51 5 5 1 1
14 Crowe Horwath International* 56 48 17% 7 7 42 34 7 7 1 1
15 Grant Thornton* 53 58 –9% 7 7 43 47 3 4 2 2
16 HLB International* 51 51 0% 9 9 32 32 10 10 1 1
Totals 11,103 11,256 -1% 630 374 3,414 3,372 665 661 48 47
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) PKF International’s staff is from correspondent firms and non-exclusive member firms. Source: International Accounting Bulletin. n SOUTH KOREA ASSOCIATIONS – STAFF DATA
Total staff Growth Partners Professional staff Administrative staff Offices Rank Name 2014 2013 rate (%) 2014 2013 2014 2013 2014 2013 2014 2013 1 PrimeGlobal* 452 423 7% 62 90 325 321 65 12 8 8
2 KS International* 267 239 12% 35 35 229 201 3 3 5 5
3 Morison International* 228 245 –7% 20 20 56 70 152 155 7 8
4 DFK International* 191 169 13% 10 10 92 149 89 10 2 2
5 Praxity* 183 190 –4% 27 27 96 90 60 73 5 5
6 MGI* 129 - - 12 - 15 - 102 - 1 -
7 AGN International* 94 92 2% 13 13 26 24 55 55 2 2
8 Integra International* 80 57 40% 3 2 75 29 2 26 4 4
9 INPACT * 11 11 0% 3 3 7 7 1 1 1 1
Totals 1,635 1,426 15% 185 200 921 891 529 335 35 35
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 July 2014 y 19
IAB 539.indd 19 25/07/2014 10:12:20 COUNTRY SURVEY SOUTH KOREA International Accounting Bulletin
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to change the auditors of their subsidiaries held responsible for accounting fraud, and and to choose a Big Four firm – if not the the authority of the Securities and Futures same firm as the one auditing the parent Commission to take counter measures, Editor: Ana Gyorkos company.” and limitations on the liability of outside Tel: +44 (0)20 7406 6707 Email: [email protected] Nevertheless, Nexia International auditors.Commenting on the latest provi- Deputy Editor/Editor of The Accountant: retained its position as the sixth-largest sion Lee says: “The new amendment to the Carlos Martin Tornero firm in South Korea with fee income of Act moves away from the accountant’s joint Tel: +44 (0)20 7406 6706 KRW34.6bn, up 8% on the previous year. liability for damages to proportional liabil- Email: [email protected] Besides audit, Kwon says Nexia Samduk ity, and this is a significant transition for the Reporter: Jonathan Minter Tel: +44 (0)20 7406 6705 had a slight growth in tax work mainly due profession,” Email: [email protected] to an increased demand for tax consulting He believes this could result in a dramat- Reporter: Vincent Huck services. This is due to the increased com- ic increase in civil litigation cases, but he Tel: +44 (0)20 7406 6709 plexity in corporate tax law as the govern- says: “The consequences resulting from the Email: [email protected] ment tries to reduce its deficit, he explains. implementation of this amendment will be Group Publisher: Ameet Phadnis Tel: +44 (0)207 406 6561 At Baker Tilly Sungto, Lee says there an interesting learning curve for the profes- Email: [email protected] was a significant increase in inbound tax sion and the industry.” queries and structuring advice for foreign Chief Subeditor: Nick Midgley companies wanting to establish a pres - Recruitment Subeditor: Kev Walsh ence in South Korea. “We anticipate good Interviewed firm leaders believe that the Subscription Enquiries: Sharon Howley Tel: +44 (0) 20 3096 2636 growth opportunities over the coming years main challenges in the coming year for Email: [email protected]
and plan to invest in this area, particularly their firms in South Korea will have to do Director of Events: Ray Giddings through astute recruitment and staff train- with recruitment. “We are seeing a general Tel: +44 (0) 20 3096 2585 Email: [email protected] ing,” he says. decline of accounting graduates coming Customer Services: But where Lee sees more potential is in through the university system, with many Tel: +44 (0)20 3096 2636 or +44 (0)20 3096 2622 advisory. “We firmly believe that the advi- opting to move directly into industry rather Email: [email protected] sory space in South Korea is growing rap- than joining a firm,” Lee explains. For more information on Timetric, idly with huge potential over the next three For Mazars’ Jauffret, South Korea’s big visit our website at vrl.timetric.com For more information on accessing years,” he says. “We see this particularly challenge is English. “It’s quite difficult to International Accounting Bulletin content in corporate recovery, insolvency and non- find people that can interact at international online, including a five-year archive, please telephone +44 (0)20 406 6579 or email performing loans-related work.” level in South Korea,” he says. [email protected]
Advisory was also the best-performing Lloyd at Baker Tilly International agrees London Office service line at Nexia Samduk in the last that most accounting networks struggle 5th Floor, Farringdon Place, year. “We have done well in the area of with English in South Korea. “It’s difficult 20 Farringdon Road, public sector consulting and not-for-profit to say that because I, like most foreigners, London, EC1M 3AP organisations,” Kwon says. “And we want don’t speak Korean,” he says. “But English Asia Office 20 Maxwell Road to extend further the consulting services in is the business language and therefore we #04-02J, Maxwell House the public sector.” look to provide very strong English lan - Singapore 069113 Jauffret agrees that advisory and consult- guage support there.” Tel: +65 6383 4688 Fax: +65 6383 5433 ing is the bread and butter of accounting He believes this will change over time as Email: [email protected] firms in South Korea. He highlights due the younger generation comes out of uni- Financial News Publishing Ltd, 201 About WealthInsight diligence and outsourcing as the services versity and enters the labour market. “The Registered in the UK No 6931627 ISSN 0265-0223 most in demand. “Especially for business younger professionals have Facebook, Twit- Unauthorised photocopying is illegal. The contents WealthInsight provides detailed data and insightful analysis on We work with and provide solutions for: which do not have a Korean culture,” he ter and with this type of connectivity you of this publication, either in whole or part, may not be reproduced, stored in a data retrieval system the world’s High Net Worth Individuals (HNWIs) and wealth Wealth Managers explains. “All the international investors in see that the English starts to improve,” or transmitted by any form or means, electronic, sector. With decades of experience providing business mechanical, photocopying, recording or otherwise, Private Banks South Korea need to understand the Kore- Lloyd says. without the prior permission of the publishers. information, WealthInsight helps organisations make informed Family Offices an documentation, so we see quite a lot of Overall, interviewed firm leaders remain decisions and win new business. work in this area.” confident about future opportunities. In the Technology Providers Professional Services – Consultants, Accountants, coming year, with an increase in English AtA WealthInsight’s core is our proprietary HNWI Regulation capability and a blocked audit market, they Lawyers, Real Estate Professionals Database of the world’s wealthiest individuals. Around Apart from the adoption and implementa- will look to increase their advisory service Fund Managers, Asset Managers, this database we have built a number of valuable research tion of ISA 600, South Korea underwent line for international businesses wishing to Venture Capitalists based products and services that make WealthInsight much another major regulatory change by amend- enter South Korea. As Lee concludes: “We Non-profits and Educational Institutions ing its External Audit Act. The major provi- remain confident about the increased busi- more than just a rich contact list. sions of the amendment are: strengthened ness potential. Inbound opportunities will requirements on the preparation and sub- continue to flourish, particularly in the non- mission of financial statements, an expan- audit services market, like IT audit and con- sion of the scope of persons who may be sulting, as well as “cyber-fraud”.< For more information contact us at [email protected] T: +44 (0)207 406 6553 20 y July 2014 www.InternationalAccountingBulletin.com
IAB 539.indd 20 25/07/2014 10:12:25 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
IAB 539.indd 21 25/07/2014 10:12:25 International Accounting Intelligence
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