September 2011 Issue 495-496 www.InternationalAccountingBulletin.com

In the line of fire Leaked: who are the winners and losers of Barnier’s vision for audit?

● Deloitte Global reports record annual revenue ● Exclusive research: how diversity varies in firms ● India survey: strong growth despite Satyam hangover ● Japan survey: firms back on track New industry report

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contents EDITOR’S LETTER

02-03 NEWS • Deloitte US sued for billions Barnier’s vision good and bad • PKF Denmark merges with Grant Thornton f there were ever any doubts about Michel ticularly unpopu- • Nusbaum says C-suite pay IBarnier’s conviction to revolutionise the lar, it will have an should match performance audit industry they have now been put to affect on the audit 04 ANALYSIS bed. procedure and pro- Deloitte global chief executive Leaked draft proposals on audit industry ductive auditor/cli- Barry Salzberg discusses reform could threaten the Big Four business ent relationships, performance and strategy after model while provide mid-tier firms with which take many the global network reported greater opportunities. years to build in revenue of $28.8bn The proposals recommend mandatory the largest compa- 09-13 INDUSTRY CHALLENGE: audit firm rotation, the banning of non-audit nies. Research on DIVERSITY services, joint audits, audit quality certifica- mandatory firm The accounting profession is breaking free from stereotypes tion, expanded audit reports and EU over- rotation shows it undermines audit quality. that have surrounded it sight reform. There’s nothing wrong with exploring a for years as firms strive to Although more hard-hitting than first mechanism to shorten audit engagements that diversify their workforce. Ana anticipated, it is important to remember that span many decades but firm rotation must be Gyorkos analyses how diversity has been addressed across the these are draft proposals and are still being considered in the context of current policies world drawing on exclusive IAB worked on before they are made public in on partner rotation and retendering. research November. Too much change too soon in the name of 14-18 COUNTRY SURVEY: JAPAN After this stage, the regulation must then independence will affect quality and compro- As Japan rebuilds following the navigate a path through the EU’s council and mise the role of the auditor. March earthquake, accounting parliament, where further horse trading is firms are under immense fee likely to take place before a watered down Non-audit ban makes no sense pressure and IFRS adoption is in limbo. David Hayes and Ana version becomes law. In other words, it’s still Barnier is planning to abolish a broad range Gyorkos report early days. of non-audit services on tax, consulting, actu- Some of the proposals will be welcomed by ary, risk management, valuations and book- 19-24 CO UNTRY SURVEY: INDIA mid-tier firms, such as the abolition of restric- keeping for networks that generate a signifi- Regulations in audit, accounting and tax have led tive lending clauses and joint audits. But the cant proportion of their European audit rev- to increased opportunities in major reforms strike at the heart of the four enue from large public companies or ‘public India as firms enjoy bumper largest networks – Deloitte, PwC, Ernst & interest entities’ (PIEs). growth on the back of a strong economy. Despite Young and KPMG. Let’s not kid ourselves, this is a direct attack this, there is Proposals on the provision of non-audit on the Big Four and it is unwarranted. still much soul services could lead to Big Four firms being To fall under the non-audit ban, firms must searching in the wake of forced to shed audit clients or risk losing their generate a third of their audit revenue from the Satyam consultancy businesses, which after years of large public companies and belong to net- fraud and signs building (and re-building in some cases) is a works that have revenue in excess of €1.5bn of a divided huge blow. ($2bn). profession. Swati Prasad reports The Big Four certainly fall into the latter Mandatory rotation not the answer but where it is hazy is how much audit rev- Barnier’s proposal on mandatory firm rota- enue they receive from large PIEs – defined tion is an attempt to improve auditor inde- as the 10 largest public companies in country pendence and scepticism. It’s due to a percep- by market capitalisation and PIEs that have tion that some audit firms are too cosy with market capitalisation of more than €1bn. management. Just this week, the world’s largest network When you consider some firms have audit Deloitte announced its global revenues soared relationships with companies for more than by more than 8% to a record $28.8bn, with Editorial Advisory Board 100 years, it is easy to see why capital market nearly 38% of revenue in consulting and Frank Arford, Crowe Horwath International CEO Geoff Barnes, Baker Tilly International president stakeholders could form that view. financial advisory services (see p4). and CEO However, mandatory audit firm rotation If Barnier’s proposals are passed, it would Jon Lisby, Kreston International executive every nine years and mandatory re-tendering threaten the growth of Deloitte and its director James Mendelssohn, MSI Global Alliance CEO every five years, in addition to current rules rivals. Christian Mouillon, Ernst & Young global vice- on mandatory partner rotation, could prove a If Big Four firms were to be affected by this chair, assurance Jeremy Newman, BDO International CEO real headache for firms and companies. regulation they would mostly likely need to Ed Nusbaum, Grant Thornton International CEO This proposal sounds unlikely to navigate assess whether to drop audit clients in order Liza Robbins, Morison International CEO a path through EU council and parliament to redress the amount of revenue they obtain Jean Stephens, RSM International CEO Robert Tautges, HLB International CEO because it’s not practical. from large public companies or split their Pauline Wallace, PwC head of public policy and Not only will it place a huge cost burden on operations altogether. regulatory affairs companies, which in times of recession is par- Importantly, having ‘audit only’ firms 4p5 www.InternationalAccountingBulletin.com September 2011 y 1 news: digest International Accounting Bulletin

LEGAL ted to building our presence in consideration interest and excep- “We have passed on the SEC’s Copenhagen to 125 people with- tional items, increased by 14% requests to the regulators in KPMG to investigate in the next 12 months and will to £30m. China, as we are required to, but $2bn UBS fraud expand in other locations over The firm’s operating profit so far the China regulators have KPMG has been appointed the next three years.” rose 57% to £14m. not given us permission to pro- by the UK Financial Services In the coming year, the firm vide papers to the SEC,” Deloitte Authority and Swiss Financial FINANCIAL RESULTS plans to focus on driving organic said. Market Supervisory Author- PwC UK increases development after a couple of “We hope that a mechanism ity to investigate the events that revenue 6% years of significant acquisitions, will be found shortly so that the lead to rogue trader Kweku Ado- including Bentley Jennison and matter can be resolved in compli- boli losing $2bn in unauthorised PwC UK has reported 6% parts of the former consolidator ance with the laws in both juris- trading at the Swiss investment growth in revenue to £2.46bn Vantis. dictions.” bank UBS. ($3.79bn) in the year to 30 June Authorities of the two coun- KPMG will investigate the 2011. This follows solid 7% LEGAL tries have been at loggerheads details of the unauthorised growth by Deloitte UK, indicat- Deloitte US sued over cross-border inspections trading and the control failures ing some positive results for the for billions because US regulators are not which permitted the activity to Big Four. allowed to inspect China-based remain undetected. The investi- Elsewhere in the market, fiscal Deloitte US is being sued for firms. gation will also assess the overall 2011 results have been mixed $7.6bn by investors who have In a fresh court application to strength of UBS’s controls to pre- with Grant Thornton and Baker alleged the firm failed to detect try and force Deloitte’s compli- vent unauthorised or fraudulent Tilly reporting contractions fraud at defunct Florida mort- ance, the SEC said: “Although trading activity in its investment while RSM Tenon and Smith & gage company, Taylor Bean & D&T Shanghai is in possession bank. Williamson posted growth. Whitaker (TB&W), one of the of vast amounts of documents UBS’s board of directors have PwC UK’s fiscal year high- biggest private mortgage firms responsive to the subpoena, it set up a separate internal investi- lights included recruiting 3,200 that collapsed during the US has not produced any documents gation to be led by the former JP people, appointing 81 new part- housing crash. to the SEC to date. As a result, Morgan CFO David Sidwell. ners, investing in a new A trustee overseeing TB&W’s the commission is unable to gain office and acquiring Diamond bankruptcy and one of the com- access to information that is crit- STRATEGY consulting. pany’s subsidiaries, Ocala Fund- ical to an investigation that has Former PKF Denmark PwC UK chairman and sen- ing, filed two separate lawsuits been authorised for the protec- firm joins GT ior partner Ian Powell said at the Miami-Dade Circuit Court tion of public investors.” despite the challenging environ- this week. Grant Thornton International ment “our assurance business Deloitte spokesman Jonathan LEGAL has added PKF Kresten Foged as performed well competitively Gandal told the media the com- E&Y faces Anglo-Irish the network’s new member firm winning the Aviva, TUI and IG pany rejects the claims and they complaint in Denmark after PwC acquired Holdings audits and achiev- are “utterly without merit”. its former member in May. ing turnover growth of 6% to Gandal said the blame for A formal complaint is expected PKF Kresten Foged, which £909m”. the fraud and losses should rest to be filed to the Irish accounting will change its name to Grant The firm reported growth of squarely on TB&W, Ocala Fund- watchdog against Ernst & Young Thornton, has nine partners and 8% to £907m in advisory serv- ing and Lee Farkas, the TB&W Ireland (E&Y) over its role as 50 staff. ices, including a 10% increase in chairman who was sentenced to auditor of Anglo Irish Bank. Grant Thornton International consulting. Tax grew by 2% to 30 years in prison for fraud. The formal complaint follows chief executive Ed Nusbaum £645m. an investigation by Chartered said the network believes this PwC’s average profit per LEGAL Accountants Regulatory Board addition is a “ground-breaking partner increased marginally to Deloitte blocked (CARB) former auditor general move” to create a strong pres- £763,000 compared to £759,000 from Longtop probe John Purcell. ence in Denmark. last year, and the bonus pool Purcell told the watchdog his The Grant Thornton leader paid to staff increased by 10% Deloitte China claims Chinese investigation has found “prima previously expressed concerns to £89m. authorities are preventing it facie cases against E&Y in about PwC’s acquisition reduc- from complying with a US Secu- respect of their role as auditors ing competition in the market. FINANCIAL RESULTS rities and Exchange Commission to Anglo Irish Bank”. PKF Kresten Foged senior RSM Tenon reports (SEC) investigation into former Purcell claimed E&Y failed partner Jørgen Anker Nielsen 31% growth client Longtop Financial Tech- to detect the scale of Sean Fitz- said Grant Thornton has a very nologies as the US regulator turns Patrick’s loans and their system- strong reputation in Denmark RSM Tenon’s revenue has up the heat on the audit firm. atic refinancing over year ends and is proud to have been select- increased by 31% to £249m The SEC has asked a US federal and a lack of appropriate dis- ed to join the network. ($394m) in the year to 30 June. court to force the Chinese affili- closure in the first set of Anglo’s “This puts us in a unique posi- The sharp increase is partly due ate of Deloitte, D&T Shanghai, financial statements in the year tion to provide distinctive client to the firm’s 2009 acquisition of to disclose documents relating to to 30 September 2008. E&Y said service to clients as well as chal- Bentley Jennison. Longtop after the firm failed to in statement it fundamentally lenging careers for ambitious RSM Tenon’s underlying respond to a US District Court of disagrees there is a prima facie professionals,” Nielsen said. profit, before amortisation of Columbia subpoena that set an 8 case to answer on three points “We have already commit- acquired intangibles, deferred July deadline. under investigation. <

2 y September 2011 www.InternationalAccountingBulletin.com International Accounting Bulletin news: analysis

CORPORATE GOVERNANCE Nusbaum: remuneration must be linked to performance

Grant Thornton International chief executive Grant Thornton believes any EU corporate remuneration packages are not linked to per- Ed Nusbaum described generous C-suite pay governance code should be based on a ‘com- formance. rises at times when companies perform badly ply or explain’ framework due to the vary- “This [issue] goes to the [heart] of the as “frankly insane” and poor corporate gov- ing stages of maturity between member state board of directors, corporate governance and ernance. economies. independent thinking,” he said. “If you have Nusbaum believes senior executive pay C-suite remuneration has been a contro- a good chairman of the board, [he will] say, should be pegged against a company’s per- versial topic in recent years due to the soaring ‘what are you guys thinking? What’s going formance and to do otherwise “sends a ter- packages enjoyed by top earners while aver- through your minds if we are asking our line rible message to the marketplace”. age workers endure pay freezes and cuts. workers to take cuts in pays while our com- Nusbaum was commenting on remunera- Twenty years ago, FTSE 100 company pany is hurting and you want to give yourself tion packages in the broader context of cor- chiefs earned 17 times the average employee’s a big raise?’ It’s frankly insane. It sends a ter- porate governance reform. Grant Thornton pay packet but today it is more than 75 times. rible message to shareholders [and] it sends a has tabled several recommendations to This month, it was revealed that pension pots terrible message to the workers.” improve corporate governance as part of an of the leading corporate chiefs soared by 70 Nusbaum points out he does not have a EC consultation. per cent in less than a decade and the average problem with CEOs making “ridiculously This includes shareholders being able to value of a FTSE 100 chief’s fund is £3.9m high amounts of money” if their performance vote on executive and director compensa- ($6m) – 130 times greater than the £30,000 is helping the company to be successful. tion, the annual public disclosure of senior fund of an average employee. The EC is expected to issue a feedback executive compensation, a triennial external Nusbaum accepts the pay packets of statement on responses to its corporate gov- board evaluation for listed companies and C-level executives in relation to the average ernance framework consultation within the ensuring that CEO/chairman responsibilities worker will always cause some “controver- next couple of months. < are not held by one person. sy” but where resentment boils over is when Arvind Hickman

www.InternationalAccountingBulletin.com September 2011 y 3 news: analysis International Accounting Bulletin

financial resultS Deloitte grows global revenue by 8% to $28.8bn

Deloitte, the world’s largest accounting “Obviously we have made many acqui- n DELOITTE network, has increased global revenues by sitions in the course of many years but it Service line fee split 8.4% to a record $28.8bn – laying down a is now embedded in our system and in the marker to its Big Four rivals. past year it is almost all organic growth,” Audit & enterprise Growth of 7.7% in local currencies Salzberg said. Tax 19.6% risk services 42.6% underlines a solid performance across Salzberg said the economy has allowed most regions and is the network’s strongest the firm to drive advisory services, which growth since 2008. contributed to growth of 15.1% in financial Last year, Deloitte overtook PwC for the advisory and 14.8% in consulting. first time, bringing in $9m more in revenue. “Going forward, with the concern over PwC would need to increase revenue by at the economy,” Salzberg added. “We are least 9% to regain top position. guarded about our future growth but we Deloitte’s success in recent years is due believe we have a sufficient platform and are to building its consulting business, which prepared to enjoy growth very similar to the dwarves that of its rivals. While PwC is a growth we enjoyed this past year. larger audit and tax network, Deloitte earns “In the area of services lines, our focus nearly 3.5bn more in consulting and advi- will be on data analytics. We are currently Consulting 29.7% sory revenue alone. very significantly invested in advance capa- Financial advisory 8.1% Audit and tax have been less profitable bilities and we are looking to invest more in Source: Deloitte businesses than consulting in recent years that area organically and inorganically.” due to enormous pressure on fees. Audit Deloitte reported more moderate increas- the Middle East, Sweden, Turkey and Nor- also has a higher man-hours to billable fees es in audit (4.7%) and tax (5.2%). way experiencing double-digit growth. ratio than many advisory services. Salzberg said the firm’s response to global “European countries like Germany with In addition, there is more headroom to fee pressure is to promote a more complete opportunities to leverage the market in a grow consulting and advisory services than audit service. place like Turkey,” Salzberg said. audit as the blue chip company audit mar- “While we maybe seeing a slower growth Deloitte is halfway through a four-year ket is saturated and clients often hold onto in those businesses than our other busi- $1bn investment programme. This includes audit firms for several years. nesses, it’s clearly a growing and significant investing $500m in FY2012 in priority mar- The network’s global workforce reached piece of our business, and we’ll continue to kets: Brazil, India, Russia, China, Japan, 182,000, a net increase of 12,000, and invest in it,” Salzberg added. Middle East and South-East Asia. is expected to grow more than 35% to The network will also pour $300m in 250,000 by FY2015. Strong in Asia Deloitte Audit, a new audit delivery tool, Deloitte global chief executive Barry Salz- Deloitte’s Asia-Pacific region, which grew and build member firms’ analytics capabili- berg told International Accounting Bulletin combined revenue by 15.8%, was the best- ties, which is expected to grow by more than Deloitte’s growth was mostly organic. performing region for the seventh consecu- 40% in FY2012. tive year with nearly all Deloitte member Deloitte is building professional service n BIG FOUR firms growing by double-digit figures. capabilities for medium-sized companies, Revenue timeline: 2006-2011 Deloitte China grew 8.3% while mem- including private companies, mid-sized pri- ber firms in Australia and India achieved vate equity firms, next-gen companies and PwC growth in excess of 25%. mid-cap multinational companies. Deloitte Salzberg said the growth could be attrib- The network will also invest millions in Ernst & Young uted in part to emerging markets and the sustainability services.< KPMG growth potential of both China and India. Ana Gyorkos and Arvind Hickman bn The high growth in Australia was led by a 30 28% increase in consulting services. n “The Australian firm is one of the most DELOITTE innovative firms [in our network],” he said. Regional breakdown 25 “They have a very serious investment and Revenue Local % of commitment to an innovation platform and Region ($bn) growth revenue analytics capabilities, and both of those areas did superbly in that market. [When North America 13.1 9.1 45.4 20 you] combine that with a robust consulting Latin America 1.3 10.6 4.4 business, they did very well.” Asia-Pacific 4.2 8.5 14.6 Elsewhere, the Americas region grew Europe 9.5 5.2 32.8 15 10.4%, led by firms in Brazil and Chile, which grew in excess of 20%. Middle East 0.3 12.4 0.9 2006 2007 2008 2009 2010 2011 Europe, Middle East and Africa revenues Africa 0.6 2.2 1.9 Source: International Accounting Bulletin increased by 3.2%, with member firms in Source: Deloitte

4 y September 2011 www.InternationalAccountingBulletin.com International Accounting Bulletin news: EC draft proposals

industry reaction Profession divided over Barnier’s EC draft

Mid-tier firms have largely welcomed EC “You have to ensure you have confidence “If you look at the combination of all draft proposals on audit while the Big Four in the market that a strong high-quality audit those things it may be going too far. I think warned some of the proposals could affect can provide. Most of the proposals in there it could just be too much for corporates [to audit quality. at the moment will impair audit quality not cope with].” The draft proposals, widely leaked to the improve it,” Wallace said, while stressing the RSM International chief executive Jean media this week, recommend mandatory proposals are only drafts and it is not time Stephens said the process still has some way audit firm rotation, the banning of non-audit to panic. to go but broadly she is pleased with the services, joint audits, audit quality certifica- Deloitte UK said any changes to the audit overriding sentiment of the draft proposals. tion, expanded audit reports and EU oversight market must not be detrimental to audit qual- “We are pleasantly surprised at the ambi- reform. ity and should focus on economic growth. tions of the commission’s proposals that will Some of the draft proposals have been wide- “We believe the costs of any proposals for go through discussion,” she said. ly welcomed, such as the abolition on restric- audited entities should not outweigh the ben- “What remains after the discussion process tive lending clauses, an EU audit passport and efits derived from improved audit quality and is going to be quite interesting. I think many improved transparency in the tendering proc- auditor choice,” Deloitte said. ways the discussion has evolved and hope- ess. Other proposals on mandatory re-tender- While he welcomed the proposals, BDO fully some measures, such as the ban on Big ing and the banning of non-audit services are International chief executive Jeremy Newman Four only clauses are going to stick.” far less popular, while there is a split between expressed some concern on his understanding Crowe Horwath International has also the Big Four and mid-tier on joint audits. of the details. backed joint audits and periodic tendering The proposal on non-audit services to audit “I am concerned by the range and extent but believes mandatory firm rotation will clients could threaten the future of the Big and inter-relationship of some of the propos- affect audit quality. Four as multi-service entities. It could force als,” Newman said. It is too early to speculate on who will be firms to drop audit clients or operate as audit- “If I understand correctly what has been the winners and losers of Barnier’s vision, only firms. presented to me, the logistics of having a nine but a common view from the profession PwC UK head of regulatory policy Pauline year mandatory rotation of firms, seven year is that any changes must not compromise Wallace told the International Accounting rotation of partners, five year tendering and audit quality or further destabilise the econ- Bulletin some of the more radical proposals doing it with joint auditors could become very omy. < could endanger audit quality. challenging. Ana Gyorkos

At a time when business leaders ponder re-establishing trust and market confidence Barnier’s vision a double dip recession, shouldn’t the EC after taxpayers have spent billions bailing out good and bad look to remove unnecessary cost rather than banks during the financial crisis. increase it? Such a statement is worrying because it p14 would affect the ability of firms to attract implies auditors are partly responsible for the diverse range of skills that make them Joint audits should be considered allowing the financial crisis to occur. Surely important service providers to business. On the positive side, there is merit in at least Barnier must know better. Breaking up the Big Four would mean exploring joint audits on a broader scale than If Barnier is fishing for reasons to change destroying the largest and most effective France. the audit industry, he ought to cast his rod in business graduate training grounds in the Whether it works or not is open to debate, a different pond. world. depending on who you talk to, but if it does Auditors did not cause the financial cri- One immediate question that springs to help dynamise the market without affecting sis and any reform to the industry should mind – what is the justification for all this? audit quality it is worth a shot. be made for the right reasons and focus on There are already quite strong independ- Although the Big Four will contend there audit quality. ence requirements on non-audit services in is plenty of competition between them, it It is the perception gap of what people many markets, such as the UK, so a lot of wouldn’t hurt for other firms to gain experi- believe auditors do compared to reality that services that would impede audit independ- ence and market share auditing the largest has not adequately been addressed. ence are already banned. companies provided it does not lead to inef- What must also come into question is the The basic litmus test of independence is ficiencies and reduced quality. consultation process itself. Are these rec- that a firm should not be able to audit the Barnier must also be given credit for abol- ommendations really what capital markets financial statements of a client if its non- ishing restrictive lending clauses and pro- stakeholders want? In some of the more con- audit services influence reporting. moting an ‘EU audit passport’ that cuts red troversial proposals, I suspect not. In layman’s terms, you shouldn’t audit tape. Strengthening the tendering processes, The draft proposals still have a consider- your own work. ensuring greater transparency around audi- able journey before they are enshrined in law The case for audit firms providing certain tor appointments and an enhanced dialogue but Barnier’s mission is clear for all to see – non-audit services to clients is that auditors between auditors and prudential supervisors the status quo is no longer acceptable. < are best placed to provide them and to hire are also sensible initiatives. an external provider would be a waste of A major fallacy of the draft is its tone. Arvind Hickman money and a repetition of work. Barnier implies ‘robust audit’ is the key to [email protected]

www.InternationalAccountingBulletin.com September 2011 y 5 news: EC draft proposals International Accounting Bulletin

What’s inside the Barnier draft?

In a leaked EC draft regulation on audit, EC Internal Markets Commissioner Michel Barnier maps out his vision for the future of the industry and the role of the auditor. International Accounting Bulletin hands down its verdict on some of the key draft recommendations

Mandatory audit firm rotation As most of the Big Four firms in the EU would be affected by this, it means they would Barnier recommends large public-interest enti- either need to become audit-only firms or ties cannot have the same auditor for more drop audit clients to fall outside the scope of than nine years with a minimum engagement an audit-only firm. period of two years. IAB verdict: Terrible idea that is based on a The draft regulation also requires audit perception that firms who provide non-audit partners carrying out a statutory audit to services to audit clients have a conflict of inter- rotate every seven years. After a break of at est that could affect the quality of their work. least two years they can return to the engage- There is no proof that such a conflict exists ment. and current rules on non-audit services in The gradual rotation required of auditors countries like the UK provide sufficient safe- refers to individuals rather than entire teams. guards. These rules could effectively break up Barnier bases these recommendations on the Big Four and change the professional serv- the assumption that a ‘lack of change in audi- ices firm model as we know it. It could also tors has created a perverse pressure on the make recruitment more difficult as it would incoming partner not to lose long standing narrow the skill sets being sought in the pro- audit clients’. fession. “The introduction of mandatory rota- Businesses will also incur more costs by tion of audit firms combined with tendering employing several suppliers to provide the would deal with that problem,” the document ment to separate the audit from non-audit services that could be done by one firm. This states. services to ensure greater auditor independ- could be one of the first proposals to be nego- “Mandatory rotation of audit firms would ence. tiated out of the regulation. also ensure that there would be new audit The recommendation is subject to an audit mandates available in the market for audits of firm generating more than a third of its annual Joint audits public interest entities.” audit revenues from large public interest enti- To try and safeguard against concerns regu- ties that belongs to a network whose Euro- To help increase the choice of audit firms lar rotation affects audit quality, auditors must pean members have combined annual audit Barnier has recommended large public inter- hand over a file containing relevant informa- revenues in excess of €1.5bn ($2bn) within est entities should be required to appoint tion concerning the audited entity so the nature the EU. more than one audit firm to carry out its of the business and the internal organisational Large public interest entities are defined as statutory audit. knowledge is not lost. This should help ensure the 10 largest public companies in country by Additionally, in this case at least one of the continuity and comparability with the audits market capitalisation and ‘public interest enti- firms will have to be outside of the largest carried out in previous years. ties’ (PIEs) that have market capitalisation of audit firms in a country and local regulators IAB verdict: Unlikely to make it into legisla- more than €1bn. will be required to produce an annual public tion. This proposal will place a great burden Barnier’s list of non audit services includes list of the largest audit firms. on firms and companies. bookkeeping, valuation, tax consulting, actu- A corporate could only appoint two of the It is not popular. Mandatory retendering arial services, designing and implementing largest firms when an audit would require after five years, partner rotation after seven financial systems, internal control and risk in-depth and very specific knowledge of a years and firm rotation after nine years will management. field of activity and or geographical cover- become too onerous and costly for firms The list also includes internal audit for age, which must be justified to the relevant and companies of this size. It is also widely audit clients, litigation support, legal serv- regulator. believed that mandatory rotation will have a ices, human resources, risk advice, manage- IAB verdict: Joint audits should be considered negative affect on audit quality. This should ment consultancy, dues diligence on potential provided they do not affect audit quality and be scraped. M&As and other expert services with no rela- help dynamise the market. tion to audit. It is worth testing this idea in a broader Non-audit services The draft states non-audit services have region than France. It could potentially effectively led to a situation where “an audi- provide a greater number of firms with the One of the most concerning recommendations tor cannot be demonstrably independent if opportunity to gain experience and market for the Big Four, who have been building their professional scepticism is compromised by share serving large PIEs. non-audit capabilities for years, is the require- conflicting commercial interests”. Questions still remain over whether this

6 y September 2011 www.InternationalAccountingBulletin.com International Accounting Bulletin news: EC draft proposals

EC Internal Markets Commissioner Michel Barnier is mapping out his vision for the future of the accounting industry

could lead to inefficiencies, but its worth the emergence of more pan-European audit the audit firm; description of the governance exploring. firms. structure; description of the internal quality IAB verdict: Any measures that cut red tape control system of the audit firm and a state- Strengthening audit committees and reduce the burden of multiple oversight ment by the administrative or management systems within the single market is a wel- body; indication of the last quality assurance The draft strengthens audit committees come move. Should make it easier for audit review; partner remuneration information. by requiring at least one of the committee firms and auditors to operate on cross-border There is a separate proposal that requires members to have competence in auditing engagements. firms to publish revenue information. and at least two members have competence IAB verdict: There’s conjecture over whether in accounting and/or auditing. The current Big Four only clauses audit firms of PIEs should be as transparent Audit Directive only requires one committee as the companies they audit. This publication member to have competence in auditing and The draft directive clearly prohibits contrac- believes they should lead by example when it accounting. tual clauses or as more commonly known Big comes to transparency. IAB verdict: Any initiatives to strengthen the Four only clauses. competence should be welcome. The draft states the existence of such claus- European Quality Certificate es has led to increased market concentration EU audit passport and is preventing some auditors from enter- The European Securities and Markets ing the top segment of the market. Authority is to develop draft regulatory tech- Such a passport would enable audit firms to IAB verdict: A sensible proposal and long nical standards in order to obtain a European carry out statutory audits in all EU member overdue. This should reduce one competi- quality certificate for statutory auditors and states, provided that the key audit partner tion barrier. audit firms carrying out statutory audits of leading the audit is approved as an auditor in public-interest entities. the concerned member state. Transparency reports IAB verdict: Provided criteria to obtain the In addition to the firm passport the com- certificate is not too onerous, this could be mission draft sets forward a similar red-tape The draft legislations require all audit firms viewed as a ‘kitemark’ of quality. cutting measure for auditors. The ‘passport’ of large PIEs to make annual transparency It could help change perceptions in the will enable statutory auditors to provide cross- reports public. market about the audit quality of different border statutory audit services on a temporary Transparency reports must include: a firms, or become an unnecessary burden that or occasional basis. description of the legal structure and owner- companies will ignore. An idea worth consid- An audit firm passport might also enable ship of the audit firm; network affiliation of ering but implementation will be key. < www.InternationalAccountingBulletin.com September 2011 y 7 EC draft proposals: COMMENT – FRANK ARFORD & DAVID CHITTY International Accounting Bulletin

The future of public company audit

The EC’s draft regulation on audit has a number of recommendations that are designed to promote greater competition in the audit market. Crowe Horwath International chief executive Frank Arford and international A&A director David Chitty share their views on the proposals

he European Commission’s draft regu- Four firms split their audit and non-audit lations are now in the public domain businesses. and, in our view, the solutions pro- We do not agree that there should be a posed should apply to large public total prohibition on the provision of non- T audit services or a breakup of existing firms. companies. We believe the debate over expectations There are perception issues but we do not and the structure of the market has not believe the provision of non-audit services extended to the audit of other public com- should be prohibited outright. panies, private companies and other sectors, We propose auditors should not be permit- and there is no case for change beyond the ted to provide non-audit services of an aggre- large public company sector. gated value which substantially exceeds the The EC has encouraged discussion regard- audit fee. ing the expectations of the audit of large pub- lic companies. The traditional format of the Stakeholder confidence key: Crowe Hor- Can the middle market networks deliver? audit report was questioned. A more detailed wath International’s Frank Arford (left) and If the proposals to change the market are to ‘long form’ audit report is now proposed. international A&A director David Chitty win stakeholder approval and maintain, if We agree with this proposal for large pub- not enhance, audit quality, then the middle lic companies as it is important stakeholders market networks of audit firms have to dem- have more information about the conduct operate and work together to form an opin- onstrate they are willing and able to service and outcome of the audit. ion. They will review each other’s work and larger listed companies. The EC has expressed concerns there is a test each other’s views and conclusions. The middle market networks have the concentration and competition issue in the required global reach needed to service this market for large public company audit serv- Periodic tendering, mandatory rotation market. The networks have implemented pol- ices in Europe. The public audit market is Many large European listed companies icies and procedures to ensure their members deemed not to be competitive and there are appear to have rarely, if ever, put their exter- have the skills needed to service the clients of barriers to entry by new participants. nal audits out to open tender. A discussion the network, whether present or future. Ninety-nine of the FTSE 100 companies prepared by the UK OFT supports this view These include global quality control stand- in the UK are audited by the Big Four audit in the context of the UK market. ards, global audit processes and global train- firms and 27 of the DAX 30 in Germany are The commission is proposing to make ing programmes which apply global account- audited by two firms. periodic tendering for public companies a ing, auditing, and quality standards. There is a view the UK Office of Fair Trad- requirement along with greater disclosure Many network member firms are already ing (OFT) has reported that the average peri- about the process. Open and transparent subject to the top level of regulatory compli- od of appointment of an auditor of a FTSE tendering, at periodic intervals, will enhance ance in their own countries, and provide the 100 company is 43 years. confidence in the process of appointing the audit capabilities and quality comparable to The EC has proposed joint audit for large auditor, particularly where the incumbent is their larger competitors. public companies involving a Big Four firm reappointed. Market change will need to take place over and a non-Big Four firm. This will increase This proposal could help to widen the time as large public company audit arrange- participation in the public company audit market for audits. Greater competition ments cannot be changed immediately. market by non-Big Four firms. has the potential to enhance audit qual- As the debate on the proposals begins, it We believe that joint audit of large pub- ity as quality should be one of the criteria is essential that, whatever the final form the lic companies can make a real change, as it assessed by audit committees when making regulations take, the solutions enhance stake- will enable more audit firms to participate in an appointment. holder’s confidence in auditors and enhance the audit of larger public companies. This is The EC is proposing mandatory rotation the quality of audit work. clearly the case in France where joint audit is with a maximum tenure by an auditor of This outcome will make the discussion, a legal requirement. nine years. Research has demonstrated that debate and controversy over some of the This reform will make the market more frequent rotation has undermined quality proposals worthwhile. < competitive and reduce the risk of the mar- and we do not believe mandatory rotation ket being dependent on a small group of very will enhance audit quality. The views expressed are the personal per- large providers. Another proposal is a total prohibition of spectives of the authors and do not reflect the Joint audit has the potential to enhance non-audit services. This has attracted head- official position of Crowe Horwath Interna- audit quality as the two audit firms will co- lines because the EC is proposing the Big tional

8 y September 2011 www.InternationalAccountingBulletin.com International Accounting Bulletin INDUSTRY CHALLENGE: DIVERSITY

Getting the balance right

The accounting profession is breaking free from the shackles of stereotypes that have surrounded it for years, as firms globally strive to diversify their workforce and create a new, more contemporary image of an accountant. Ana Gyorkos investigates how diversity has been addressed across the world

he days when the first women and helm – RSM International’s Jean Stephens. BDO Brazil chairman and chief executive people of varying races and back- The Grant Thornton International Busi- Raul Correa da Silva says his firm has been grounds entered the profession are ness Report 2011 found women currently trying to keep the gender recruitment ratio not as distant as one would imagine, hold 20% of senior management positions for entry level at 50:50, however at manag- T ment level the numbers of females signifi- with most changes occurring place in the globally in privately held business, down past two decades. from 24% in 2009, and up just 1% from cantly drops. The profession globally has acknowl- 2004. The mid-tier firm’s research attributed “In our profession, the number of women edged that staff diversity is essential for the decline to difficult economic conditions. was small 15 years ago, but it has been grow- future business success. However, firm lead- The International Accounting Bulletin’s ing in the past few years,” Correa da Silva ers tell the International Accounting Bulletin diversity survey found only a third of firms says. there is still a way to go before diversity will across the world have a workforce with “So, now I would say the percentage of be at a sufficient level and fully reflect the fewer than 45% women, with firms from the women in our company – senior level profes- demographics. Middle East having the lowest proportion of sionals – is of about 20%, but considering A survey conducted by this publication to women. Some 40% of the Middle Eastern the current recruitment processes, it will start accompany the report saw 308 accounting firms surveyed had fewer than 10% female to increase fast.” firms respond from around the world. The staff. Da Silva says when he qualified there were findings paint an interesting picture as we see North American and European firms have only a handful of women in the profession; how different continents approach diversity the highest proportion of women. In North he married Brazil’s second female auditor. and where their priorities lay. America, 84% of firms having at least 45% KPMG UK head of recruitment Iain In order to better understand how different women, while in Europe it is 72% of firms. McLaughlin says the firm’s gender ratio is at regions and countries approach diversity we In the Asia-Pacific region, 44% of firms about 50:50 “but there is considerable vari- have interviewed firms leaders and profes- have more than 45% women. ety by grade and function”. sional bodies across the world to cover some At Singaporean firm Foo Kon Tan Grant “Of course we would like to see more of the diversity basics: gender, race, mobility Thornton, 70% of staff are women, which is women at senior levels,” McLaughlin says. and educational background. relatively high in Asia. HR managwer Dolly “There are things that we are doing, one Ng Soon Cheng said the female-friendly hir- of them is our Reach programme. This three- Cracking the glass ceiling ing policy is due to programmes to encourage month programme allows women to articu- Globally, there are more women entering the women to come back into profession after a late their career goals, provides inspiration accounting profession each year and in some career break. from various internal and external leaders, firms they outnumber male colleagues. “As the birth rate is low in Singapore, to feedback on their leadership style, opportu- However, seeing women take on leader- encourage working women to return to the nity to build their networks, sponsorship and ship positions in the profession is still rare workforce after giving birth, employers pro- other support. and has been flagged as one of the important vide paid maternity leave of between 12 and “We recognise we need to better represent- areas needing improvement. 16 weeks,” Ng Soon Cheng says. ative of females at a senior level.” At present, only one of the 10 largest glo- “Of this, four weeks of salary is reim- PwC US diversity leader Maria Castañón bal accounting networks has a female at the bursed by the government.” Moatscould points out that, while her 4p12 www.InternationalAccountingBulletin.com September 2011 y 9 INDUSTRY CHALLENGE: DIVERSITY International Accounting Bulletin

n DIVERSITY Age chart – firms from different regions select the average age of staff. African firms have the youngest workforce, 76% have an average age of 25-35 years n DIVERSITY Europe gender balance – European firms have Age some of the most gender balanced workforces. 80 25-35 years 36-45 years 46-55 years >55 years 45% of firms surveyed reported female 70 workforces greater than 55% of staff 60

21-40%, 16% 50 >20%, 6% 40 30 <65%, 24% 20 10 0

Africa Europe North Latin Asia-Pacific Middle East America America

Source: International Accounting Bulletin

41-55%, 35% 55-65%, 19%

Source: International Accounting Bulletin IAB global diversity survey:

“I think in five years’ time we’ll see “I think diversity, whether it’s been a much improved situation in terms forced upon the accountancy profession

of changing the demographics of the I’m not too sure, but it’s certainly high on profession to closely resemble the the agenda of all accountancy firms and demographics of the country. I think organisations” n DIVERSITY there’s still commitment, and the com- Tony White, HR & recruitment director, Higher education – in most regions, business mitment is reflected by the financial RSM Tenon degrees are the most common form of tertiary resources that are put aside” education for accountants Victor Sekese, CEO, SizweNtsaluba

Other Gobodo Science Social studies Mathematics Business/Economics % n DIVERSITY survey n DIVERSITY 100 Regional breakdown of participating firms Middle East expats – firms in the Middle East report the largest number of expats

80 Europe 46% Africa 6% None 33% blurb Middle East 6% Asia-Pacific 15% 60 <40%, 44%

40

20

0 Africa Europe Asia-PacificMiddle East North AmericaLatin America 20%-40%, 11% South and Central America 11% 5%-20%, 6% Source: International Accounting Bulletin >5%, 6% Source: International Accounting Bulletin Source: International Accounting Bulletin

10 y September 2011 www.InternationalAccountingBulletin.com International Accounting Bulletin INDUSTRY CHALLENGE: DIVERSITY

n DIVERSITY Female friendly firms – Western economies have the most gender balanced workforce

>10% 10-30% 31-45% 46-65% >65% % n DIVERSITY survey

100 Workforce size of participating firms

Firms 80 200

60

40 150

20

0 100

Africa North Europe America Asia-Pacific Middle-East Latin America 50 Source: International Accounting Bulletin

0

<50 employees >500 employees Still room for improvement 50-100 eemployees100-250 employees200-500 employees Source: International Accounting Bulletin “I think diversity is a very healthy thing “What diversity means for us in our con- and it’s commercial beneficial. You know text having moved away from an apartheid we don’t make anything, we’re not a system, our big driver is change the demo- manufacturing firm, our firm is built on graphic of our membership to represent its people, and diversity in thinking will the demographic of the country” n produce a drive innovation and growth Nazeer Wadee, chief operating officer, DIVERSITY with our clients” South African Institute of Chartered Expat barometer – firms highlight the Iain McLaughlin, head of recruitment, Accountants percentage of expats within their workforce. Latin America has the smallest proportion of KPMG UK foreign employees

>40% 20% - 40% n DIVERSITY n DIVERSITY 1% - 20% Work experience – percentage of firms offering Qualified breakdown – nearly a third of firms None internships and graduate programmes have a workforce with 60% or more qualified % 100 No accountants Yes % Firms 80 100 100

60 80 80

40 60 60

20 40 40

0 20 20 Europe Africa Middle EastAsia-Pacific 0 Latin America 0 North America >20% >75% Source: International Accounting Bulletin Internship Graduate 20%-50% 50%-60% 60%-75% programme Source: International Accounting Bulletin Source: International Accounting Bulletin

www.InternationalAccountingBulletin.com September 2011 y 11 INDUSTRY CHALLENGE: DIVERSITY International Accounting Bulletin

p94 firm may recruit 50% women, “as women not white could do the job. It just meant you Across the Atlantic, Castañón Moatscould advance in their careers, those numbers probably had to work 40% to 50% harder explains that PwC takes high-performing change”. than anyone else.” employees from minority backgrounds and “Perhaps women begin to make choices Racial diversity has changed significantly matches them with an advocate at senior around juggling career, family, etc. By the in recent years and this is partly due to the partner level to encourage them to progress time you get to the manager level you are not Black Economic Empowerment Act, which within the firm. at 50%,” Castañón Moatscould explains. imposes a quota of black employees per com- “We have affinity groups – we refer to “So we really invest in supporting working pany. them as ‘circles’ – not only for women, but parents and we have put in place things like So much so, Wadee says, that it has become also minorities such as Asian Americans, Full Circle. difficult to satisfy the demand for qualified African Americans as well as Hispanics,” “This is [a programme] where we assign black accountants, particularly female black she says. women to a PwC coach – someone they can accountants. “We also reach out to minority high school still have a relationship with even when they Morison International member SizweNt- students and parents on navigating the col- are not with the firm because they are taking saluba Gobodo is the largest firm outside of lege choice decision.” time off. the Big Four. Despite efforts such as these, Castawñón “It also gives them access to our firm’s Moatscould adds: “My personal feeling training to keep their skills current.” is that our African-American and Latino As women slowly make their mark, firm “Unless you were white, finding students are still under-represented in the leaders accept there is still a way to go before employment was really difficult, accounting programmes nationwide.” women well and truly break the glass ceil- especially at the Big Five... ing. Professional mobility It just meant you probably had Another way firms are becoming more Racial diversity to work 40% to 50% harder diverse is through secondments and other Racial diversity is another area that has than anyone else” programmes that allow accountants to work improved in recent years for several rea- Nazeer Wadee, SAICA abroad. sons. International Accounting Bulletin research Businesses want to better reflect the revealed that Latin America employs the cross-section of people in the societies they lowest number of people from abroad, with operate, while globalisation and improved 74% of responding firms saying they have mobility of the profession has led to a rise in A forerunner firm, SizweNtsaluba was one no expats. secondments. of the first ‘black firms’ – a firm largely com- Middle East is the region with the highest In some countries, such as South Africa, posed of black Africans. Chief executive Vic- number of expats, with 44% of firms saying racial diversity is an important issue due tor Sekese says when he did his professional they have more than 40% foreign workforce. to relatively low proportion of black Afri- training in the late 1980s and the early 1990s More then half of respondents from North can accountants compared to the countries you could literally count the number of black America and Europe also said they have no demography. chartered accountants. expats working for their firm. South African Institute of Chartered “You sort of knew everybody because In Asia-Pacific. 50% of responding firms Accountants (SAICA) chief operating officer there were so few of us,” Sekese points out. have between a 1% and 40% foreign work- Nazeer Wadee recalls that, when he quali- Prior to the merger of SizweNtsaluba and force. fied in 1998-99, South Africa was moving Gobodo earlier this year, the firms were HLB International US member firm Anch- out of the racist and suppressive apartheid known as black firms. in, Block & Anchin is increasingly recruiting regime that stifled opportunities for black “Because of us having a majority of black and sponsoring accountants from the Philip- accountants. staff you might say we are a black firm but pines, South Africa and Asian countries such “For me personally, the difficulty back then that doesn’t mean we only employ black peo- as China and Korea. was finding employment,” Wadee says. ple,” Sekese says. “We have always been open to hiring what “Unless you were white, finding employ- “At partner level we have representatives we think are the best and the brightest,” ment was really difficult, especially at the Big of the racial group: African black, coloured, human resources director David Finkelstein Five. Indians and whites, both male and female.” says. “What you then struggled with was getting Sekese says SizweNtsaluba Gobodo closely “At the time when it was hard to get the somebody to believe that somebody who was reflects the demographic of the country. quality we wanted from the US workforce, we heard that people coming over from Phil- n DIVERSITY ippines, for example, were very talented and Education – in most regions, firms have two thirds of the work force with a university degree we decided to look at recruiting from over- seas.” North Latin Africa Asia-Pacific Middle East Europe Another firm with an internationally America America diverse work force of more than 18 nation- Less than 20% 11 2 0 7 0 3 alities is Foo Kon Tan Grant Thornton. 20%-50% 17 10 0 28 4 17 “As there is a shortage of local talent in the industry, foreign talent helps to complement 50%-60% 11 2 5 12 11 23 the workforce,” Ng Soon Cheng says. 60%-75% 17 23 11 13 13 17 “On top of this, the special richness that More than 75% 44 63 84 40 72 40 foreign talent brings and blends provide us Source: International Accounting Bulletin with a different perspective at work.”

12 y September 2011 www.InternationalAccountingBulletin.com International Accounting Bulletin INDUSTRY CHALLENGE: DIVERSITY

Most foreign employees at the firm are n DIVERSITY from other Asian countries as well as the US Qualified accountants – in most regions, firms have between 20% - 50% qualified workforce and UK. Professional accountancy body CPA Aus- North Latin Africa Asia-Pacific Middle East Europe tralia says that, in Australia, accounting is America America on the government’s skills shortage list, Less than 20% 39 27 0 18 0 11 which provides an easy passage for migrant 20%-50% 39 19 37 40 25 23 accountant workers to enter the country. “The main countries of origin are China 50%-60% 10 19 16 20 25 31 and India,” CPA Australia executive general 60%-75% 6 19 21 11 30 9 manager for member engagement Jeff Hugh- More than 75% 6 16 26 11 20 26 es explains. Source: International Accounting Bulletin The UK has always been known for recruiting from abroad, however, recent gov- America said they would hire people with a really diverse mix,” she explains. ernment restrictions to lower immigration those qualifications. The survey accompanying this report levels is likely to stem the flow of migrant Most firm leaders explain that, while there found the majority of responding firms from workers entering the country and have an is a growing interest in other educational around the world had more than 75% of impact upon diversity. backgrounds, most recruitment activity is workforces university educated. “As a company, we have visa programmes focused on business graduates. The Middle East has the highest number of and we have our allocation on the number of Finkelstein says, for Anchin, Block & university educated professionals, with more people we can bring in but there are so many Anchin, most graduates have a master’s than 84% of responding firms having more hurdles now,” RSM Tenon HR & recruit- degree and majored in accounting. 75% of the workforce with a university edu- ment director Tony White. “The pool is large enough that you don’t cation. In Europe, 40% or responding firms “It is very difficult to do that now.” need to go outside accounting,” he says. have more then 75% university educated To get around the restrictions, RSM Tenon Sekese says, in the SizweNtsaluba Gobodo staff. has started to do intercompany transfers audit practice, most recruits have an account- within the RSM International network. ing degree due to the way the profession has Room for improvement “We have intercompany transfers where been structured historically. Although firm leaders have seen enormous our people will go over to South Africa, “However, lately we are now employing changes in diversity there is still a way to America, Australia and will do anything from non-accounting graduates to work in other go. three months to two years,” White says. divisions that we have,” he adds. KPMG’s McLaughlin says the profes- “Then, on the flip side, we will get people “For example, the next group of graduates sion “probably isn’t quite diverse enough, coming to the UK to do that. So it is almost we have are graduates in the IT space so we there probably is a lot of room for improve- like a work exchange programme that is have got a number of people that are quali- ment”. quite sophisticated.” fied from an IT point of view. “I think the profession overall, and frank- McLaughlin, from KPMG UK, says the “But, to a very large extent, it is still ly the service we provide the clients, would firm is working with the UK government to accounting degrees. We find ourselves with definitely benefit from increased diversity,” better understand the regulation. As yet, it teams of various skills, legal skills, investiga- he adds. has not yet affected the firm’s recruitment tive skills and accounting skills. “It is an industry challenge we recognise strategy. “With the new green economy, we are now. Our peer group recognise that now.” looking for people who have an understand- Sekese says: “I think in five years’ time The next generation ing of environmental law and environmental we’ll see a much improved situation in terms Traditionally, firms have sought accounting issues.” of changing the demographics of the profes- talent from business degree backgrounds UK firms, however, are more open to peo- sion to closely resemble the demographics of but this is not necessarily the case in every ple with non-traditional higher education the country. I think there is still commitment country. qualifications. White says academic perform- and the commitment is reflected by the finan- In regions where the talent pool is small ance is as important as academic pursuit. cial resources that are put aside.” or there is fierce competition from other “Our policy would be to take people from Firm and professional body heads agree sectors, firms have broadened the educa- a wide range of courses from politics, histo- diversity is an area that needs to be closely tion criteria of candidates. Larger firms that ry, sociology, geography, maths, whatever,” monitored and resources invested in order provide a myriad of consulting services are White says. to improve the demographics of the profes- also seeking professionals with backgrounds “It doesn’t matter. What matters is seeing sion. in IT, climate change, engineering and other on the graduate assessment days why people Perhaps in certain areas additional regula- industry sectors. want to be an accountant. What is their hun- tion is required to bring along the next level The most common degree of accounting ger, rather than have they have got a distinc- of changes. For example, mandatory female recruits, according to International Account- tion in accountancy at xyz university.” quotas at management level might bring the ing Bulletin survey respondents is a business ICAEW head of member services Sharon additional push women need to break the and economics degree. In North America, Gunn says the institute is also looking to glass ceiling in financial services. 91% of recruits without an accountancy take in more students from non-accounting Regardless of regulatory intervention the degree have a business or economics degree. backgrounds. profession globally is aware of the impor- Some 27% of respondents from Africa “That is actually very typical of the make- tance of diversity; however there is still a also said they look at social studies degrees, up of our profession right now – we don’t way to go before firms are able to put this While only 3% of respondents from North just take relevant accounting graduates, but challenge behind them. < www.InternationalAccountingBulletin.com September 2011 y 13 country survey: Japan International Accounting Bulletin

Earthquake, IFRS shockwaves strike

As Japan rebuilds following the March earthquake, accounting firms are under immense fee pressure and IFRS adoption is in limbo. David Hayes and Ana Gyorkos find firm leaders in pursuit of opportunities abroad while domestic markets take a tumble

apan’s accounting profession has had “We are strongly related with each other n to deal with exceptional operational and the disaster has hit our life and economy JAPAN circumstances this year following a significantly,” Murayama says. Accountancy market 9.0 magnitude earthquake that sent a “Although it does not directly affect our J business, we realise some industries have at a glance Tsunami hurtling towards North-East Japan on 11 March. been suffering from nuclear crisis, lack of Earthquake damage occurred in an area materials and facilities, electrical shortages, Revenue stretching about 350km north to south from bad communication as well as slow politi- Largest by revenue: KPMG, ¥109bn Sendai to Tokyo along the East Japan coast- cal decision and emergent appreciation in Smallest by revenue: Mazars, ¥88m line and up 100km inland in some areas just Japanese currency. It affects our business in Highest growth rate: BDO Japan, 132% north of Tokyo. It is one of the worst natural the end.” Lowest growth rate: Crowe Horwath disasters in modern Japanese history. Grant Thornton Japan senior partner Japan, -55% According to the Japanese National Police Satoru Endo says the firm hasn’t felt any Staff Agency, 15,782 people died and 4,086 peo- direct effect from the disaster. Largest workforce: Deloitte Japan, 7,851 ple are missing, while 270,000 buildings “However, indirectly we think we have Smallest workforce: Mazars, 18 were either damaged or destroyed. And, felt the effect. It has caused even more fee Most professionals: Deloitte Japan, 6,318 while a nuclear power plant catastrophe pressure and affected our IPO related work. Most partners: KPMG, 735 stole much of the headlines, it is the destruc- There has been a lot of postponing of IPOs,” Most admin staff: Deloitte Japan, 842 tion of lives and businesses that will have a Endo says. Most offices: Deloitte Japan, 38 lasting legacy. In spite of the devastation caused to the Source: International Accounting Bulletin Today, six months after the earthquake Tohoku region, the rest of Japan was large- struck, damage to factories and other indus- ly unaffected and industrial recovery since trial facilities still affect the supply of auto- March has been faster than many people staggering growth of 20%. PwC Japan is rel- motive parts, electronic components and originally expected. atively small compared to its rivals, report- cigarettes, as well as fishery and agricul- “After the earthquake people said there ing ¥58.3bn in the year to 30 June 2011. tural products. This all has a run-on effect would be serious damage affecting industry This is due to the demise of its previous for Japan’s accounting firms, says RSM until November or December but against Japanese member, Misuzu Audit Corpora- Sawamura & Co managing partner Aki this forecast we have seen a quick recovery. tion, which dissolved in 2007 after account- Murayama. However, there is still a problem due to the ing scandals. n Japan serious appreciation of the yen,” KPMG The firm with the highest growth is BDO Total revenue vs market growth (2007-2011) Japan executive board member and Tokyo Japan, which grew by 135% due to the addi- office managing partner Tsutomu Takahashi tion of BDO Toyo & Co, a former Crowe Total revenue says. Horwath Japan member. The new addition Market growth makes BDO the largest mid-tier firm with ¥bn % 500 25 KPMG on top annual revenues of ¥6.69bn. The Japanese accounting market has grown The loss of Toyo & Co led to Crowe Hor- 2% as most firms have not yet felt the full wath Japan reporting a 55% decrease in rev- 400 20 business effects of the earthquake and tsu- enue to ¥1.89bn. nami on their balance sheet. Although this is As audit is the predominant service line an improvement on fiscal 2009/2010 – it is for firms, bringing in 56% of annual income, 300 15 a far cry from the hefty growth experienced firms are feeling the pinch of fee pressure prior to the global financial crisis. and looking to grow via M&As and advi- 200 10 The market leader KPMG has grown rev- sory services. A delay on the adoption of enue 2% to ¥109bn in the year to 30 June IFRS will also have an impact on consulting 2011. services. 100 5 KPMG is closely followed by Deloitte Japan, which reported similar revenue Audit under pressure 0 0 growth to ¥108bn in the year to 31 May Aside from the natural disaster, fee pressure 2011. has been a challenge for Japan’s accounting 2007 2008 2009 2010 2011 The fourth largest firm, PwC Japan, firms. Source: International Accounting Bulletin reported a 1% decline, following last year’s “At the moment our clients are very price

14 y September 2011 www.InternationalAccountingBulletin.com International Accounting Bulletin country survey: Japan

conscious and we have very big pressures a lower fee, and then clients approach us to current shortage of IPOs means the number from our audit clients. Another thing is that offer them a more attractive fee,” Takahashi of listed companies in Japan has started to we have increased competition from other says. decrease.” firms – from Big Four firms to other mid- Takahashi says a dearth of IPOs and the Isoda says Grant Thornton has tried to tier players. It’s hard to compete for new merging of listed companies is contracting manage fee pressure by cutting the over- clients,” Grant Thornton Japan partner and the market for audit. heads and fixed cost. audit leader Taro Isoda explains. “The trend for listed companies in Japan Tax services have also been exposed to fee Takahashi says that KPMG has seen tight to merge as a way to increase their opera- pressure. Mid-tier leaders observe fee cut- fee competition from medium and small tional efficiency is one that concerns many ting on services such as transfer pricing. accounting firms. accounting firms,” he says. “Tax has potential, but we have seen “Audit fees are about the same as last year. “Each merger results in the loss of an severe competition from the Big Four in Competitors approach our clients and offer audit client for one accounting firm. The terms of transfer pricing. The Big Four are4

n JAPAN Leading accounting firms, networks and associations: fee data

Fee split (%) Fee Growth Corporate Year- Rank Name income rate Audit & Management Corporate Litigation Tax services recovery/ Other end (¥m) (%) accounting consulting finance support insolvency FIRM/INTERNATIONAL AFFILIATE 1 KPMG*†(1) 108,638.0 2 81 10 – – – – 9 Jun 11 2 Deloitte Japan*†(2) 108,234.0 2 73 8 15 4 – – – May 11 3 Ernst & Young*†(e) 107,729.3 2 – – – – – – – Jun 11 4 PwC Japan*†(3) 58,300.0 -1 50 17 – – – – 33 Jun 10 5 BDO Japan*†(4) 6,696.2 132 91 5 3 – 1 – – Jun 11 6 Grant Thornton Japan*† 6,145.0 -5 79 13 4 2 0 0 0 Sep 10 7 Mirai Group/Reanda 1,598.0 -1 22 18 36 – 22 – 2 Jun 11 International*† 8 Seishin & Co/Moore Stephens 511.6 2 65 26 – – – – 9 Dec 10 International* 9 Nakamoto & Company/PKF 325.1 26 36 5 59 – – – – Dec 10 International*† 10 Mazars†(5) 88.0 -23 85 11 1 1 – – 2 Aug 11 Total revenue/growth 398,265.2 2

NETWORK/ASSOCIATION OF INDEPENDENT FIRMS 1 RSM Japan*† 3,659.0 37 27 19 54 – – – – Jun 10 2 Baker Tilly Japan*† 2,442.7 -4 68 22 4 1 1 – – May 11 3 Crowe Horwath Japan*†(6) 1,890.5 -55 65 6 29 – – – – Mar 11 4 Nexia International*† 1,629.0 8 78 – 20 0 0 0 2 Jun 10 5 HLB Japan*† 1,490.1 -5 39 37 – 6 12 – 6 Dec 11 6 ECOVIS Japan* 1,442.3 58 62 38 – – – – – Aug 11 7 Integra International* 1,400.0 0 15 75 10 – – – – Dec 10 8 UC&CS Global* 1,221.4 – 20 – 80 – – – – Dec 10 9 INPACT Asia Pacific* 899.2 1 29 66 5 – – – – Dec 11 10 Morison International* 769.4 – 88 – 11 – – – 1 Jul 11 11 Praxity(7) 688.0 -6 64 23 1 1 0 0 11 n/a 12 DFK International* 516.8 14 37 31 26 6 – – – Sep 10 13 MGI* 503.3 13 – – – – – – – Jun 11 14 IGAF Polaris* 498.8 – 83 – 11 6 May 11 15 Kreston International*†(8) 469.0 2 31 50 12 – – – 7 Oct 10 Total revenue/growth 15,860.5 2 Notes: *Disclaimer = Only data from the named member firm or the exclusive member firms within a network/association is included. Data relating to correspondent and non-exclusive member firms is not included. †These organisations come under the IFAC definition of a network or network firm; (e) IAB estimate (1) Tax service line fiscal year ends 31 December 2010. Other includes advisory; (2) The year-end is for global reporting use only; (3) Other includes income from: , corporate finance and corporate Recovery/Insolvency; (4) In 2010 the year-end was March; (5) Fee income does not include income from correspondent firms and non-exclusive members. If it were to, total fee income would be ¥178m; (6) In 2009 the year-end was December; (7) Praxity year- end is the latest possible year-end of its member firms. Fee income does not include income from correspondent firms and non-exclusive members. If it were to, total fee income would be ¥ 848m; (8) Fee income does not include income from correspondent firms and non-exclusive members. If it were including it the total fee income would be ¥ 5.2bn. Source: International Accounting Bulletin www.InternationalAccountingBulletin.com September 2011 y 15 country survey: Japan International Accounting Bulletin

4 offering big discounts for those engagements Japanese Minister for Financial Services Japan Institute of Certified Public and it’s hard for us to offer the same when Shozaburo Jimi said, on 21 June, the manda- Accountants says 60% of listed companies tendering for new clients. Existing clients tory introduction of IFRS will be reconsid- are Big Four clients and most are expected were not affected by this,” Isoda says. ered due to concerns over the additional cost to use IFRS on a voluntary basis, adhering to Reanda Japan managing director Mitsuo for already struggling Japanese companies. the previous IFRS adoption schedule. Taka- Kubo says his firm is focused on providing At the time, the FSA said if Japan decides hashi points out that most large listed Japa- tax as a stable source of income. to make IFRS mandatory there will be a nese companies his firm serves will go on to “We are thinking of expanding our tax non-mandatory lead-in period of five to implement IFRS as originally scheduled. service in the coming future by adding seven years to allow companies time to pre- Small- and medium-sized listed companies transfer pricing planning and international pare for the new standards. This means the may delay their previous plans to implement tax service into our tax service line,” Kubo earliest date IFRS could become mandatory IFRS until the government makes further explains. is from 2017. announcements. There are about 3,700 listed companies in Endo says the IFRS delay has created an IFRS U-turn Japan and 40% are small- to medium-sized impact on Grant Thornton’s fees because of Three months after the earthquake, account- entities that are not expected to implement the loss of IFRS consulting projects. ing firms received another shockwave when IFRS until it becomes mandatory. These are “Our clients don’t really know what the the government announced plans to delay largely served by small- and medium-sized government will do next; have they stopped the introduction of IFRS. accounting firms. the adoption indefinitely or will they change

n JAPAN Leading accounting firms, networks and associations: staff data

Total staff Partners Professional staff Administrative staff Offices Rank Name 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 FIRM/INTERNATIONAL AFFILIATE 1 Deloitte Japan*† 7,851 7,753 691 679 6,318 6,289 842 785 38 38 2 Ernst & Young*†(e) 7,391 7,247 – – – – – – – 35 3 KPMG*† 6,772 6,593 735 714 5,314 5,182 723 697 34 32 4 PwC Japan*† 3,959 2,083 215 82 3,218 1,726 526 275 8 4 5 BDO Japan*† 592 205 123 29 423 156 46 20 7 4 6 Grant Thornton Japan*† 411 388 69 63 294 276 48 49 3 3 7 Mirai Group/Reanda International*† 130 128 11 11 114 113 5 4 3 3 8 Seishin & Co/Moore Stephens International* 37 38 11 9 24 26 2 3 1 1 9 Nakamoto & Company/PKF International*† 22 21 4 4 16 16 2 1 1 1 10 Mazars† 18 13 1 1 15 12 2 0 2 1 Totals 27,183 24,469 1,860 1,592 15,736 13,796 2,196 1,834 97 122

NETWORKS & ASSOCIATIONS OF INDEPENDENT FIRMS 1 Kreston International*†(1) 441 394 11 11 365 322 65 61 10 8 2 UC&CS Global* 422 – 367 – 1 – 54 – 4 – 3 Baker Tilly Japan*† 269 297 61 72 165 205 43 20 12 13 4 RSM Japan*† 228 133 19 9 174 48 35 76 4 3 5 Crowe Horwath Japan*† 221 579 33 102 170 447 18 30 6 6 6 Nexia International*† 152 – 29 – 104 – 19 – 5 – 7 Integra International* 135 – 6 – 120 – 9 – 4 – 8 ECOVIS Japan* 111 89 7 3 95 80 9 6 2 1 9 HLB Japan 107 107 18 18 75 71 14 18 4 4 10 Praxity 103 101 5 5 90 89 8 7 4 3 11 INPACT Asia Pacific* 78 77 24 25 40 38 14 14 9 9 12 DFK International* 66 71 11 11 46 51 9 9 4 4 13 IGAF Polaris*† 56 – 18 – 37 – 1 – 3 – 14 Morison International* 56 – 15 – 36 – 5 – 3 – 15 MGI* 30 30 12 12 13 12 5 6 3 3 Totals 2,475 1,878 636 268 1,531 1,363 308 247 77 54 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; †These organisations come under the IFAC definition of a network or network firm; (e) IAB estimate; (1) Kreston international staff includes staff from correspondent firms and non-exclusive members. Source: International Accounting Bulletin

16 y September 2011 www.InternationalAccountingBulletin.com International Accounting Bulletin country survey: Japan

their mind again next year? For the next 12 n JAPAN months I think we will just be waiting to see Firm movements what the next decision will be,” he says. Newly appointed Crowe Horwath mem- NETWORK/ASSOCIATION FIRM ADDITIONS, MERGERS & ACQUISITIONS ber firm Yusei Audit & Co senior auditor Baker Tilly Japan Added: Collegia International (Tokyo); Lost: Kainan (Tokyo), Meicho (Kanazawa) An Kwi Ha says the cost of adoption of BDO Japan Added: BDO Toyo & Co IFRS is high and the decision could even depend on whether the US adopts the global KPMG Japan Established: KPMG Management Consulting Co standards. Mazars Established: Mazars SCS Global Audit Corporation Kubo says a hurdle to introducing IFRS in Morison International Added: A&A Partners (Tokyo) Japan is that most companies, especially in UC&CS Global Added: four AOTS member firms (Tokyo, Yokohama, Osaka, Toyota) the large manufacturing sector, do not con- Source: International Accounting Bulletin sider IFRS a “suitable tool for their account- ing” because it values assets using mark-to- market accounting. of Asia, Brazil, Russia and South Africa, in International network and referral is pick- “One of the big reasons is that the manu- which big western companies focus on as ing up. facturing industry usually requires a long well. In terms of other advisory services, Rean- period of time to research and develop their “They are looking outside of Japan other- da’s Kubo says there is an increased demand products and the valuation made by tem- wise they cannot survive,” for business improvement advisory services, porary fair market value is not suitable for The movement of clients oversees is also particularly in business restructuring. them. Nevertheless, many big listed compa- presenting opportunities for KPMG in tax Takahashi contends that advisory services nies in Japan have prepared well and 90% services. are a hard sell in Japan because many big of them are ready for the adoption of IFRS,” companies employ large numbers of capa- Kubo says. ble mid-managers who can provide similar “Our clients are considering advice internally. Going overseas how to expand their businesses. “Western companies do not have as many As audit services are under intense fee pres- Rather than looking at the United capable mid-management people so west- sure, firms are increasingly looking towards ern companies hire outside advisers. But strengthening their advisory capabilities. States and Europe, they are for Japanese companies their mid-level staff New advisory and transfer pricing oppor- focusing on emerging markets... can handle such projects. That is one reason tunities are tightly linked to Japanese com- They are looking outside of Japan why Japanese companies do not hire outside panies’ appetite for investing oversees, espe- advisers,” he says. cially in Asia-Pacific countries. otherwise they cannot survive” KPMG Japan is seeing an increasing inter- Tsutomu Takahashi, KPMG Japan Few jobs as growth stalls est among clients in outbound investment as All of the firms interviewed for this survey more Japanese companies look abroad for say there are few new positions available long-term business growth. Takahashi says within their business as growth slows and this is due to Japan’s uncertain economic “In the future there is cross-border tax firms try and fight pressure on fees. outlook. advisory work potential. Japanese compa- Kwi Ha says at the moment there are more “Our clients are considering how to nies are considering overseas investment or accountants looking for jobs than there are expand their businesses,” Takahashi says. M&A, so we use our international KPMG vacancies. “Rather than looking at the United States network to serve them. We can expand tax “We don’t have an exact plan for how and Europe, they are focusing on emerging consulting and transfer secondees to over- many people we want to recruit in the next4 markets such as China, India, other parts seas offices,” he says. Isoda says the earthquake momentarily n JAPAN n Japan halted outbound investment but it is now Average fee split Market share slowly returning. “Because of the appreciation of the Japa- Other 7% Mid tier 11% KPMG 26% nese yen, more Japanese companies are try- Management ing to buy or go abroad. So we are asked to consulting 15% give them advice about things like moving to China and other countries in South-East Asia,” Isoda says. The outbound investment trend places a PwC great deal of importance on global network 13% and association ties. Yusei Audit & Co partner Ryoichi Komat- su says the firm’s decision to join Crowe Horwath International in January was due Deloitte 25% to a thirst to win more cross-border engage- Audit & accounting 56% Ernst & Young 25% ments. Isoda says Grant Thornton has been Tax 19% Source: International Accounting Bulletin increasingly using the Grant Thornton Source: International Accounting Bulletin www.InternationalAccountingBulletin.com September 2011 y 17 country survey: Japan International Accounting Bulletin

4 year because we have to see the economy expanded to China, India, Russia, Turkey, to avoid fee reduction pressure. Also, we must first,” she says. South Africa, Brazil and elsewhere. There find how to provide advisory services to audit Isoda and Murayama say at present it is a will be more locations which we have not yet and non-audit clients. How to increase advi- recruiters market for accounting firms. decided,” Takahashi says. sory fees is critical to our survival,” he says. “However, profit per staff is crucial and KPMG Japan has 91 staff on overseas The most worrying issues facing firms is the I believe mid-tier accounting firms set strict secondments and 14 more secondees are to economy, which has been severely disrupted standards for the recruitment nowadays,” be sent abroad by the end of 2011. since March, and the increasing appreciation Murayama adds. of the Japanese yen. Kubo says that Reanda Japan is still look- Uncertainty ahead In order to report growth for the current ing to recruit foreigners. Despite Japan’s quick and surprising recovery fiscal year, firms have to invest in their advi- Takahashi says KPMG is increasingly since the events in March there is still a sense sory capabilities and look at further con- looking at secondment opportunities for of caution and uncertainty going forward, solidation as audit and other services are staff. This is partly being driven by Japanese especially while an IFRS transition remains squeezed by fee pressure. companies approaching KPMG and other in limbo. As Japan works to rebuild its infrastruc- Big Four firms for financial due diligence Takahashi predicts that in the next 12 to ture, economy and spirit, accounting firms prior to investing overseas. 18 months it will be a difficult market. have plenty of other challenges on their “Our Japanese staff secondments have “We have to make our audit clients happy plate. <

n JAPAN Leading accounting firms, networks and associations: who’s who

FIRM TELEPHONE, FAX, EMAIL, WEBSITE REGION HEAD/CONTACT Baker Tilly Japan Tel: +81 (3) 6820 8000; Fax: +81 (3) 5532 1181; Email: [email protected]; Shigeyuki Moriuchi Website: www.bakertillyinternational.com BDO Japan Tel: +81 (3) 5322 3531; Fax: +81 (3) 5322 3593; Email: [email protected]; Website: www.bdo.or.jp Jun Sugita Crowe Horwath Japan Tel: +60 (3) 2166 0000; Fax: +60 (3) 2166 9200; Email: [email protected]; Mok, Yuen Lok Website: www.crowehorwath.net Deloitte Japan Tel: +81 (3) 3457 7321; Fax: +81 (3) 3457 7426; Email: [email protected]; Website: www.tohmatsu.com Futomichi Amano DFK International Tel: +44 (0) 207 436 6722; Fax: +44 (0) 207 436 6606; Email: [email protected]; Website: www.dfk.com Martin Sharp ECOVIS Japan Tel: +81 (3) 5228 1820; Fax +81 (3) 5228 1830; Email: [email protected] / Tel: +8 (3) 5360 7880; Chiba Kazuhiko/ Fax +81 (3) 5360 7888; Email: [email protected]; Website: www.Ecovis.co.jp Yoshiaki Uni Grant Thornton Japan Tel: +81 (3) 5770 8855; Fax: +81 (3) 5770 8830; Email: [email protected]; Website: www.gtjapan.com Satoru Endo HLB Japan Tel: +44 (0)20 7881 1100; Fax: +44 (0)20 7881 1109; Email: [email protected]; Website: www.hlbi.com Rob Tautges IGAF Polaris Tel: +1 678 417 7730; Fax: +1 678 999 3959; Email: [email protected]; Kevin Mead Websites: www.igafpolaris.org / www.accountants.org INPACT Asia Pacific Tel: +852 2806 3923; Fax:+852 2104 3282; Email: [email protected]; Website: www.inpactgroup.com Derek Lai Integra International Tel: +1 604 817 1500; Fax: +1 604 939 1872; Email: [email protected]; Richard Purcell Website: www.integra-international.net KPMG Tel: +81 (3) 3266 7552; Fax: +81 (3) 3266 7650; Email: n/a; Website: www..or.jp Hideyo Uchiyama Kreston International Tel: +44 (0)1245 449266; Fax: +44 (0)1245 462882; Email: [email protected]; Website: www.kreston.com Jon Lisby Mazars Tel: +81 (3) 5464 3077; Fax: Email: [email protected]; Website: www.mazars.jp Bruce Darrington MGI Tel: +44 (0)1932 853393; Fax: +44 (0)1932 854323; Email: [email protected]; Website www.mgiworld.com Jonathan Farrow Mirai Group/ Tel: +81 (3) 3519 3970; Fax: +81 (3) 3519 3971; Email: [email protected]; Website: www.miraic.jp Mo Jianjie Reanda International Morison International Tel: +44 (0)20 7638 4005; Fax: +44 (0)20 7638 4006; Email: [email protected]; Liza Robbins Website: www.morisoninternational.com Nakamoto & Company/ Tel: +852 8170 3806, Fax: n/a; Email: [email protected]; Website: www.pkf.com Stephen Darley PKF International Nexia International Tel: +44 (0)20 7487 4648; Fax: +44 (0)20 7487 3484; Email: [email protected]; Website: www.nexia.com Kevin Arnold Praxity Tel: +44 (0)20 8774 4020; Fax: +44 (0)20 8774 4029; Email: [email protected]; Website: www.praxity.com Græme Gordon PwC Japan Tel: +81 (0) 3 3546 8650; Fax: +81 (0) 3 3546 8738; Email: [email protected]; Website: www.pwc.com/jp Koji Hatsukawa RSM Tel: +81 (3) 3269 8801; Fax: +81 (3) 5261 2702; Email: [email protected]; Website: www.rsmi-japan.com Aki Murayama Seishin & Co/ Tel: +81 (0) 3 5218 7016; Fax: +81 (0) 3 5218 7020; Email: [email protected]; Website: www.seishin.or.jp Nobuyuki Ishiwata Moore Stephens UC&CS Global Tel: +1 (212) 847 9552; Fax: +1 (212) 512 0507; Email: [email protected]; Mauricio Mobarak Website: www.uccsglobal.org

Source: International Accounting Bulletin

18 y September 2011 www.InternationalAccountingBulletin.com International Accounting Bulletin COUNTRY SURVEY: INDIA

Impressive growth masks uncertain future

Today, the going may be good with both opportunities and growth, but the risk of under-capacity looms large over the profession in India. With a raft of audit, tax and accounting reforms on the horizon, Swati Prasad looks at how firms are adapting to change after much post-Satyam soul searching

he past three years have been crucial in taxation, such as the Direct Tax Code and n INDIA for accountants in India. First there the Goods and Service Tax, and delibera- was the INR70bn ($1.54bn) Satyam tions on the Companies Bill 2009. Mid-tier accountancy T fraud in January 2009 – the biggest The Satyam fraud did considerable dam- market at a glance corporate fraud in India’s history. The scam age to the profession. shifted the entire focus on auditors and their According to Vishesh Chandiok, national Revenue role, forcing the regulator to take some managing partner of Grant Thornton India, Largest by revenue: Grant Thornton India, strong steps towards increasing account- Satyam led to a significant change in the INR1,57bn ability in the profession. attitude within and towards the profession Smallest by revenue: Ghosh Khanna & This was accompanied by various regula- in the country. Co/Enterprise Network Worldwide (ENW), tory changes – the rolling out of IFRS-con- “Satyam’s auditors [Price Waterhouse] INR22.2m verged standards by the Institute of Char- being sent to jail even before they were Highest growth rate: Kreston Intl, 302% tered Accountants of India (ICAI), changes proven guilty has compounded the problem Lowest growth rate: Ghosh Khanna & Co, of the profession’s inability to attract high- -11% n India quality talent,” Chandiok says. Staff Overall fee split firm/international affiliate, “The number of professionals entering Largest workforce: Grant Thornton, 963 2010-2011 practice has rapidly declined year-on-year.” Smallest workforce: Ghosh Khanna & Co, While this is one side of the story, the 57 Other 18% Audit & other side relates to the growth of the Indi- accounting Most professionals: Grant Thornton, 819 48% an economy that is leading to considerable Most partners: HLB India, 65 opportunities for accountants in the coun- Most admin staff: RSM Astute Consulting try. Group/Suresh Surana & Associates, 405 “India is poised for challenges and chang- Most offices: IGAF Polaris, 25 es,” says Talati & Talati senior partner Sunil Talati. “Besides the Companies Bill 2009, which Source: International Accounting Bulletin is pending in Parliament for long, the Income Tax Act is being amended and a new Act – firms in India.” Management the Direct Tax Code 2012 – is likely to be The economic slowdown did not have consulting 15% effective from 1 April 2012. much of an impact on the profession. Tax 19% “We expect the GST regime by 2013, According to Chandiok, the maximum which will create lot of professional oppor- impact of the economic slowdown was in Source: International Accounting Bulletin tunities for small- and medium-sized CA the 2009-2010 fiscal year, with capital rais-4 www.InternationalAccountingBulletin.com September 2011 y 19 COUNTRY SURVEY: INDIA International Accounting Bulletin

4 ing and transactions slowing down signifi- are growing at healthy rates. For instance, Even smaller firms saw impressive growth. cantly. for Talati & Talati, a medium-sized audit Sanjay N Goenka, an independent chartered “This changed pretty quickly from early firm headquartered in Ahmedabad, fiscal accountant based in Mumbai, also had a 2010, so 2010/2011 was a much better year, 2010/2011 was one of the best years of the good year. with revenue growth of 25%,” he says. past decade. “[Fiscal 2010/2011] has been good and For Grant Thornton, 2010/2011 was also The firm opened a branch in Mumbai in the major perceptible change is that SME a year when the firm made significant stra- 2010 and another in Delhi in 2011, adding clients to whom I cater to are looking for a tegic investments to build its infrastructure to its branches in Anand, Baroda and Surat. CA who can, in addition to the regulatory for the future. The firm also recruited more than 15 CAs needs, also act as a multi faceted advisor for “The CA profession in India is today pass- during the year due to a substantial increase their overall needs,” Goenka says. ing through a crucial phase of restructuring, in its audit practice. Goenka has six people working for him upgradation, value addition, diversification International Accounting Bulletin survey but none of them are CAs. and global integration,” says G Ramas- results saw growth across most firms in “I try and cater to all the requirements of wamy, president of the ICAI. India. my clients on my own or through my profes- Ramaswamy says in a borderless world Although our survey does not feature sional circle,” he adds. where individual economies have merged the Big Four, the leading mid-tier firms all For some CA firms, revenues increased within the global order, challenges and reported substantial growth – 12 firms, net- due to the simple fact that the revenues of opportunities for professional accountants works and associations reported double- their clients went up. have been expanding. digit growth out of a pool of 19 groups. “Last year, our clients performed very The average growth of firms was a stag- well – especially the big ones. Impressive growth gering 25%, well above the average of most “As a result, we saw a 30% increase in Most audit firms in India – big or small – markets this publication analyses. our business,” says Vinod Kumar Jain, the

n INDIA Leading mid–tier accounting firms, networks and associations: fee data

Fee split (%) Fee Growth Corporate Year– Rank Name income rate Audit & Tax Management Corporate Litigation recovery/ Other end (INRm) (%) Accounting Services Consulting finance support insolvency FIRM/INTERNATIONAL AFFILIATE 1 Grant Thornton India*† 1,574.10 25 40 21 19 20 – – – Mar 11 2 RSM Astute Consulting Group/ 605.6 15 38 18 16 1 – 1 26 Jun 11 Suresh Surana & Associates*† 3 Mazars*† 439.0 10 60 20 – 10 – – 10 Aug 11 4 BDO Consulting*† 287.4 69 1 28 39 21 – – 11 Mar 11 5 PKF India*† 265.5 31 54 6 27 2 – – 11 Mar 11 6 TRChadha and Co/ 154.6 21 65 20 10 5 – – – Mar 11 BKR International* Total revenue/growth 3,326.2 24

NETWORK/ASSOCIATION OF INDEPENDENT FIRMS 1 Nexia International*† 848.0 65 43 23 26 – – – 8 Jun 10 2 Praxity* 456.7 15 60 19 1 10 – – 10 n/a 3 HLB India*† 388.0 14 49 9 7 1 – – 34 Mar 11 4 DFK International* 376.6 -10 52 7 24 5 – – 12 Sep 10 5 Moore Stephens† 232.5 -4 67 15 11 – – – 7 Dec 10 6 Morison International* 197.9 168 61 24 4 2 – – 9 Dec 10 7 IGAF Polaris* 177.1 33 65 20 7 – – – 8 May 11 8 MSI Global Alliance* 176.6 1 40 24 16 8 – – 12 Mar 11 9 Kreston International*† 101.8 302 53 29 9 6 – – 3 Oct 10 10 GMN International* 73.4 -5 30 30 20 – – – 20 Mar 11 11 INPACT Asia Pacific* 71.7 -4 28 15 9 12 2 3 31 Dec 10 12 Integra International* 26.3 7 45 30 25 – – – – Dec 10 13 Ghosh Khanna & Co/ENW* 22.2 -11 65 10 10 – – – 5 Mar 11 Total revenue/growth 3,148.8 25% 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. †These organisations come under the IFAC definition of a network or network firm. Source: International Accounting Bulletin

20 y September 2011 www.InternationalAccountingBulletin.com International Accounting Bulletin COUNTRY SURVEY: INDIA

proprietor of Mumbai-based Vinod Kumar n REGULATION Jain & Co. The firm employs 10 people, including Profession split over contentious Companies Bill two CAs. It offers in auditing, tax, consulting and project In August 2010, the Parliamentary Stand- But the Big Four are not quite happy with finance. The audit fees and consultancy fees ing Committee, strongly influenced by the some of the recommendations of the com- increased in line with turnover for clients. Satyam fraud case, submitted its recom- mittee. One such recommendation is on “Project finance is growing at a very fast mendations on the Companies Bill 2009. audit rotation. pace. The fee in this area is also very high,” Several suggestions are far-reaching and if “We believe firm rotation should be says Jain. they become law could change governance for audit committees and shareholders to For Vinod Kumar Jain & Co, income tax standards in India. decide, not set in statute,” says Price Water- and statutory audit services grew by 15 to The Companies Bill 2009 has undergone house partner Harinderjit Singh. 20%, internal audit grew by 40% while a large number of changes arising out of “If introduced in the Companies Act, project finance saw growth of 60%. Parliamentary Committee’s deliberation, foreign-owned companies, those with their In the case of Grant Thornton, all service changes proposed by the Ministry of Com- primary listings overseas and smaller com- lines performed admirably in fiscal 2010- pany Affairs and reactions from industries, panies should be excluded. 2011. businesses and professional bodies. “We also believe a longer period, for “With several regulatory changes on the “The bill will definitely impact the pro- example, five year partner and 10-year firm anvil in India, our internal focus is on accel- fession as it is the professional responsibil- rotation, would be preferable in terms of erating investments in tax and regulatory ity of chartered accountants to convey to audit quality and costs.” services over the medium term,” Chandiok all stakeholders whether the accounts and PW is also not in favour of ICAI taking says. financial affairs of the company are true disciplinary action against a firm if a part- For most audit firms, compliance work and fair,” says G Ramaswamy, president ner has been found guilty. has increased substantially. Indian com- of the Institute of Chartered Accountants “Permitting disciplinary actions against a panies today pay taxes electronically, and of India. firm merely because there is a case against every quarter. Among other things, the committee has a partner is unfair and will do nothing to Tax returns, too, are filed electronically. recommended mandatory rotation of audit improve audit quality or the Indian capital Moreover, there are certifications required firms (every five years) and audit partners markets,” Singh says. for foreign remittances. In short, companies (every three years). Another contentious issue, Singh adds, is today need to turn to CAs for several com- It also asks for the new law to incorpo- that of managerial remuneration. pliance issues. rate joint and individual liability of audit “The limit on managerial remuneration “We must appreciate the speed and the partners and audit firms. proposed is against the concept of share- manner in which the Ministry of Corporate The Parliamentary Committee has sug- holders’ democracy,” he says. Affairs is consistently gearing up with lat- gested the bill re-impose restrictions on the “The discretion in respect of managerial est technology, systems and compliances,” remuneration of key managerial person- remuneration should be left to the company says Talati. nel. and its shareholders.” < Right from the registration of compa- nies to filing of various forms and annual accounts, “various registrars of companies post recommendation of the Standing Com- changes to IFRS itself. are working in the most satisfactory manner mittee,” Singh adds. “Therefore, a broader As a result, “several of the IND-AS stand- because of computerisation and minimisa- consensus needs to be achieved before this ards that have been published would soon tion of personal contacts”, Chandiok adds. bill is passed in the parliament.” be redundant and the Indian standard set- Most large and medium-sized firms are ters would need to move quickly to incorpo- Regulatory uncertainties ready for implementation of IND-AS. For rate those newer standards into the IND-AS India has already rolled out 35 accounting instance, Talati’s firm is fully geared up for framework”, Chandiok adds. standards converged with the International convergence of Indian accounting standards Tax is another area being impacted upon Financial Reporting Standards (IFRSs) – with the IFRSs. by regulation. The new Direct Tax Code known locally as IND-AS. “We have one partner and two CAs, who Bill would replace the current income tax However, the effective date of imple- are exclusively devoted and equipped to deal structure and would also bring relief to the mentation is yet to be announced due to with the convergence,” Talati says. taxpayers as the tax slabs have been simpli- some taxation matters that are still to be However, Indian industry is concerned fied. resolved. about the number of carve-outs from the The aim of the bill is to simplify the provi- Implementation of IFRS-converged stand- IFRS. sions of the Income Tax Act and make it tax ards was to begin in a phased manner, with “IND AS, the so called converged stand- payer-friendly. effect from 1 April 2011. ards, are themselves expected to be a selec- “The implementation of DTC would “We do not see IFRS-converged standards tive extract of IFRS with several important usher in a new era of taxation regime,” says being implemented in the near future,” says carve outs” says Chandiok. Ramaswamy. Harinderjit Singh, a partner at Price Water- “This almost entirely defeats the purpose The ICAI has submitted suggestions on house India. of adopting IFRS and the common global the GST to the concerned ministries and is Singh shows the same pessimism over accounting language objective.” working closely with the government. passing of the new Companies Bill 2009. Further, while India has deferred conver- “GST would bring in uniformity in the “Our understanding is that the Compa- gence with IFRS, both IFRS and US GAAP levy of tax on goods and services and the nies Bill 2009 has undergone major changes continue to converge, resulting in significant profession can plunge into this field of serv-4 www.InternationalAccountingBulletin.com September 2011 y 21 COUNTRY SURVEY: INDIA International Accounting Bulletin

4 ices in a comprehensive manner,” Ramas- “So much so that all the Big Four now According to Chandiok, the government wamy says. have branches in Ahmedabad, which was needs to recognise the changing needs of Singh adds: “We look forward to making not the case prior to 2010.” Indian companies. progress on DTC and GST, which will pave According to Jain, only the big firms are “In the last 60 years since, the ICAI has the way for implementation of converged able to see quantum growth, thanks to the laid a very strong foundation for the profes- IFRS in India.” paucity of CAs joining the profession. sion,” he says. “While there is ample scope for small “But the future needs of India Inc and our Consolidation of small firms firms to grow, they are not able to see quan- capital markets will not be met unless we One of the major problems faced by audit tum growth. That’s mainly because clients have a significant number of large firms and firms in India – particularly the small and want all services under one umbrella. And those firms are effectively but fairly regu- medium-sized ones – is the fact that young small firms are not able to offer that,” Jain lated.” CAs are choosing to the private sector over says. India has only five firms with more than public practice. Goenka believes manpower is a “univer- 1,000 people. Given this scenario, Chandiok “Over 90% of the fresh CAs passing sal issue which will assume more serious says the profession is bound to end up with exams are opting for employment in busi- proportions” in the future. significant under-capacity to serve India’s ness and industry and some with big audit Although there is a lot of talk on con- growing corporations. firms,” says Talati. solidation of small firms, very little is hap- Several states in the country are growing pening in this area. Often, consolidation of Role of the ICAI at a rapid pace, which means larger firms are small firms is not successful and a tenuous There has been a lot of disgruntlement in the expanding further squeezing smaller region- process. profession regarding the role of the regula- al practices. Take the case of Gujarat. “For me to change from an individual to a tor – the ICAI. “The population of state has almost dou- system will be a difficult process,” explains While the Big Four are keen the ICAI’s bled in last seven years and so has the busi- Jain, adding that he is open to consolidation role be limited to education and training, ness and opportunities for the accountancy because “quantum growth is not possible smaller firms are keen the regulator brings profession,” Talati says. without consolidation”. about more accountability in the system so

n INDIA Leading mid–tier accounting firms, networks and associations: staff data

Total staff Partners Professional staff Administrative staff Offices Rank Name 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 FIRM/INTERNATIONAL AFFILIATE 1 Grant Thornton India*† 963 815 41 35 819 682 103 98 9 8 2 RSM Astute Consulting Group/ 898 874 28 26 465 459 405 389 16 16 Suresh Surana & Associates*† 3 PKF India* 554 471 18 17 501 436 35 18 6 5 4 Mazars*† 450 398 13 11 340 270 97 117 5 5 5 TR Chadha and Co/BKR International* 342 305 11 10 309 266 22 29 6 6 6 BDO Consulting*† 313 275 11 12 255 224 47 39 9 9 Totals 3,520 3,138 122 111 2,689 2,337 709 690 51 49

NETWORK/ASSOCIATION OF INDEPENDENT FIRMS 1 HLB India*† 958 933 65 63 682 702 211 168 17 18 2 Moore Stephens International† 654 713 46 46 490 500 118 167 21 18 3 Nexia International*† 603 794 35 34 432 644 136 116 11 12 4 Praxity* 535 398 23 11 406 270 106 117 12 5 5 Morison International* 529 372 43 31 317 293 169 48 15 12 6 IGAF Polaris*† 524 385 59 36 221 208 244 141 25 18 7 Kreston International*† 481 242 31 20 357 162 93 60 12 8 8 DFK International* 460 476 45 52 253 280 162 160 16 16 9 MSI Global Alliance* 394 458 32 32 321 336 41 90 4 9 10 INPACT Asia Pacific* 283 315 29 28 226 261 28 26 15 13 11 GMN International* 155 75 18 9 20 10 117 56 6 3 12 Integra International* 60 74 11 11 26 47 23 16 4 4 13 Ghosh Khanna & Co/ENW(e)* 57 59 9 9 22 30 26 20 3 3 Totals 5,693 5,294 446 382 3,773 3,743 1,474 1,185 161 139 Notes: e = IAB estimate. *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. †These organisations come under the IFAC definition of a network or network firm. Source: International Accounting Bulletin

22 y September 2011 www.InternationalAccountingBulletin.com International Accounting Bulletin COUNTRY SURVEY: INDIA

that they can assure their clients of timely way into a proposed significant revision to is not in anybody’s interest,” Chandiok resolution of cases such as delayed income the Companies Act 1956,” says Chandiok. says. tax refund or rectifications. “The proposals as they are drafted will Chandiok favours of independent regula- Many in the industry also favour an inde- likely result in significant increase in the tion of the profession and beefing up moni- pendent oversight board to regulate the cost to companies without any direct benefit toring and enforcement of audit firms. profession, instead of the ICAI. In fact, the to India Inc or their investor base.” “However, this will only work if these Indian government has an oversight board institutions are truly independent and led on its agenda. Global branding by people of high integrity who have no The Standing Committee (on the Compa- While all international network brands con- continuing affiliations to any audit firm,” nies Bill 2009) has recommended the scope tinue to be widely used for non-audit serv- Chandiok says. of the National Advisory Committee on ices, the ICAI does not permit such brands to “Any regulator that is only run by the Accounting Standards (NACAS) be widened be provide audit services that come under its profession itself will never be seen as inde- so that it can also set auditing standards and scope of review. pendent,” Chandiok adds. oversee audit quality. Within the audit pro- Statutory audit, which is mandatory for all “Regulation of the profession in India fession, this is being viewed as a move to Indian companies, must be carried out by a needs to catch up to world-class standards clip the wings of the ICAI. firm registered with the ICAI. This includes and be designed to ensure capital markets According to Chandiok, the ICAI has the Indian subsidiaries of multinationals. An can have the required confidence in the used the involvement of Price Waterhouse audit under international standards, whether Indian profession and the work it does for – an Indian member of a the international for global consolidation, group reporting or public interest entities of all sizes that make audit network PwC – in Satyam to push its voluntary disclosure, can be signed off by a up India Inc.” long-established agenda of wanting a dis- globally branded firm. The ICAI needs to be responsible for persal of work to smaller firms rather than “The end result is a profession where in training and education, including continu- developing larger firms. substance all international brands operate ing professional education, and in helping “Mandatory audit firm rotation has been but are outside the ambit of any local regu- members improve their standards. brought back on the agenda and finds its lation of the professional regulators, which “The ICAI needs to work with an inde-4

n INDIA Leading mid-tier accounting firms, networks and associations: who’s who

FIRM TELEPHONE, FAX, EMAIL, WEBSITE REGION HEAD/CONTACT BDO Consulting Tel: +91 22 6672 9602; Fax: +91 22 6672 9777; Email: [email protected]; Website: www.bdoindia.co.in Sunil Sharma DFK International Tel: +44 (0)20 7436 6722; Fax: +44 (0)20 7436 6606; Email: [email protected]; Website: www.dfk.com Martin Sharp GMN International Tel: +61 (2) 9264 9144; Fax: +61 (2) 9264 6334; Email: [email protected]; Website: www.gmni.com Cameron Johnstone Ghosh Khanna & Co/ENW Tel: +91 11 2696 2981/82; Fax: +91 11 2696 2985; Email: [email protected] / [email protected]; Ashish Ghosh Website: www.gkcindia.com Grant Thornton India Tel: +91 98100 69000; Fax: n/a; Email: [email protected]; Website: www.wcgt.in Vishesh Chandiok HLB India Tel: +91 (0)22 2266 2550/1270/2011; Fax: n/a; Email: [email protected]; Website: www.hlbi.com Ketan S Vikamsey IGAF Polaris Tel: +1 678 417 7730; Fax: +1 678 999 3959; Email: [email protected]; Website: www.igafpolaris.org / Kevin Mead www.accountants.org INPACT Asia Pacific Tel: +852 2806 3923; Fax: +852 2104 3282; Email: [email protected]; Website: www.inpactgroup.com Derek Lai Integra International Tel: +49 (0) 30 8938 890; Fax: +49 (0) 30 8938 8999; Email: [email protected]; Susanne Martius Website: www.integra-international.net Kreston International Tel: +44 (0)1245 449266; Fax: +44 (0)1245 462882; Email: [email protected]; Website: www.kreston.com Jon Lisby Mazars Tel: +91 124 4814444; Fax: n/a; Email: [email protected]; Website: www.mazars.co.in Monish Chatrath Moore Stephens International Tel: +44 (0)20 7334 9191; Fax: +44 (0)20 7651 1637; Email: [email protected]; Richard Moore Website: www.moorestephens.com Morison International Tel: +44 (0)20 7638 4005; Fax: +44 (0)20 7638 4006; Email: [email protected]; Liza Robbins Website: www.morisoninternational.com MSI Global Alliance Tel: +44 (0)20 7583 7000; Fax: +44 (0)20 7583 7577; Email: [email protected]; James Mendelssohn Website: www.msiglobal.org Nexia International Tel: +44 (0)20 7487 4648; Fax: +44 (0)20 7487 3484; Email: [email protected]; Website: www.nexia.com Kevin Arnold PKF India Tel: +49 (0)69 17 00 00 580; Fax: +49 (0)69 17 00 00 758; Email: [email protected]; Oliver Grosse- Website: www.pkf.com Brauckmann Praxity Tel: +44 (0)20 8774 4020; Fax: +44 (0)20 8774 4029; Email: [email protected]; Website: www.praxity.com Græme Gordon RSM Astute Consulting Group/ Tel: +91 (22) 2287 5770; Fax +91 (22) 2287 5771; Email: [email protected] / Tel: +91 (22) 6696 0644; Suresh Surana/ Suresh Surana & Associates Fax: +91 (22) 2820 5685; Email: [email protected]; Website: n/a Lokesh Mudaliar TR Chadha & Co/ Tel: +98 10 010841; Fax: 4325 9930; Email: [email protected]; Website: www.trchadha.com Sumant Chadha BKR International

Source: International Accounting Bulletin www.InternationalAccountingBulletin.com September 2011 y 23 COUNTRY SURVEY: INDIA International Accounting Bulletin

4 pendent oversight body to improve and n India modernise licensing, naming and quality Top-six revenue per partner control of the profession,” Chandiok says. “It is best that the ICAI adopts this vol- INRm 40 Editor: Arvind Hickman untarily or it will be forced to do so sooner Tel: +44 (0)20 7563 5631 rather than later.” 35 Email: [email protected] Singh is of the view that the regulator Deputy Editor: Nicola Maher 30 Tel: +44 (0)20 7563 5618 must operationalise the concept of multi- Email: [email protected] disciplinary partnerships and ensure greater 25 Reporter: Ana Gyorkos awareness amongst various regulators. Tel: +44 (0)20 7563 5619 “Firms with global presence bring global 20 Email: [email protected] Surveys Researcher: Sara Perria perspective to the profession and support 15 Tel: +44 (0)20 7563 5618 regulators to develop a strong and sustain- Email: [email protected] 10 able profession,” Singh adds. Contributor: Isobel Greenlees, David Hayes, Swati Prasad “These large firms employ a large number 5 of members of the ICAI who are actively Group Publisher: Andy Cook involved in promoting high technical and 0 Tel: +44 (0)20 7563 5616 professional standards.” Email: [email protected] Mazars Praxity Chief Sub-editor: Mark Armitage HLB India Sub-editor: Beatrice Forrest Towards a brighter future Head of Global Sales: Sarah Wootton Grant Thornton India Nexia International The accounting fraternity is rather optimistic Tel: +44 (0)20 7563 5650 Email: [email protected] about the future of the profession in India. RSM AstuteSuresh ConsultingSurana & Associates Group/ Campaign Solutions Manager: Keri Farrell “Whether the GDP growth is at 8% or Tel: +44 (0)20 7563 5634 Source: International Accounting Bulletin less, I see definite and satisfactory growth for Email: [email protected] all small and medium-sized CA firms. The Subscription enquiries: Allan Sahbani profession of CAs has a very bright future,” define a vision for the profession and work Tel: +44 (0)20 7563 5628 Email: [email protected] says Talati. actively on it. Customer Services: The big firms display the same optimism. “We can’t go on making rules to deal with Tel: +44 (0)20 7563 5681 “Our budgets forecast 40% organic issues without a strategy and a clear vision Email: [email protected] growth in 2011- 12. Five months into the of what the destination for our profession in year and we are on track with the numbers,” India is,” he says. For more information on VRL, visit our website says Chandiok. Although growth is strong and opportu- at www.vrlfinancialnews.com For more information on accessing More importantly, Grant Thornton is win- nities aplenty, there is uncertainty over the International Accounting Bulletin content ning transformational clients on a weekly Indian profession. online, including a five-year archive, please telephone +44 (0)20 7563 5681 or email basis. In the last couple of months, domestic It is unclear how audit reform will change [email protected] inflation and governance concerns have been the shape and nature of audit firms and supplemented with a global ‘double-dip’ whether regulations will favour smaller London Office recession being a real possibility. domestic firms or larger ones with global 34 Porchester Road, London W2 6ES, “We continue to keep a watch on these affiliations. Tel: +44 (0)20 7563 5600 indicators,” says Chandiok. “While they will Questions also remain over India’s system Fax: +44 (0)20 7563 5601 certainly have an impact on the short term, of self regulation. Asia Office the long term India growth story remains Add to this India’s insistence to carve-out 20 Maxwell Road very much intact. I certainly hope our regu- parts of IFRS that do not correspond well #04-02J, Maxwell House Singapore 069113 latory framework also evolves sufficiently to with its economic conditions and you have Tel: +65 6383 4688 support that growth story.” a profession desperate to preserve the status Fax: +65 6383 5433 While there is general optimism amid firms quo for as long as possible as it struggles to Email: [email protected]

for a brighter future, there are concerns too. come to grips with globalisation. Financial News Publishing Ltd, 2011 Chandiok, for instance, would like the India’s challenge will be to see how well it Registered in the UK No 6931627 government to play a role in helping to can cope with the inevitable change. < ISSN 0265-0223 Unauthorised photocopying is illegal. The contents of this publication, either in whole or part, may not be reproduced, stored in a data retrieval system n India or transmitted by any form or means, electronic, mechanical, photocopying, recording or otherwise, Firm movements without the prior permission of the publishers.

NETWORK/ASSOCIATION FIRM ADDITIONS, MERGERS & ACQUISITIONS BDO Consulting Added: Locus Consulting Pvt (Hyderabad) GMN International Added: Ranjit Karthikeyan Associates Kreston International Gained: Singrodia Goyal & Co (Mumbai) Morison International Added: BK Khare & Co. (Mumbai) MSI Global Alliance Lost: George Mathew & Co, Cochin PKF India Merged: G Shankar (Coimbatore) Source: International Accounting Bulletin

24 y September 2011 www.InternationalAccountingBulletin.com RESOURCE

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