January 2013 Issue 521 www.InternationalAccountingBulletin.com

Change of scale World survey: M&A crucial for growth in flat market

●●Global network launched ●●KPMG auditors charged over collapsed US bank ●●Special report: What Mongolia has to offer to the accounting profession Give your students a business perspective of the world of accounting. Give your students access to content they can trust. Give your students the edge. Subscribe to The Accountant

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CONTENTS Presenting… the IAB

News 02-03 World Survey 2013 ■ New global network launched ■ Deloitte acquires Monitor ■ Dutch firm joins Morison focus on market niches. International January heralds not only the start of a New Year at IAB, but also the busiest part of it. The emerging markets paint a different This month we have been beavering away on picture, with Africa singled out as an excit- our annual IAB =World Survey, comprising ing expansion opportunity, as Chinese inves- hours of data crunching (made possible by tors show appetite for the continent’s natu- Feature 04-06 your kind contributions), interrupted only ral resources and economic predictions look by one-to-one interviews with the industry’s increasingly upbeat. 04-06: MONGOLIA most senior leaders, eleven altogether this In terms of service lines not much has The discovery of vast reserves of copper, coal and gold has catapulted Mongolia year. changed, but several pressures on audit have to the top of the world’s fast-growing While January is the busiest month for the emerged: regulatory uncertainty, increased economies. Paul Golden reports. IAB team, our work on the World Survey compliance requirements, fee pressure, starts long before, and each year we strive deadlocked global adoption of IFRS and dif- to make it that little bit richer in data and ficulties in attracting young audit partners, country survey 07-24 analysis. This year we were conscious of to name but a few. some of your concerns about the data and With accounting market concentration the ranking process, especially in relation to still a hot topic across Europe – and with the non-exclusive, correspondent and alliance US, India and some African countries look- member fee income. As a result, we have ing at the issue, many firm leaders report a spoken to each network and association change in clients’ behaviour. While pressure surveyed, asking for increased transparency on fees is still very acute, most firm leaders in breaking up the results into full-member say there’s been at least a change in percep- 07-24: WoRLD survey fee income and fee income coming from any tion triggered by the market concentration Struggling clients, slow business growth, increased regulatory compli- non-exclusive/correspondent and alliance debates, leading to clients asking more ques- ance and fee pressure have become the members. With networks especially, we’ve tions and looking more seriously at mid-tier conditions accounting firms have had to accept as the ‘new normal’ in order had considerable success in obtaining this alternatives to the Big Four. to adapt their strategies and grow data, and have managed to note most of the With the outcome of the EU audit reform their business. IAB reports. revenue portions not coming from full-mem- debate and the UK Competition Commis - ber firms. Nevertheless, this year we’ve stuck sion’s final report still pending, some say the to footnoting the amounts that came from debate itself has moved the market a long non-full-member sources, but the transpar- way in the right direction, arguing that any ency achieved in the survey process has given intervention by regulators or politicians now us a good base to build upon and consider could be counterproductive in efforts to cre- how we can look to break down the data in ate and sustain a more dynamic market. coming years. What 2013 holds is hard to predict, but Enough about our methodology – let’s most of the industry’s most senior leaders Editorial Advisory Board move onto the results. Growth through have given us their insights which we share Frank Arford, Crowe Horwath International CEO Kevin Arnold, Nexia International executive M&A has emerged as one of the main trends with you in this issue, while interpreting director this year and a major contributor to success the main trends of the past and current fis- Geoff Barnes, Baker Tilly International president and CEO among global organisations. cal year. I hope you enjoy reading the survey Graeme Gordon, Praxity executive director In general, networks performed much bet- and the data analysis on pages 7 to 24 and Stephen Jacobs, INPACT International president Jon Lisby, Kreston International executive ter than associations in 2012, with growth that the information is of value to you in your director flat for the latter. Overall market growth own businesses in the coming months. James Mendelssohn, MSI Global Alliance CEO Christian Mouillon, Ernst & Young global vice- among the 45 IAB surveyed international Finally I’d like to thank the IAB team chair, assurance networks and association averaged 5%, who’ve put such a lot of hard work into the , Grant Thornton International CEO Ed Nusbaum down from last year’s 8%. World Survey: group editor Fred Crawley, Michael Reiss von Filski, Geneva Group Inter- national CEO Growth was hard to come by in the devel- our reporters Carlos Martin Tornero and Liza Robbins, Morison International CEO oped markets with revenue increases mainly Peter Johnstone, and cub reporter Jonathan Martin van Roekel, BDO International CEO Jean Stephens, RSM International CEO attributable to M&A activity and changes in Minter. Robert Tautges, HLB International CEO strategy to adapt to market conditions, such Ana Gyorkos Pauline Wallace, PwC head of public policy and regulatory affairs as increased audit efficiency and increased [email protected]

www.InternationalAccountingBulletin.com January 2013 y 1 news Round-Up International Accounting Bulletin

IAB Online - JANUARY news round-up

Top 5 articles ASIA-PACIFIC Revisonbrya in Stockholm. protection last November as part PCAOB inspections show audit Deloitte establishes of the acquisition deal. EUROPE deficiencies up partnership in Myanmar Monitor has struggled since Deloitte has established an CC delays publication of 2008 when it reduced its staff by KPMG auditors charged over the preliminary findings a fifth and closed several small audit of collapsed US bank independent correspondent firm (ICF) in Myanmar, becoming the The UK Competition Commission offices. It also sold a research BDO Israel merges with national second Big Four firm to re-enter has again revised the subsidiary in 2010. The company firms the market after KPMG did so in administrative timetable for was established 30 years ago November. its statutory audit services by six US entrepreneurs with Deloitte establishes partnership market investigation, pushing ties to Harvard University, to in Myanmar The firm, Myanmar Vigour, will back the publication date for provide strategic consultation offer accounting and advisory its provisional findings to mid- services to the executive Deloitte restructures China services. Myanmar, or Burma as operations February. management of global businesses it’s also known, is considered The original deadline for the and governments. It has 1,200 a possible emerging economic Most re-tweeted article preliminary report, along with employees, with a presence in 15 frontier, as recent easing of a potential list of recommended countries, including the US, UK, CC delays publication of international sanctions against preliminary findings actions subject to the findings, Brazil, China, India, South Korea, the country has provoked interest was set for November 2012, Singapore and countries in the from international investors. before being delayed until Middle East. KPMG’s expansion there was Read in 151 countries January. the first Big Four involvement According to the revised EUROPE UK 28% in Myanmar since PwC left the timetable, a final report is Dutch firm joins Morison US 14% country in 2003. expected in August, before the International Hong Kong 5% statutory deadline set for October Amsterdam-based firm De GLOBAL India 4% 2013. This deadline falls two Hooge Waerder (DHW) has joined Malaysia 4% HLB International expands years after the investigation accounting association Morison Other 55% in Singapore and Sweden was launched, following a International (MI). Singapore-based firm KBH recommendation by the Office The firm has 150 employees and Integra has joined HLB of Fair Trading. five offices around Amsterdam, International. and is ranked among the top five KBH has 70 staff and GLOBAL accounting firms in the province specialises in audit and Deloitte acquires Monitor of North Holland. It offers accounting, tax, and advisory Deloitte has acquired almost all of accounting, audit, tax, corporate services to both local and strategy consulting firm Monitor, finance, personnel administration, international clients. KBH will be creating a new business operating consulting and legal services. HLB’s second firm in Singapore, under the Monitor Deloitte brand. DHW has become MI’s second after HLB Loke Lum. The deal was completed after firm in the Netherlands, with MI In addition, Malmö-based HLB approval from the US Bankruptcy founding member Hoek en Blok Revisorsgruppen has acquired Court for the District of Delaware. already working in the province of Join our online community the six-strong team of Zachrisson Monitor filed for bankruptcy South Holland.

LinkedIn Group World Accounting Intelligence

Twitter movers & shakers WAI_News Crowe Horwath International Grant Thornton UK has hired firm’s global advisory practice. (CHI) member firms have elected Shaun O’Callaghan as UK head of Chang joins Grant Thornton from Facebook page Andrew Pianca (pictured) as CHI’s restructuring, also promoting Ernst & Young where he was the life World Accounting Intelligence new chairman. Pianca Sarah Bell to restructuring sciences leader for Greater China succeeds Mark partner. and Asia-Pacific. He is also a board Hildebrand, who O’Callaghan has member of the China Institute of retires after being more than 20 years’ Internal Auditors and an advisor to Scan our QR code for quick the network’s experience, including the Shenzhen Stock Exchange and smartphone access to IAB chairman since roles as managing the China National Audit Office. 2007. P ianca, director at FTI Consulting formerly the chief and as lead partner Ernst & Young’s US transaction executive of Crowe for KPMG’s strategic and advisory services practice Clark Whitehill, has been a operational restructuring has made six appointments, CHI board member for the past six practice. taking on Orlan Boston, Steven years and also served as chairman McLeighton, Ben Pickering, of the board’s strategic planning Grant Thornton International has Thomas Taylor, Giri Varadarajan, force. appointed Stanley Chang to the and Simon Western.

2 y January 2013 www.InternationalAccountingBulletin.com International Accounting Bulletin Analysis news

New global network launched

UK firm Taylorcocks and French firm Sore- market, or firms sitting within associations, to the private sector as part of its spending gor founded TCS Global, a new global that are looking to grow and be part of a cuts. accounting network, late last year. network,” he told International Accounting Frost said: “To have someone like Jeremy TCS Global has member firms in 18 Bulletin. Newman on board, with all his experience, countries and is led by former HLB chief TCS Global won’t adopt a single firm cov- knowledge and expertise is testament to the operating officer James Frost, who says the erage principle in all the countries where it confident outlook we have at TCS Global.” network is focused on supporting the inter- operates, said Frost, although a single firm Newman said he’s providing TCS Global national expansion of SMEs, with a strong coverage might be the best solution in some with insight about how accounting firms emphasis on active business development for countries. “We’re looking to decide on the operate around the world and how account- its independent members. type of representation on a country-by- ing networks have to be set up. “I’m a non- He said its biggest short-term priority country basis and whatever suits a certain executive chairman so I see myself helping is to secure a US and German firm to join country most,” he added. TCS Global and challenging them, involv- the network, given the importance of those Former BDO International chief executive ing my own experience for them to draw markets. “We already have strong firms in Jeremy Newman has become TCS Global’s upon,” said Newman. the UK, France, China, Hong Kong etc,” he non-executive chairman. “It’s for them to draw upon it and say how said, “but we’re looking for members across Newman left BDO International in 2011 I can help. It’s for me to challenge and ask the world in order to ensure good global and has since worked with RSM Tenon as a questions. If TCS Global had wanted to rep- coverage.” special advisor when the firm hit trouble in licate what was in the marketplace already, Frost said one reason for setting up the early 2012. He’s also the current chairman I wouldn’t have been interested, because network was because there are currently of the UK Audit Commission, which is in it is something I have already done. I got insufficient international networks in the the process of being scrapped following the involved because it’s something new and market. “There are a lot of good firms in the government’s decision to move local audits I’m confident it will grow and develop.” <

KPMG auditors charged over collapsed US bank

The US Securities and Exchange Com - dollars in loan-related losses and losses on tors seem to be more proactive, according mission (SEC) has charged two KPMG US real estate repossessed by the bank at the to London School of Economics senior lec- auditors with improper professional con- height of the financial crisis. turer Carsten Gerner-Beuerle, a corporate duct in relation to the audit work of failed The bank’s chief executives – also charged law and securities regulation specialist. “Of Nebraska-based bank TierOne. by the SEC in September last year – alleg- course auditors were found liable before, The SEC’s investigation, the first in edly engineered a scheme through which but as far as the financial crisis is concerned which auditors have been charged by the TierOne appeared to comply with required I’m not aware of another case brought by watchdog for their role during the financial high capital ratios as it engaged in riskier the SEC,” Gerner-Beurle told IAB. crisis, alleges KPMG partner John Aesoph types of lending across Las Vegas, Arizona Gerner-Beurle said the SEC has always and senior manager Darren Bennett failed and Florida. been a forceful regulator and auditors’ lia- to comply with professional auditing A statement issued by the SEC said bility can be extremely heavy. “There has standards. a hearing will be scheduled before an to be a limit somewhere and traditionally “Aesoph and Bennett merely rubber- administrative law judge who will hear the regulation has been protective,” he said. stamped TierOne’s collateral value esti - auditors and the regulator’s allegations. However, he added, this approach might mates and ignored the red flags surround- However, the firm appears upbeat, with a be changing as regulators tend “to strike ing the bank’s troubled real estate loans,” KPMG spokesperson telling International a balance, because if the risk of liability is said SEC enforcement division’s outgoing Accounting Bulletin: “Our partner and too high then the audit fees would also be director Robert Khuzami. senior manager look forward to presenting higher and jeopardise the business model The SEC alleges the auditors lacked the the facts in support of the work that was of auditors”. appropriate professional scepticism to performed at TierOne.” In any event, he concluded “there should detect TierOne’s misbehaviour, which it The financial crisis has stimulated be a very clear case as to finding an auditor claims involved understating millions of enforcement in many countries and regula- liable”. <

www.InternationalAccountingBulletin.com January 2013 y 3 Country survey MONGOLIA International Accounting Bulletin

‘Minegolia’ braced for economic revolution The discovery of vast reserves of copper, coal and gold has helped catapult Mongolia to fifth in the list of the of world’s fast-growing economies. Such rapid expansion will fuel considerable growth for accounting and related services, provided issues relating to foreign investment can be resolve, reports. Paul Golden.

he World Bank’s most recent quarter- middle of last year reflected what the World ■■ If you do not have a member firm in ly report observes that the economy Bank describes as significant near-term risks, Mongolia, do you plan to expand to of the world’s fourth most sparsely notably the uncertain global economic out- Mongolia in the future? populated country is starting a huge look, slowing growth in China and massive T 5.6% expansion as it begins to develop its mineral rises in government spending. Exports fell by wealth – which includes the world’s larg- 39% year-on-year in August, the largest fall est untapped reserve of coal and one of the since mid-2009, driven mainly by a drop in 11.9% world’s five largest copper and gold mines. demand for coal from China. GDP grew by 17% last year and the IMF Ironically at a time when many developed expects growth to average 14% per annum nations are debating the merits of auster- between 2013 and 2016. ity, the World Bank has identified uncon- 44.4% 38.9% Mongolia has made notable progress trolled state spending as a potential source towards developing a modern business of future economic problems for Mongolia. infrastructure. In the International Finance It recommends government spending does Corporation (IFC) 2012 ‘Doing Business’ not increase faster than GDP and focuses report it was ranked 76th out of 185 coun- on infrastructure bottlenecks and promot- tries surveyed – up from 86th in 2011 – with ing long-term growth through investments No, we are not looking to have a the report highlighting improvements such in social sectors. member firm in Mongolia as the elimination of the minimum capital The current account deficit has continued requirement for limited liability companies. to widen, although it remains funded by Yes, but expanding into Mongolia is not in our short term plans The IFC report also notes greater access foreign direct investment flows. This invest- to credit information by guaranteeing bor- ment in the mining industry and the boost it Yes, we are looking to expand into Mongolia in the next year or so rowers’ right to inspect their personal data will deliver to related sectors will increase and the expanded protection of investors by demand for qualified accountants and audi- Yes, we are at the final stages of increasing disclosure rights. tors as well as business advisers and tax having representation in the country However, a sharp fall in exports in the experts according to L Badamkhand, head Source: International Accounting Bulletin

4 y January 2013 www.InternationalAccountingBulletin.com International Accounting Bulletin MONGOLIA Country survey

“The Ministry of Finance conducted a ■ ■ The size of international network firms currently in the market in Mongolia survey on adoption of IAS among entities and organisations in Mongolia in 2006, which found that just under three-quarters of respondents had adopted IAS,” he says. “However, it would be reasonable to say that the actual progress of IAS adoption is signifi- cantly lower in practice.” Nexia PWC The Ministry of Finance has granted spe- International cial licences for auditing and assurance ser- vices to more than 100 audit firms in Mon- KPMG golia, but Gombo says the number operating actively is much lower and that about eight firms account for most of the market. Baker Tilly “Non-audit services are in demand, but International outside the top six or seven firms there is BDO a lack of professional consultants who can meet clients’ service requirements. The Mongolian parliament enacted a new Tax Services Law in December 2012, so now we are seeing the beginning of the development of these services,” Gombo explains. Notes: Revenues of firms do not exceed $4m and more than 100 staff. E&Y and Deloitte do have representation in Mongolia, but did not disclose the information to IAB Source: International Accounting Bulletin He says in recent years the government has worked to establish stability agreements with foreign companies that will improve of the foreign relations division of the Mon- director Jargalsuren Jigden. “Mongolia tax credits and the tax environment. “As a golian Institute of Certified Public Account- now has more than 2,800 certified public result, the number of foreign direct invest- ants (MICPA). accountants,” he says. “Over the past five ments has increased dramatically and a lot In addition to the accounting and auditing years the quality and methodology of the of world-renowned firms have entered the laws passed in 1993 and 1996 (the years in MICPA’s training and examination proce- market. We see this as one of the factors that which the National Association of CPAs and dures has improved significantly, based on has increased the need for high-quality pro- its successor the MICPA were established) the requirements of International Account- fessional audit and accounting services.” respectively, she refers to more recent laws ing Standards, and in November 2012 the Other factors that will boost demand for covering certified tax accountants and evalu- MICPA was admitted to the International BDO Mongolia’s services include Mongo- ation of assets to support her view that the Federation of Accountants.” lian mining conglomerates’ efforts to raise legal environment for the accounting profes- Jigden explains that accounting services money through IPOs in international stock sion is well developed. and audits of financial statements are in markets. And Gombo also describes the “There is no limitation or restriction greatest demand in Mongolia, an indication information technology-related advisory on international audit firms in Mongolia, that companies are increasingly commit- market as being in its infancy with signifi- although there are several specific require- ted to good governance and transparency. cant potential to grow. ments indicated in law on foreign investment, “Competition in the market is fierce, espe- His expectations for future growth in for example that no less than 70% of total cially since the arrival of the leading global accounting services in Mongolia are consid- employees of a foreign investment company accounting networks and the increasing erable. “In 2012, BDO Mongolia accounted should be Mongolian citizens.” number of foreign-owned enterprises with for 5-6% of the market and we expect to The MICPA says there are 92 audit firms operations in Mongolia,” he says. achieve a double-digit share in 2013. As – including all the Big Four – operating in our focus is on mid-market companies, for Mongolia, but it does not have data on the which there is huge market potential, we size of the market or the share controlled by Firms in Mongolia fully anticipate that our market share will PwC (which opened an office in Mongolia The most recent addition to the accounting be 15-20% after three years of operation,” in October 2010), KPMG Audit (May 2012), industry is BDO Mongolia, which was cre- he says. Deloitte Onch (January 2012) and Ernst & ated in January 2013 by bringing together Membership of the MICPA has been Young Mongolia Audit (2001). audit firm Itgelt Audit and IT/advisory increasing as interest in the profession Dalaivan Audit (a member of Baker Tilly firm Amar Incon. Managing partner Bay- grows and is quite significant in a country International) pre-dates all these ventures by anmunkh Gombo reckons there is urgent with a population of only three million peo- some distance, having been in business since demand for professional advisory services ple, observes Matthew Holmes, director at 1993. The accounting profession has come on how to adopt International Accounting KPMG Mongolia. a long way over that period says executive Standards. KPMG Audit was established in May

www.InternationalAccountingBulletin.com January 2013 y 5 Country survey International Accounting Bulletin

2012 as a joint venture between KPMG Holmes is confident that as long as the panies seek to improve management.” Korea and the largest Mongolian audit firm. economy continues to grow, there will be PwC Mongolia managing partner Carolyn More than 50 professionals, including three a corresponding increase in demand for Clarke says the Big Four firms are working local partners and one seconded partner, are KPMG’s services. But Peter Markey, Ernst with the MICPA to raise standards through now employed providing audit, tax and & Young country managing partner for training and insisting on the proper applica- advisory services to local and international Mongolia, is concerned that recent govern- tion of international requirements. clients. ment actions have made foreign investment The most significant challenge facing Holmes points out that ACCA training is less attractive. international firms working in Mongolia is now also available within the country, where “Over the last nine months, new laws the requirement to maintain ratios in rela- previously it was necessary to go abroad to governing overseas investments in strategic tion to the number of Mongolian versus study for any foreign qualifications. assets have made it harder to invest. There international staff according to Clarke. This “Standards are improving due to a com- is a real challenge as the fact that investment bination of factors, including demand was limited through to 2009 means that from international clients; increased access there was very little real vocational train- to international standards of training via “Over the last nine months, ing and it can be difficult to recruit suitable ACCA qualifications and international Mongolian staff, she admits. firms; improved translation of IFRS into new laws governing overseas “Training from the bottom up is really the Mongolian; and more people learning Eng- investments in strategic assets only option to maintain international stand- lish and therefore able to access materials have made it harder to invest. ards. In addition, the rapidly changing legal and training without translation.” There is a feeling that the environment creates challenges – both the In terms of tax and advisory, the main country’s wealth should remain accounting law and auditing law are due to demand is for good information, Holmes in local hands, but this wealth be revisited in the next few months.” continues. Tax advice is very much in demand given “Mongolian tax law was only established cannot be realised without the lack of clarity in local tax laws, which in the early 1990s and is still developing,” foreign investment and mining she describes as inconsistent in places. he says. “Guidance is not always clear and comes with risks, which the “This leaves significant grey areas for rarely available in English, so good local government lost sight of when interpretation by companies at a time when advice is essential. commodity prices were high.” the government is very much in need of tax “Similarly, local market knowledge for receipts. In general, companies want to do businesses considering investing or setting Peter Markey, Ernst & Young the right thing, but are simply uncertain as up companies in Mongolia can be hard to to how to apply the rules.” find, so we see potential there.” The huge inflow of foreign direct invest- ment has also resulted in the need for finan- is a feeling that the country’s wealth should cial and tax due diligence. Also in demand Local rules remain in local hands, but this wealth can- are capital markets advice and services to Any audit firm operating in Mongolia must not be realised without foreign investment improve the conduct and quality of compa- employ at least two locally registered audi- and mining comes with risks, which the nies (including risk management and corpo- tors, but that rule affects local and inter- government lost sight of when commodity rate governance advice). national firms equally. The regulation that prices were high.” “While the country is improving in terms affects international organisations most As a result, he tempers expectations of of transparency and governance [the 2012 acutely, particularly when they are building future growth with the observation that Transparency International report saw the up a local workforce with appropriate skills business sentiment is less positive than it was country move into the top 100 countries for and experience, is the restriction on employ- this time last year. the first time], there is still a long way to ment visas. “We employ just over 50 people (40 in go to reach the standards of the developed “All businesses have a quota of local staff assurance, the remainder split equally economies,” adds Clarke. that must be employed in proportion to the between tax and support) compared to just “Some recent government actions have workforce as a whole,” Holmes says. over 20 people at the same time last year impacted the potential for foreign invest- “This is a minimum of 70%, but may be and our turnover doubled over the last 12 ment. The uncertainties created by the Stra- higher depending on the business struc - months. However, that figure is slightly tegic Entity Foreign Investment Law, the dis- ture. Since the general level of education in misleading because we have brought in cussions to renegotiate many of the double Mongolia is high this is not too onerous a people from other territories, so around tax treaties and the pressure from certain requirement, but it can be difficult in a small 40% growth [from Mongolian resources parties to rewrite the Oyu Tolgoi [copper population to find staff with the right com- exclusively] is more accurate and we reckon and gold mine] investment agreement have bination of professional skills and language this can be sustained. Audit will continue to cast doubt in many investors’ minds. knowledge to work in an international envi- dominate, but I anticipate increased demand “The next few months will be critical,” she ronment.” for advisory services, particularly IT, as com- concludes. <

6 y January 2013 www.InternationalAccountingBulletin.com International Accounting Bulletin World survey

A profession adapting to a changing world Struggling clients, slow business growth, increased regulatory compliance and fee pressure have become the conditions accounting firms have had to accept as the ‘new normal’ in order to adapt their strategies and grow their business.

he numerous M&A and movements KPMG grew the least out of the Big Four, growth in US dollars exceeding the growth among accounting firms worldwide reporting revenues of $23bn for the year of the Big Four and BDO International. Its were the main reasons for growth to 30 September 2012, up just 1%. Due to chief executive Ed Nusbaum says the 10% in the global accounting market the slowdown, KPMG has had to make job growth is a combination of strong organic T cuts in some of its largest firms, such as its and M&A growth. “The one change that in 2012. As organic growth, especially in developed markets, was hard to come by, UK operation. works in our favour is that the economy new measures had to be explored in pur - KPMG global chairman Michael is becoming much more global, and that suit of increasing market share and profit Andrew partly attributes the result to globalisation, which you’ve been hearing growth. KPMG reporting in the final quarter of about for 50 years, has expanded down In line with the trend observed through- 2012, while the rest of the Big Four report- to the smallest of companies,” Nusbaum out 2012, it is networks that are pulling ed in Q2 or Q3. “Right across the board explains. the industry into the black, with 5% aver- September was really tough, and that will Nusbaum believes the 10% growth is age growth among IAB surveyed networks reflect in their [other Big Four] results sustainable. However, he cautions, a lot in the past fiscal year. For the second year, next year,” he says. “Secondly, we didn’t depends on the economy and the opportu- PwC retained its position as the world’s grow as much by acquisitions. PwC has got nities in the market. largest accounting firm with revenues of the Diamond acquisition coming into its In 2012 Grant Thornton International $31.5bn in the year to 30 June 2012, up results, Deloitte has got Bearing Point, so, again overtook RSM in the race to be 8% on the previous year. very large advisory businesses.” the sixth-largest network globally. Grant Deloitte remains in close proximity with Andrew says that in the second half of Thornton slipped to number seven in 2010 revenue up 9% to $31.3bn in the year to 31 the year the firm faced challenges such as but now regains sixth spot. With revenues May 2012. The third-largest firm, Ernst & pressure on margins, which decreased dis- of $4.1bn Grant Thornton International Young (E&Y), increased its fee income by cretionary spending and also challenges is $195m ahead of RSM. RSM increased 5% to $24.4bn, with the firm’s chief oper- from the regulatory environment. These its fee income by 1% to £3.9bn in the year ating officer John Ferraro saying growth included the uncertainty of the EU audit to 30 September 2012 and the network’s levels differed across the world, with the reform and the pre-Christmas demand chief executive Jean Stephens says growth firm successful in winning some bigger from the US Securities and Exchange Com- continues to be a challenge. “We are still audit engagements and with advisory fast- mission (SEC) that all the Big Four and growing but it’s not at the level I would growing due to a narrower, more focused BDO hand over audit papers of Chinese like. I think particularly in our larger mar- approach. “We’re number one in three of companies listed on the US stock exchange, kets we’ve had some challenges,” she says. the top six emerging markets, and we want which is, for the time being, in direct viola- RSM also rebranded in 2012 leaving the to be number one overall. If we continue tion of Chinese secrecy laws. word International behind and trading to grow this way we will reach that goal,” Grant Thornton International had a only as RSM. Ferraro explains. very good year in 2012 with double-digit It has been a good year for BDO

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International, strengthening its position as ■■ Total revenue vERSus growth: 2003-2012 the fifth-largest network with 6% growth to $6bn. The firm had a strong year in $bn Growth % Revenue Growth % M&A (see box on p16-17) and its global 200 20 chief executive Martin van Roekel says its growth is mainly due to the firm’s ability 15 150 to adapt to changing circumstances and to 10 implement new strategies. Kreston International, the 13th-largest 100 5 network, increased its fee income by 12% 0 last year and, according to chief executive 50 John Lisby, despite a good performance -5 one of its main challenges was bidding successfully against the branded mid-tier 0 -10 networks. “As a result we are in the pro - 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

cess of moving our firm to being branded,” Notes: Growth = the average growth of networks and associations surveyed. Lisby says. Source: International Accounting Bulletin Nexia International, the 10th-largest network, reported growth of 22% last start with,” she says. “To increase profitability you have to year, mainly attributable to the mergers of Less than two years after the merger of think about releveraging, refocusing and two of its US firms (see box on page 16-17). associations IGAF and Polaris Interna - just striving to get a better performance, Nexia International executive director tional, to form IGAF Polaris, the associa- bearing in mind that audit is a commodity Kevin Arnold says 22% growth is prob - tion has rebranded to PrimeGlobal in the now,” he adds. ably unsustainable, but asserts it’s a good hope this will enable it to attain a stronger KPMG’s Andrew says there’s been very indication of where the network is going. position in the market. PrimeGlobal, the heavy discounting of audit prices during Nexia took the number ten spot from third-largest association globally, has suf- the global financial crisis. He says: “This is PKF International, which was hit signifi - fered a 14% drop in fee income, due mainly a problem where regulators are very rightly cantly by the loss of member firms in Aus- to increased movement among members. asking you to lift your quality and your tralia, the UK and China (see box on page standards. But your cost structures are still 16-17). PKF International’s results don’t Squeeze of audit margins subject to inflation. Our costs aren’t going reflect the losses yet, but if the network Out of all the service lines, audit has been down but our prices are, so margins are fails to secure replacement firms it’s likely under most pressure, varying from fee getting squeezed.” to drop even further down the network’s pressure, increased regulatory oversight Andrew says that one way the firm has pecking order. IAB made several attempts and standard compliance, to increasing tried to address this issue is by increasing to speak to PKF, but the network has been statutory audit thresholds across Europe. focus on quality and improving audit effi- unable to respond as yet. Arnold says many of Nexia’s members ciency. “You’re assessing levels when you Associations had a more challenging are reporting difficulties in making income do your audit. What level of audit work year, with average growth among IAB from audit. Larry Chastang, Nexia Inter- do you do?; can you offshore any of that surveyed firms flat. Morison International national’s regional chairman for North work?; how can you handle it more effi - chief executive Liza Robbins says the 2% and Central America and managing prin- ciently? So we spent a lot of our time think- growth was good against the backdrop of cipal of international services at Larson - ing and debating around those issues,” he global markets. “We’re not in a rush for Allen, adds that, in his experience, where says. numbers or rankings; it doesn’t suit our audit profitability is suffering “you have to E&Y’s Ferraro acknowledges pric - business model. Our firms can only join rethink the audit process and a number of ing continues to be tough as buyers have the association if they’re international to our firms have gone through that process”. become more ‘sophisticated’. He adds that one of the firm’s largest investments, $400m, is audit and that delivering a more Exchange rate affecting fee targeted methodology is one of the main income growth: Timetric observation targets. Mazars chief executive Philippe Castag- A factor that has significantly affected firms across A stronger euro (or a weaker dollar) has had nac says that the price war keeps evolving the board is the euro and US dollar exchange rate. a number of implications for EU-based firms. According to Timetric economists, the euro has While their costs (measured in euros) remain and “this will need to stop at one point as strengthened against the dollar since August (by fixed, revenues generated abroad (also measured we will no longer be able to discount”. roughly 9.3%) because of diminished fears of a in euros) diminish, thus pressing on margins. “One way of addressing this issue is to disorderly breakup of the eurozone and increasing Likewise, measured in dollars, these companies specialise in niche services and sectors concerns about the structural fiscal problem in the would have seen their costs increase, given a set where the price war is less intense. It’s US. level of revenues in dollars. about finding those niches which have

8 y January 2013 www.InternationalAccountingBulletin.com International Accounting Bulletin World survey

■■ Top 10 networks by audit revenue ■■ Top 10 networks by tax revenue ■■ Top 10 networks by non-audIt and non-tax services revenue PwC 14,872.0 -2% PwC 7,909.0 4% Deloitte 12,207.0 14% Deloitte 13,146.0 6% E&Y 5,948.0 3% PwC 8,696.7 16% E&Y 11,233.0 7% Deloitte 5,472.0 9% KPMG 7,830.0 4% KPMG 10,363.5 -1% KPMG 4,836.3 1% E&Y 7,081.8 11% BDO 3,609.5 1% RSM 1,196.0 6% Grant Thornton International 1,338.0 26% Grant Thornton International 1,923.7 11% BDO 1,143.0 6% BDO 1,263.3 11% RSM 1,913.9 0% Grant Thornton International 920.0 10% RSM 877.0 -2% Baker Tilly International 1,757.9 4% Baker Tilly International 862.3 11% Crowe Horwath International 769.4 6% Nexia International 1,618.8 10% Crowe Horwath International 738.6 2% Baker Tilly 696.5 3% Crowe Horwath International 1,569.6 2% PKF International 724.0 -1% Nexia International 596.4 3%

Notes: The growth rate has been worked out by comparing International Notes: The growth rate has been worked out by comparing International Notes: The growth rate has been worked out by comparing International Accounting Bulletin service line data from 2011 and 2012, which are the Accounting Bulletin service line data from 2011 and 2012, which are the Accounting Bulletin service line data from 2011 and 2012, which are the figures reported to this magazine. This table does not include associations of figures reported to this magazine. This table does not include associations of figures reported to this magazine. This table does not include associations of independent firms. independent firms. independent firms. Source: International Accounting Bulletin Source: International Accounting Bulletin Source: International Accounting Bulletin

more resistance for fee pressure,” he says. that’s having on the reputation of the pro- may just be differences of opinion, which On top of intense fee pressure, client fession is an issue that concerns all of us,” don’t amount to audit failure. So we have loyalty has decreased, according to Baker he says. to find a better way of classifying major Tilly International chief executive Geoff One of the most prominent inspec - audit failure and what is relatively minor Barnes. “The days are long gone where we tions are those of the US Public Company audit differences.” can assume if we’ve looked after a client Accounting Oversight Board (PCAOB) for 20 years that’s going to continue,” he and recently the watchdog issued several The future of IFRS says. reports noting a year-on-year increase The prospect of having a global report - ing standard, IFRS, has been pushed even further into the future and the US Securi- ties and Exchange Commission (SEC) has “The SEC is all about protecting investors, not about protecting the failed to make the expected decision on IFRS adoption in the US in 2012. While accounting firms. If investors are not supportive of adopting IFRS it the International Accounting Standards becomes more difficult. Now there are some who are supportive of it, Board (IASB) was optimistic the US will but the ones who are not supportive tend to be more vocal” make a positive decision on IFRS adoption, Ed Nusbaum, CEO Grant Thornton industry leaders were not as surprised by the delay. Nusbaum says it would be politically extraordinarily difficult to adopt IFRS right now in the US. “I certainly wasn’t “We also have the increasing of audit in “audit failures” in most leading firms’ expecting it, companies aren’t in favour of thresholds in Europe and other parts of audits. Deficiencies observed ranged from it, politicians aren’t in favour of it, inves - the world. Governments around the world failing to obtain sufficient supportive evi- tors aren’t in favour of it. So why would are looking to eliminate what they call red dence of audit opinions, to failing to have you adopt it? It would be a very unpopular tape from the owner-managed business effective internal control financial report- move at the moment,” he says. and from larger companies as well, and ing (ICFR) in place. Andrew says the As much as Grant Thornton Interna - that means that many companies may not PCAOB inspection process is a healthy and tional is supportive of IFRS, Nusbaum says legally require an audit. How we as an useful thing and that the firm has learned as long as the SEC gets negative feedback accounting profession deal with that is an from it. on IFRS from investors the likelihood of issue,” he says. “It’s useful to have that exchange of news adoption is low. Commercial challenges are joined by and we really find it useful. It does make “The SEC is all about protecting inves - challenges arising from increased audit our operation more consistent,” Andrew tors, not about protecting the accounting oversight and increasing compliance says. “So they’re able to tell us offices A, firms. If investors are not supportive of demands. Andrew highlights the impor - B, and C are operating at the same level, adopting IFRS it becomes more difficult. tance of audit inspection on the reputation and that’s a very helpful thing. Where I do Now there are some who are supportive of the profession. “The published inspec - take issue a little bit is around the word - of it, but the ones who are not supportive tions by the regulators and the impact ing ‘audit failure’. Some of these ‘failures’ tend to be more vocal,” he says.

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Despite the delay in the IFRS adoption tics control accounting – that would be a ing priority for the largest networks, with decision, the convergence project between disaster,” Nusbaum says. “Whether it’s in all Big Four networks seeing non-audit, IFRS and US GAAP is still going ahead the US or Europe or China or wherever it non-tax revenue increase both absolutely with big issues such as lease accounting may be, accounting should be about good and as a proportion of total income. PwC and revenue recognition standard still hav- accounting standards free of political and Deloitte experienced 14% and 15% ing to be finalised. influence.” absolute growth in non-audit, non-tax Nusbaum says market value accounting BDO’s Roekel says he doesn’t mind poli- income respectively, while Ernst & Young is a big issue and that some would argue ticians being involved in the discussion and KPMG International saw 11% and 4%. that it goes too far, but some would argue “as long as all relevant stakeholders are Outside the Big Four, networks gener - that it doesn’t go far enough. “I think mar- involved, decisions aren’t taken too quickly ally saw a decrease in the relative impor - ket value accounting is the right answer and all aspects are considered”. tance of advisory services: of the seven - when you’re looking at investments, and “Of course when there is a crisis or some- teen networks where figures were com - it’s better for the economy to get those thing new comes up, there’s always a temp- parable between 2011 and 2012, five saw losses recognised and behind them to move tation for politicians to react impulsively no change in the percentage of total fee forward. And some of the politicians don’t to show they are dealing with it,” he says. income provided by non-audit, non-tax like those answers, but we cannot let poli- In 2012, advisory services were a grow- services, while nine saw a decrease.

■■ WORLD SURVEY Networks: fee data Fee split (%) Corporate Rank Revenue Growth Audit & Tax Management Corporate recovery/ Litigation 2012 Name ($m) rate(%) Accounting services consulting finance Insolvency support Other Year-end NETWORKS 1 PwC* (1) 31,510.0 8% 47 25 - - 28 Jun-12 2 Deloitte*(2) 31,300.0 9% 42 19 - - - - 39 May-12 3 Ernst & Young* 24,420.0 7% 46 25 21 - - - 8 Jun-12 4 KPMG*(3) 23,030.0 1% 45 21 - - 34 Sep-12 5 BDO(4) 6,015.8 6% 60 19 - - - - 21 Sep-12 6 Grant Thornton 4,181.6 10% 45 22 - - - - 33 Sep-12 International*(5) 7 RSM(6) 3,987.4 1% 48 30 14 - - - 8 Dec-12 8 Baker Tilly International* 3,316.8 3% 53 26 7 2 4 1 7 Jun-12 9 Crowe Horwath 3,077.7 5% 51 24 11 1 - - 13 Dec-12 International(7) 10 Nexia International* 2,840.0 22% 57 22 9 1 1 1 9 Jun-12 11 PKF International* 2,682.8 2% 55 27 9 2 1 - 6 Jun-12 12 Moore Stephens 2,283.2 -1% 54 27 6 2 1 1 9 Dec-12 International(8) 13 Kreston International*(9) 1,964.8 12% 45 31 9 2 2 - 11 Oct-12 14 HLB International* 1,571.3 -12% 54 24 8 2 1 1 10 Dec-12 15 Mazars*(10) 1,299.4 -3% 50 11 - - - - 39 Aug-12 16 UHY International* 620.3 0% 63 17 7 2 1 2 8 Dec-12 17 Russell Bedford International* 382.0 1% 58 21 10 - - - 11 Jun-12 18 ECOVIS International*(11) 282.1 4% 37 28 12 1 2 1 19 Dec-12 19 IECnet* 115.2 7% 57 31 5 1 1 1 4 Jun-12 20 Reanda International* 92.9 6% 59 8 12 - 5 - 16 Dec-12 21 SMS Latinoamérica(12) 64.6 7% 47 28 18 1 3 - 3 Dec-12 22 UC&CS America* 32.1 -6% 62 28 10 - - - - Dec-12 Total revenue/growth 145,070.0 6%

Notes: *Disclaimer = Only data from the exclusive member firms within the network or association is included. Data relating to correspondent and non-exclusive member firms is not included.(1) Other includes advisory services; (2) Other includes consulting and financial advisory services; (3) Other includes advisory services; (4) Other includes advisory services; BDO revenue includes $1.44bn from two exclusive alliance networks; (5) Other includes advisory services and outsourcing; (6) RSM revenue includes $1bn from an exclusive alliance network and from exclusive correspondent firms; (7) Crowe Horwath International information includes alliance/non-exclusive/correspondent firm revenues. The fee income from alliance/non-exclusive/correspondent firms was $46m in 2012; (8) Moore Stephens revenues include $42.2m from correspondent firms; (9) Kreston International fee income revenues do not include non-exclusive member revenues. Fee income from correspondent and non-exclusive members is $75.9m; (10) Mazars reports its global revenues in € with 2012 revenues at €1,013.4, up 6%; (11) ECOVIS International does not include fee income of associated US partners. If it were to, the combined revenue of the network would be $448.5m; (12) SMS Latinoamérica revenues include $2.4m from correspondent member firms. Source: International Accounting Bulletin

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Excluding networks with less than $1bn and just four saw a decrease. ance has been a big area for us.” in fee income during 2012, only Grant As well as the perennial recessionary sta- While the global transaction and IPO Thornton International, BDO Interna - ples of restructuring work and assistance markets have been reportedly quiet, save tional and Crowe Horwath International in outsourcing, compliance was reported for sporadic activity in East Asia, market experienced growth in their non-audit, by firm leaders as a growing area of oppor- consolidation in many industries has driv- non-tax income at all. For Grant Thorn - tunity. It seems the global increase in en demand for advisory work surrounding ton International, non-audit, non-tax fee enthusiasm for regulation that has caused the M&A process, in areas such as valu - income grew at a rate of 26%, while at problems for accounting firms may also, ation, due diligence, “corporate hygiene” BDO International it grew by 11% and at when applied to clients (especially those work in preparing companies for sale, and Crowe Horwath International by 6%. in the financial services sector), be driving corporate finance for acquisitions. Advisory services were markedly more business for networks and associations. IT has been a strong area, with the abil- of a priority for international associations. Nusbaum comments: “We conduct an ity to steer companies through a plethora For eight out of 15 associations where fig- annual survey of business leaders and of technological options driving advisory ures were comparable, non-audit, non-tax what they cited as the biggest impediment growth among the Big Four especially. In income increased as a proportion of total to international growth was red tape and particular, says Andrew of KPMG, “big income, while three experienced no change regulatory problems. Certainly compli- data” and information security are two

■■ WORLD SURVEY Associations: fee data

Fee split (%)

Corporate Rank Revenue Growth Audit & Tax Management Corporate recovery/ Litigation 2012 Name ($m) rate(%) Accounting services consulting finance Insolvency support Other Year-end ASSOCIATIONS

1 Praxity 3,720.7 1% 49 22 9 1 1 1 18 n/a

2 LEA Global/Leading Edge 2,723.5 5% 40 35 20 2 1 1 1 Dec-12 Alliance

3 PrimeGlobal(1) 2,029.5 -14% 53 23 9 5 2 1 7 May-12

4 Geneva Group International 1,924.0 6% 30 29 22 5 6 3 5 Dec-12

5 AGN International(2) 1,603.2 8% 54 24 - - - - 22 Oct-12

6 BKR International 1,330.0 -2% 58 30 1 - - - 11 Jun-12

7 DFK International(3) 1,082.5 -2% 48 29 7 2 3 3 8 Sep-12

8 IAPA 1,056.8 5% ------n/a

9 Morison International 723.2 2% 56 16 8 5 3 4 8 Dec-12

10 CPA Associates International 643.0 0% 47 32 12 - - - 9 Oct-12

11 MSI Global Alliance 558.1 3% 51 20 9 4 9 7 - Dec-12

12 MGI 483.4 -3% ------Jun-12

13 JHI 345.1 - 43 28 8 2 2 8 9 Dec-11

14 Alliot Group 327.2 -24% 31 27 13 24 - 5 - n/a

15 KS INTERNATIONAL 323.5 2% 48 18 8 8 3 2 20 n/a

16 INPACT 305.7 -1% 55 28 11 1 1 1 3 Dec-11

17 Integra International 299.1 11% 45 30 15 - 5 5 - Dec-12

18 EuraAudit International 268.1 -8% 60 23 7 - - 1 9 Dec-12

19 GMN International 217.9 5% 69 14 8 2 1 1 5 Dec-12

20 UC&CS Global 169.5 22% 50 37 13 - - - - Dec-12

21 Parker Randall International 133.7 2% 55 25 15 5 - - - Dec-12

22 ACEE 23.6 5% 43 10 - - - 11 3 Dec-12

23 Abacus Worldwide 11.7 ------Dec-12

Total revenue/growth 20,303.0 0%

Notes: In contrast to the Networks fee ranking table, income contributions from correspondent and non-exclusive member firms may be included in total fee income for associations. (1) IGAF Polaris rebranded to PrimeGlobal in 2012; (2) Other includes advisory services; (3) DFK International revenues include revenues from correspondent and non-exclusive members. Full member fee income for 2012 is $1061.3m. Source: International Accounting Bulletin

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areas likely to drive future demand. “We’re compared to less than a third for networks. tax and what tax to pay. That’s not neces- focusing a lot on data analytics,” he says. Most global leaders interviewed sarily the public’s perception.” “[Companies] want to know how to use big remarked that the tax advisory environ - BDO’s Van Roekel agrees that the issue data resources to the advantage of their ment had been in many ways a repeat of will grow in 2013, arguing: “Tax is going organisations. Data security is a big area the previous year’s with its focus on trans- to become more and more of an issue in the too – there are a lot of global privacy issues, fer pricing and cross-border advice, with political debate, given the growing need of and companies want to ensure that they’re one important exception – the surge of governments to collect more tax money.” protected against cyber attacks, that they public and political scrutiny aimed at inter- There has been a general shift in men - conform to privacy laws, that they have a national corporate tax arrangements at the tality over the past few months where tax system that can’t be penetrated by third end of 2012. avoidance has become bad and poses a big parties.” Andrew comments: “It’s not just a ques- reputational risk for firms. Jane Howard, tion of whether the international legal head of professional liability at UK law Tax as a reputational issue rules apply, it’s a question of public inter- firm, Wragge & Co says that more claims As with advisory services, tax appeared to est. The frustration for us is that there is are likely to arise from failed tax structures be more of area of growth as a proportion an international set of rules that apply here, and tax mitigation advisory services in the of overall fee income for associations than and it would require substantial change for short to medium term. Certain structures for networks, with more than half report- those to be rewritten. Most of our work is that once escaped scrutiny (and were rou- ing proportional increases in tax income, educating people about how to pay their tinely sold by a wide range of accountancy

■■ WORLD SURVEY Networks: staff data

Rank Name Total staff Partners Professional staff Administrative staff Offices 2012 2012 2011 Growth 2012 2011 2012 2011 2012 2011 2012 2011 (%) NETWORKS 1 Deloitte* 193,359 181,566 6% 9,948 9,673 34,464 33,103 148,947 138,790 154 n/a 2 PwC* 180,529 168,710 7% 9,359 8,697 139,723 129,720 31,447 30,293 776 771 3 Ernst & Young* 167,225 151,841 10% 9,129 8,671 125,594 112,200 32,502 30,970 726 718 4 KPMG* 152,390 144,677 5% 8,624 8,150 117,190 110,730 26,576 25,797 700 700 5 BDO 54,933 48,890 12% 4,778 4,467 41,979 36,278 8,176 8,145 1,204 1,118 6 Grant Thornton 35,809 31,581 13% 2,839 2,619 26,987 23,620 5,983 5,342 638 527 International* 7 RSM 32,757 32,674 0% 3,126 3,132 23,947 23,522 5,684 6,020 702 698 8 Crowe Horwath International 29,239 28,276 3% 3,335 3,379 21,335 20,186 4,569 4,711 671 650 9 Baker Tilly International* 25,667 24,481 5% 2,650 2,577 18,986 17,965 4,031 3,939 672 642 10 Nexia International* 22,319 20,043 11% 2,600 2,211 15,261 13,507 4,300 4,325 581 507 11 PKF International* 21,978 21,432 3% 2,276 2,234 16,681 16,351 3,021 2,847 440 440 12 Moore Stephens 21,224 21,197 0% 2,312 2,328 15,273 15,153 3,639 3,716 624 636 International 13 Kreston International* 21,009 19,032 10% 1,448 1,336 16,303 15,225 3,258 2,471 640 594 14 HLB International* 15,811 16,455 -4% 1,754 1,860 10,878 11,726 3,179 2,869 479 477 15 Mazars* 13,161 12,508 5% 727 705 10,413 9,844 2,021 1,959 236 183 16 UHY International* 7,134 6,801 1% 768 732 5,210 4,785 1,156 1,284 268 246 17 Russell Bedford 4,967 4,406 13% 549 520 3,751 3,294 667 592 240 222 International* 18 ECOVIS International* 4,360 3,874 13% 597 581 3,295 2,860 434 433 263 225 19 Reanda International* 2,195 2,063 6% 109 96 1,829 1,741 257 229 42 40 20 SMS Latinoamérica 1,873 1,767 6% 162 158 1,571 1,478 140 131 74 71 21 UC&CS AMERICA* 1,834 2,557 -28% 170 167 1,635 1,934 391 456 146 95 22 IECnet* 1,418 1,171 21% 219 198 977 775 222 198 118 109

Totals 1,011,191 946,002 7% 67,479 64,491 653,282 605,997 290,600 275,517 10,394 9,669

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

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firms and their wealth management arms) recognised the reputational implications ish, but that might not be for some time. are now seen as tax avoidance or evasion. for their business of being seen not to pay Smaller firms may want to take a market In addition to the new package of anti- their fair share of UK tax by the man in the share from those withdrawing from this avoidance measures announced by the UK street and adjusted their approach accord- area and will continue to sell some of the government in December, the draft 2013 ingly. It is a good illustration of how repu- structures that no longer pass scrutiny by Finance Bill provides for the introduction tational pressure can also change behav - those charged with practice protection at of a ‘General Anti-Abuse Rule’ (GAAR) iour,” she explains. the larger firms.” aimed at deterring and countering tax “Understandably, and in part for reputa- While North America and Europe con- avoidance. tional reasons, several of the bigger players tinue to bring in most of the revenues, it More broadly, the Starbucks episode in in the accountancy world don’t want to be has long been established that for inter - the UK is a good example of the differ - associated with the adverse publicity that national networks and associations it’s ence between what is lawful and what is comes out of litigation or press coverage not just about being where the bulk of deemed acceptable in the current climate, that focuses on tax advice that appears the fee income is, but also about having says Howard. “Starbucks (and other well perfectly lawful, but comes close to (or that all-important global coverage. On known brands) had lawfully offshored may cross) the line between legitimate average IAB surveyed networks and asso- their profits to other lower-tax jurisdic - mitigation and tax evasion,” she contin - ciations have offices in 70 countries across tions” she explains. “Once HMRC shone ues. “I think the longer-term climate for the world, with 13 networks and associa- the spotlight on the practice, Starbucks this kind of litigation will probably dimin- tions having coverage in more than 100

■■ WORLD SURVEY Associations: staff data

Rank Name Total staff Partners Professional staff Administrative staff Offices 2012 2012 2011 Growth 2012 2011 2012 2011 2012 2011 2012 2011 (%) ASSOCIATIONS OF INDEPENDENT FIRMS 1 Praxity 31,593 30,227 5% 2,768 2,511 23,588 23,834 5,237 5,245 559 553 2 LEA Global / Leading Edge 25,459 24,550 4% 2,175 1,600 18,854 18,323 4,430 4,627 459 460 Alliance 3 PrimeGlobal 19,573 19,303 1% 2,189 2,206 13,738 13,491 3,646 3,564 764 812 4 Geneva Group International 12,897 10,360 24% 1,303 1,244 - - - - 592 546 5 BKR International 11,275 11,158 1% 1,403 1,343 8,679 8,737 1,193 1,078 583 593 6 AGN International 10,646 10,513 1% 1,292 1,268 7,494 7,384 1,860 1,861 465 458 7 DFK International 10,571 10,040 5% 1,188 1,179 7,601 6,386 1,782 2,475 386 380 8 Morison International 8,744 8,503 3% 820 779 6,319 6,030 1,603 1,694 251 239 9 CPA Associates International 7,466 6,944 8% 870 810 5,414 5,035 1,182 1,182 314 296 10 IAPA 7,357 9,461 -22% 872 1,104 4,043 6,213 2,442 2,144 300 295 11 MSI 5,746 6,879 -16% 728 711 3,806 5,030 1,212 1,138 152 172 12 MGI 5,700 5,923 -4% 764 767 2,988 2,950 1,948 2,206 294 294 13 INPACT 4,055 4,050 0% 571 549 2,976 2,959 508 542 248 207 14 Alliot Group 3,706 3,495 6% 479 441 2,426 2,090 801 964 171 173 15 KS International 3,670 3,727 -2% 394 405 2,397 2,445 879 877 153 165 16 JHI Association 3,580 - - 472 - 2526 - 582 - 169 - 17 Integra International 3,298 3,086 7% 411 395 2,330 2,149 557 542 189 177 18 EuraAudit International 2,878 2,988 -4% 384 401 2,131 2,207 363 380 238 239 19 UC&CS Global 2,716 3,271 -17% 377 322 2,183 2,370 518 579 231 133 20 GMN International 2,525 2,473 2% 281 285 1,257 1,193 987 995 113 120 21 Parker Randall International 1,559 1,758 -11% 211 227 1,214 1,373 134 158 102 102 22 ACEE 183 161 14% 36 31 119 92 28 38 27 26 23 Abacus Worldwide 155 - - 20 - 91 - 25 - 7 - Totals 185,352 178,870 4% 20,008 18,578 122,174 120,291 31,917 32,289 6,767 6,440

Notes: In contrast to the Networks fee ranking table, income contributions from correspondent and non-exclusive member firms may be included in total fee income for associations. Source: International Accounting Bulletin

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Regional Breakdown

■■ North America ■■ Revenue and staff split by region ■■ Revenue and staff split by region Name Rev Staff Big Four Mid-tier

Mid-tier networks 2% Fees Fees 13% 5 RSM 2,419.0 13,257 19% 33% 6 BDO 2,389.5 14,671 Middle East

6% 46% 7 Grant Thornton International 1,767.0 10,121 Fees 25% 30% Asia Pacific 19% 23% 8 PKF International 1,459.6 7,206 38%33% Staff Europe Staff 9 Crowe Horwath International 1,390.8 7,580 7% 25% 34% 10 Baker Tilly International 1,388.6 7,625 38% Latin America 37% Staff37% 11 Nexia International 1,372.0 6,714 North America

12 Moore Stephens 975.3 4,999 37% International 3% 13 Kreston International 918.7 5,326 49% 14 HLB International 601.7 3,389 49% Middle East Asia Pacific Europe TheThe Americas Americas Asia Pacific Europe 15 UHY International 203.5 1,085 Asia Pacific Europe Latin America North America

Source: International Accounting Bulletin Source: International Accounting Bulletin Source: International Accounting Bulletin

■■ North America ■■ Latin America ■■ Latin America

Name Rev Staff Name Rev Staff Name Rev Staff

Associations Mid-tier networks Associations

1 Praxity 2,019.4 10,788 5 BDO 168.5 3,573 1 LEA Global/Leading Edge 67.0 611 Alliance 6 Grant Thornton International 146.0 3,437 2 LEA Global/Leading Edge 1,780.5 16,548 2 PrimeGlobal 56.9 1,367 Alliance 7 RSM 96.9 1,653 3 Praxity 51.5 1,016 3 PrimeGlobal 904.7 5,140 8 Crowe Horwath International 83.6 2,627 4 CPA Associates International 33.0 1,137 4 AGN International 689.5 4,363 9 Moore Stephens 74.3 2,673 International 5 UC&CS Global 32.1 1,834 5 Geneva Group International(e) 595.6 3,998 10 Baker Tilly International 70.7 1,619 6 DFK International 540.8 2,964 6 JHI Association 30.6 1,096 11 SMS Latinoamérica 64.6 1,873 7 BKR International(e) 386.0 3,569 7 DFK International 27.8 843 12 Kreston International 51.2 1,704 8 Geneva Group 20.0 387 8 IAPA 342.0 1,815 13 PKF International 47.0 2,004 International(e) 9 CPA Associates International 288.0 1,864 14 Nexia International 44.0 1,209 9 AGN International 19.0 497

10 MSI Global Alliance 197.8 1,192 15 Mazars 38.2 823 10 MGI 18.9 757

Source: International Accounting Bulletin Source: International Accounting Bulletin Source: International Accounting Bulletin

14 y January 2013 www.InternationalAccountingBulletin.com International Accounting Bulletin World survey

■■ The big four

North America Latin America Europe Africa/Middle East Asia-Pacific Rev Staff Rev Staff Rev Staff Rev Staff Rev Staff Deloitte 14,800.0 66,394 1,300.0 18,461 10,000.0 59,553 900 8,764 4,900.0 40,187 PwC 11,187(1) 44,885 1,037.0 12,236 12,800.0 68,710 1,077 11,008 5,409.0 43,690

The Americas Europe/Africa /Middle East Asia-Pacific Rev Staff Rev Staff Rev Staff E&Y 9,820 50,256 10,459 81,022 4,141 35,947 KPMG 7,450 41,320 11,510 78,380 4,070 32,690

Notes: (1) Includes the Caribbean Source: International Accounting Bulletin

■■ Europe ■■ Europe ■■ Asia-Pacific

Name Rev Staff Name Rev Staff Name Rev Staff

Mid-tier networks Associations Mid-tier networks

5 BDO 2,283.6 18,501 1 Praxity 1,225.7 10,270 5 BDO 1,043.9 15,538

6 Grant Thornton International 1,579.4 12,225 2 Geneva Group International 1,000.0 6,577 6 Crowe Horwath International 760.5 11,057 (e) (1) 7 Baker Tilly International 1,149.1 8,106 7 Baker Tilly International 640.2 6,841 3 PrimeGlobal 942.0 9,527 8 Nexia International 1,091.1 8,248 8 Grant Thornton International 579.0 7,799 4 AGN International 778.4 3,478 9 Moore Stephens 923.4 8,121 9 RSM 531.2 8,350 International 5 IAPA 641.9 3,816 10 Mazars 952.7 7,246 10 PKF International 425.4 4,030

11 RSM 878.3 7,662 6 LEA Global/Leading Edge 610.0 5,677 11 Kreston International 344.4 5,753 Alliance 12 Nexia International 300.6 5,211 12 Crowe Horwath International 785.3 6,842 7 BKR International(e) 533.0 4,510 13 Moore Stephens 264.8 4,235 13 HLB International 661.0 5,769 8 DFK International 375.4 3,336 International

14 PKF International 660.5 5,958 9 Morison International 373.6 3,209 14 HLB International 259.8 4,760

15 Kreston International 607.4 6,477 10 MSI Global Alliance 283.8 2,224 15 UHY International 100.0 2,073

Source: International Accounting Bulletin Source: International Accounting Bulletin Source: International Accounting Bulletin

■■ Africa/Middle East ■■ Africa/Middle East ■■ Asia-Pacific

Name Rev Staff Name Rev Staff Name Rev Staff

Mid-tier networks Associations Associations

5 BDO 130.2 2,650 1 Praxity 110.2 2,623 1 Praxity 313.9 6,896

6 Grant Thornton International 111.0 2,227 2 Morison International 74.8 1,362 2 Geneva Group International(e) 269.3 1,676 (1) 7 PKF International 90.2 2,780 3 GMN International 53.1 405 3 LEA Global/Leading Edge 225.0 2,036 8 Mazars 80.7 2,146 Alliance 4 LEA Global/Leading Edge 41.0 382 9 Baker Tilly International 68.2 1,476 Alliance 4 Morison International 133.6 2,789 5 Geneva Group International 38.9 258 10 RSM 61.9 1,434 5 DFK International 128.5 3,038 (e)(1)

11 Crowe Horwath International 57.5 1133 6 MGI 28.4 342 6 PrimeGlobal 125.6 2,278

12 Moore Stephens 45.4 1,196 7 AGN International 28.1 970 7 AGN International 88.2 1,338 International 8 Integra International 74.5 883 13 Kreston International 43.1 1,133 8 MSI Global Alliance 23.8 606

14 Nexia International 36.8 937 9 INPACT 17.6 419 9 KS INTERNATIONAL 71.6 1,538

15 UHY International 22.0 524 10 IAPA 12.4 351 10 CPA Associates International 67.0 1,608

Source: International Accounting Bulletin Source: International Accounting Bulletin Source: International Accounting Bulletin

www.InternationalAccountingBulletin.com January 2013 y 15 world survey International Accounting Bulletin

countries. The trend of expanding to continue to be an issue.” est growing region for Grant Thornton, new countries each year and the merging Andrew says local factors are quite according to Nusbaum. “Countries like of existing members continued in 2012, important in Europe, and some economies China and India continue to grow, as do and as Europe poses a growth challenge, are much more heavily impacted than oth- all the other emerging markets such as Bra- opportunities were identified elsewhere. ers by austerity measures. “So if you’re a zil,” he says. Europe in general has been challenging UK economy based upon financial services, There are also good prospects for growth for BDO International, according to van you’re going to be pretty challenged at the in the developed markets, says Nusbaum, Roekel. moment, as opposed to an economy like and it’s important for the network to focus “In Western Europe the effects of the Germany which is exporting cars and tech- on building brand reputation, establishing recession are still having a considerable nology at a record rate,” Andrew explains. a unique value proposition and targeting impact on the business of our firms, not Moving away from the stagnant markets new clients in those economies.” to mention the price competition resulting of Europe, networks and associations were Barnes says his network has been affirm- from lower demand, but considerable sup- able to find opportunities elsewhere. Grant ing its ‘one firm per country’ policy and ply, in those markets,” he says. “In some Thornton’s Nusbaum says the network has many of its members are fully taking on parts of Southern Europe, because of sov- successfully expanded further into Africa the Baker Tilly branding such as the firm ereign debt issues, some of our firms have and in the Baltic by adding Latvia, Esto - in Germany and Mexico, which indicates a faced pressure as well.” nia and Lithuania in the past fiscal year. shift towards members looking to take on Roekel is not expecting any sudden “We have also filled all the CIS countries, the international brand. improvements and says if Europe is to see we’ve completed all of South America, so “One of the things that’s happening with growth in the coming months it will be very now the only area where we aren’t in every us now is almost all of our firms are ‘Baker limited. “Our business is largely linked to country is in Africa,” he says. “In terms Tilly something’. Many are asking just to economic development, and there’s not a of revenue growth those don’t necessarily use the Baker Tilly name,” he explains. positive expectation for growth in many add up into big percentages, because if you RSM, despite losing its spot as the sixth- European economies in the coming year,” move into smaller countries the revenues largest network globally, has had a good he says. “If there will be growth, it will be are small. But these countries are critically year with 14 new firms joining. “We have extremely limited. Nevertheless when our important for serving global clients and added several firms in Africa and five in firms are able to differentiate themselves important for explaining our capabilities Europe including the merger of our Zurich in the market, we will be able to realise throughout the world.” and Geneva members in Switzerland,” says some growth, but price competition will Asia-Pacific continues to be the fast - Jean Stephens.

M&A trend ready to shift up a gear Last year will be remembered for its large-scale M&As latest IAB China survey, however, the merger will still strategic in their natures and that we are not looking – as the year when increased consolidation moved leave PKF with more than 1,500 staff at its remaining for mergers just to add revenue or to build bulk.” from being a prediction to reality, as organic growth Chinese offices. At Baker Tilly International, chief executive Geoff in developed markets continued to be hard to come Strong M&A activity is in line with BDO’s strategy Barnes reveals several merger discussions are taking by. to grow significantly in the next few years, according place across its network members and says he doesn’t PKF International had a challenging year, to the firm’s chief executive. Martin van Roekel. discount the possibility of a large-scale merger for beginning in Australia with the Grant Thornton “We want to make it clear to the market that we are some of its member firms, pointing to lively merger International takeover of BDO’s Sydney and Perth the leading mid-tier network around the world,” he activity in North America, especially in the US. office leading to a series of musical chairs. BDO made says, adding that there are a large number of smaller Barnes says: “For many networks a large share of a deal with PKF East Coast Practice, which put a big firms and networks currently struggling to keep their global revenues comes from the US. It’s still the dent into PKF’s strong performance in Australia, their knowledge, tools and strategies up to date biggest financial community even with China pushing losing A$94.2m ($99.5m) or 77% of its overall with changing regulation and the increasing grip of it. The services our industry offers are challenged in revenues. regulators. some parts of the world, and that means the leaders The news from Australia was soon followed by “There is also high fee pressure in a number of of these accounting firms want to see the firm be speculation, confirmed in October, that BDO UK countries, making it necessary for smaller firms to successful and will look for opportunities to grow the and PKF UK were to merge creating the nation’s reconsider their future position. As a result a number business. One of those will be through merger.” sixth-largest firm with estimated revenues of £386m of mergers have taken place, and I think this number Nexia had a good run in the US with two of its large ($612.5m) in a deal expected to be finalised early this will increase in 2013,” Roekal continues. US single firms LarsonAllen and JH Cohen merging year. The newly merged firm will close the gap for BDO Roekel confirms BDO International will continue with large market players in the past two years. Both on Grant Thornton UK, which had revenues of £417m looking for M&A possibilities. “A number of our mergers played in Nexia’s favour as the LarsonAllen in the year to 30 June 2012. existing firms have been contacted by local firms merger with Clifton Gunderson, an HLB International In November PKF International chairman Wolfgang looking to explore the possibility of joining forces in member firm, resulted in the newly merged firm, Hofmann told International Accounting Bulletin that their territories,” he says. CliftonLarsonAllen, choosing Nexia as its global the network is looking for a UK replacement; however Grant Thornton International’s chief executive affiliate. And, the JH Cohen merger with Reznick no suitable candidate has been hinted at as yet. Ed Nusbaum says the market is good for M&A Group, a PrimeGlobal member firm, followed in the A week after the UK announcement, BDO China opportunities, but notes that mergers are always same footsteps by opting for Nexia membership. said it was taking on 350 staff from PKF China difficult. “There’s a lot of complexity involved in Both mergers significantly boosted Nexia’s global strengthening the firm’s presence in Beijing, pulling them off in a profitable way,” he says. “We’re revenues. Its international executive director Kevin Shenzhen and Wuhan. According to data from the always concerned about making sure the mergers are Arnold says that if the two newly merged firms had

16 y January 2013 www.InternationalAccountingBulletin.com International Accounting Bulletin World survey

There are also several very ambitious year to 30 June 2012. quickly. It’s an economy which is chang - and fast-growing firms within the RSM Stephens says that the network felt some ing very fast. And places like Columbia, network, such as its Chinese member, of the effects of RSM Tenon’s woes. “When Peru and Chile, which have been largely which is the sixth-largest firm in the mar- you have an international shared brand resource-based, have also done well, and ket. “Our firm in China has some very that people around the world are focusing demonstrated through strong government ambitious growth plans that I have no on, events such as RSM Tenon affects that. leadership what you’re able to do with doubt they will reach. That will continue I think RSM Tenon has strong leadership, these emerging economies. So it’s a good to drive our success within the region, but it has made changes it needed to make, and emerging small business class.” also internationally,” Stephens explains. is confident of moving forward. In terms of When discussing Africa, network leaders When looking at RSM in 2012 it’s client service, RSM Tenon is dedicated to were at pains to point out that they were, impossible to overlook the challenging the network, and it is working with other in fact, discussing 54 sovereign territories time its UK member RSM Tenon has gone members on client needs. That has never with wildly different circumstances. The through in the past 12 months. Following wavered,” she says. overall impression is that the continent’s RSM Tenon’s acquisition of RSM Bentley growing indigenous industries, as well as Jennison in 2009 and certain assets of Van- Africa’s potential global – particularly Chinese – investment, tis in 2010, the firm had to issue a profit For KPMG, with its $100m investment in and the work of charities, is driving con - warning in February 2012, along with a Africa, the continent is an important mar- siderable growth in demand for accounting restating of accounts for the previous fis- ket for the future. “We see Africa pretty services. While networks and associations cal year. The firm, the only listed account- much where Asia was ten years ago and it enjoy impressive growth in many African ing firm on the London Stock Exchange, has huge potential,” says Andrew. He adds countries, problems with local inflation announced a 9.3% drop in revenues to that in the BRIC and the Group of Eleven are diluting this growth when it is reported £107.8m ($169.6m)in the six months to 31 countries it has been extremely important in Western currency. December 2011, which led to it having to for the firm to build very strong capacity. Staffing is also problematic for many firms, renegotiate bank loans, cut staff by 11% “South America has been doing well as with difficulties experienced both in secur- and undergo a complete change of senior there are significant infrastructure invest- ing local talent and convincing expatriates executive team. ments going into Brazil,” he explains. to relocate to the continent. Nevertheless, as Despite the actions taken in the first six “They’ve discovered massive oil and gas KPMG’s Andrew comments, firms are “now months of 2012, the firm’s full-year fee fields and they have a good modern govern- seeing a generation of very impressive young income dropped 8.8% to £208.2m in the ment which is lifting living standards very African leaders coming through”.

opted for the alternative international affiliation it last spring. The rules are designed to place control have to have large number of their staff qualified in would have had a significant impact on the network. of large firms into Chinese hands and ensure voting China will bring about different strategies of how “I think for the network the risk was that we would be rights are dominated by Chinese-qualified CPAs. those firms are going to embark upon the process. We impacted in a non-advantageous way by a lot of these In the first instance firms must restructure from a don’t have an inkling of that and just keep our fingers mergers,” he says. “I used to have nightmares about joint venture to special general partnership with the crossed.” reporting to the members in Washington that CLA percentage of foreign partners not exceeding 40%. The Big Four have mainly kept growing by acquiring went to HLB and CohnReznick went to PrimeGlobal.” Since May, KPMG and Deloitte have carried out the Generally there’s been plenty of market changes transition, with the Chinese authorities showing more advisory businesses. Andrew says that KPMG hasn’t for accounting firms, especially following some of lenience than initially anticipated. made as many acquisitions of large consultancy the biggest M&As, such as the BDO UK and PKF UK firms such as PwC and Deloitte in the past two years, deal, according to Arnold. “There are a lot of networks Transitional arrangements but maintains he has looked at some smaller-scale KPMG was the first of the Big Four to complete the out there at the moment wondering how best to acquisitions, saying: “There are lot of consulting process and global chairman Michael Andrew says it go forward” he says. “And obviously there’s a lot of companies that are geared up substantially for discussion about mergers. We’ve been approached was all much smoother than anticipated. “Initially growth, which just isn’t taking place at the moment, by a number of firms from other networks as we’re the Chinese authorities specified some very rigorous so they’ve been under some financial pressure. We’re growing and – uniquely – we don’t require members requirements which none of the Big Four firms would to brand as Nexia although we encourage them to. have been able to achieve,” he says. “Then, through seeing a lot of movement in the marketplace.” So we’re in discussion with more firms than we need sensible discussion, they agreed to transitional Ernst & Young global chief operating officer John to be.” arrangements which allowed us to build up to their Ferraro says the firm is always open to acquisitions In light of the recent spate of M&As it’s become required portfolio, which will be 80% local partners in as they are a good fit with the existing service lines. even more important to retain existing members three years’ time.” “I would anticipate M&A to continue and maybe and most firms report satisfactory retention levels. While KPMG and Deloitte have completed the even accelerate,” he says. “Clients want you to have Roekel says retention of members has been good in transition with no big upsets, PwC and E&Y still need world-class talent in both scale and coverage. An the past fiscal year, with none of its members subject to do so and some level of anxiety among mid-tier acquisition is something we would use to fill gaps to Big Four buyouts, like the one in 2011 when KPMG network leaders can be expected. Brazil bought out BDO Brazil. Barnes says this at goes with the territory. “If in our competencies, for example in data analytics, Meanwhile, speculation has been brewing in China you’re running a network, on occasion you’re going which is impacting all our services line and also of a Big Four takeover of a larger mid-tier player after to have large and small firms being poached,” he some of our sub-service lines, as well as expansion in new localisation rules were imposed on the Big Four says. “The Chinese ministry telling Chinese firms they emerging lines.”

www.InternationalAccountingBulletin.com January 2013 y 17 world survey International Accounting Bulletin

Success in harnessing this new wave fees growing considerably as firms look to already started benefiting the mid-tier, of African leadership has been best provide a wider range of services. because although “it’s just tendering” some demonstrated by Morison Internation - Andrew says the EU debate and the issue companies will “look at Grant Thornton al with SizweNtsalubaGobodo (SNG), of mandatory rotation had “caused a num- or another firm and say ‘we like what we the largest black-owned and managed ber of clients to consider and put in place see’”. accounting firm – and the fifth-largest – in processes to test the effectiveness of the Early 2013 will see new announce - South Africa. Morison International CEO audit they’re getting”, leading to “more ments from Juri and from the Competition Liza Robbins explains: “SNG’s plan for tenders in the marketplace” and “more Commission, but other countries are also a pan-African presence is also Morison internal reviews”. But he welcomed the looking at new legislation. In the US the International’s plan for Africa. SNG heads perceived watering down of the original PCAOB is examining mandatory rotation, up our African board and we go hand in green paper, saying the new draft was and Nusbaum says the concept is being hand with that.” “more sensible” without reforms such as taken “very seriously” in China and India. In Africa, says Barnes, some public sector bodies are now insisting on joint audits. On the whole, he concludes, “legisla - Looking at growth rates in all networks with income above £1bn, the tion is nothing”. What is more important fastest-growing was Grant Thornton International at 13%, followed by is consumer perception, and learning from BDO International at 12% and Nexia International at 11%. The latter the mistakes of others. led the market in terms of partner growth rate, with an 18% increase on the back of merger successes in North America. PwC led the Big Four in Recruitment and retention partner growth, with an increase of 662 (8%) E&Y – the fastest-growing member of the Big Four in staff terms once again – was the profession’s biggest recruiter by volume during 2012, growing headcount by 10% as 15,384 staff joined the network. Two big events which evolved in 2012, separate audit firms or joint audits, which Looking at growth rates in all networks and will continue into 2013, are the UK he sees as not being “particularly practical with income above £1bn, the fastest-grow- Competition Commission (CC) market con- or commercial.” ing was Grant Thornton International at centration inquiry and the European audit While the European Parliament was 13%, followed by BDO International at reform debate, which is still at parliament drafting its proposals, the UK Competi - 12% and Nexia International at 11%. The committee level. tion Commission began an investigation latter led the market in terms of partner The draft audit legislation released by into possible collusion among the Big Four, growth rate, with an 18% increase on the the lead committee, Juri, in September and the concentration of audits of FTSE back of merger successes in North Ameri- received a mixed reception from stake - 350 companies. While a CC survey found ca. PwC led the Big Four in partner growth, holders for excluding, as it did, many of the 97% of FTSE 350 audit switches were to, with an increase of 662 (8%). more radical proposals from the original or between, Big Four firms, the initial con- Overall, global network staff numbers European Commission green paper, such clusions of the audit market investigation rose by 7% over the year, however many as separation of audit and advisory, joint said there was no evidence of collusion. admit that staff numbers have been stalling audits and short interval mandatory rota- However, there were “conditions condu- in developed markets. tion. cive of tacit coordination”, possibly re- As the regional analysis reveals (see IAB reported in September that Juri rap- inforced by “audit and accounting stand- pages 14 and 15) mid-tier and Big Four porteur Sajjad Karim had proposed a cap ards and other regulatory requirements”. firms have much higher staff numbers of 25 years for auditor appointments, as Kreston International’s Lisby says that in emerging markets, generating less fee well as excluding proposals such as pure while the Big Four “continue to argue that income than in the developed world. For audit firms and joint audits. The final text there is real competition” among them - example, IAB analysis shows that while is expected early this year, but, whatever selves “the industry, the public and the revenue from Asia-Pacific only repre - the result, the consensus appears to be that marketplace don’t accept” that it is “prop- sents 2% of all revenues reported by mid- even just discussing audit reform has made er and adequate”. He continued: “The mar- tier firms, the region accounts for 6% of the issue more prominent among clients. ket is also, at long last, beginning to under- their overall staff count. The situation is Barnes says he thought it was “excellent” stand that there are places where quality very different in North America, which that more companies had become aware exists other than in the Big Four.” accounts for 45% of all fees earned, but of a wider audit choice, but the mid-tier Additionally, in 2012 the UK Financial only has 30% of overall mid-tier staff networks “have to have the resources to Reporting Council (FRC) added manda- working on generating that income. Simi- do it”, and it could take some years for tory ten-year tendering to the UK Corpo - lar trends were observed in the IAB Big the reforms to “percolate” through. He rate Governance Code, on a ‘comply or Four regional analysis. believes that the debate “has been good for explain’ basis, with the aim of improving RSM International’s Stephens comment- the profession”, with consulting and other audit quality. Nusbaum believes this has ed that while slow but steady growth was

18 y January 2013 www.InternationalAccountingBulletin.com International Accounting Bulletin World survey

expected to continue for networks, move- remunerated the position. “We all have ■■ WORLD SURVEY ment between firms was set to increase. “A international software that’s becoming a Average growth for firms by country lot of our people have stayed put for the little mechanical and provides less abil - years of the financial crisis, but when the ity for people to form their own opinions. 2011 2012 2012 market starts to open up they will be look- And that is a switch-off for young people,” (%) GDP ing elsewhere, so we’re all in for some turn- he says. India 24 20 4.9 over,” he asserts. He fears that the increasing automation Turkey 14 35 3.0 KPMG’s Andrew said firms were also of the audit process necessitated by down- in a good position in terms of the base of ward cost pressure may only exacerbate China 10 28 7.8 recruits available to them, explaining: “As the lack of stimulation for younger staff, South Africa 10 10 2.6 financial institutions have downsized their and feels the solution will be the integra - workforce and graduate intake we have tion of audit and advisory services, decry- Australia 10 9 3.3 tended to stay in the market – we’ve prob- ing the idea proposed by regulators that Mexico 7 8 3.8 ably had a record number of applications “you must completely segregate your audit this year. So that’s one area that’s not chal- service lines with giving advice to clients South Korea 6 2 2.7 lenging us greatly.” on entrepreneurial matters. If in addition UK 6 6 -0.4 In terms of selecting the right people to providing audit services you can provide from a broad base, BDO’s van Roekel said general business advice, I think that would Spain 3 3 -1.5 the challenge was “to find people with a be an attraction for young people,” Barnes Russia 3 11 3.7 combination of technical and entrepre - concludes. Japan 2 3 2.2 neurial skills. Technical knowledge is Kreston’s Lisby agrees there is a reten - becoming more of a commodity, so peo - tion issue, adding: “I think the education Canada 2 8 1.9 ple need other skills or talents to make that came from my generation certainly France 1 4 0.1 them more attractive for firms to keep and isn’t appropriate for generation X and gen- grow.” eration Y. US -1 8 2.2 To many network leaders, however, the “I think the way the audit world has gone, Italy -1 7 -2.3 big challenge is not recruitment but devel- the challenge for the profession in the opment – specifically how to stoke young future is to keep the best people in audit Germany -4 4 0.9 people’s ambition to become audit part - when audit is such a challenged service Netherlands -6 1 -0.5 ners. Tilly’s Barnes worries that few audit line. I think there’s a threat to global audit managers find their experience leads them quality if people prefer to choose other World 8 5 2.6 < Notes: Growth rates are taken from International Accounting Bulletin country to seek partnership, no matter how well service lines.” surveys in 2012.

Biggest issue in 2013 IAB asked firm leaders what they see as the biggest challenge facing the profession in 2013. “I think the biggest challenge is making sure we increase our relevant. People would like forward-looking information and relevance both to the users of financial information and the information about risks and the quality of operations.” companies that we advise. The expansion of the auditor’s BDO International global chief executive Martin van Roekel report is fraught with potential litigation issues, but in essence would be beneficial; we have to be willing to speak “The risk that the EU Parliament will not take a common out and provide our opinions in this discussion.” sense view of the profession’s true future requirements due Grant Thornton International chief executive Ed Nusbaum in no small part to lobbying by pressure groups.” Praxity executive director Graeme Gordon “I think it’s the effort to work towards a common set of global rules. The frustrating thing for us at the moment is “What concerns me most is the increased commoditisation that the EU green paper is extra-territorial, when you’ve of audit and tax preparation services. Clients want to got a different set of rules applying to the UK, Netherlands, France, US, Japan etc.” negotiate prices as if the service is a commodity, and that’s KPMG global chairman Michael Andrew having an impact. As such the goal is to make yourself stand out, offer more than just audit, make it worth more to them.” “The biggest challenge will be to adapt the profession’s Nexia International executive director Kevin Arnold offering to make audit more relevant to investors and stakeholders, and more fitting to the needs of the 21st “Recruitment is an area where we need to be stronger, and century. In financial reports auditors’ opinions are normally that presents a risk for any network when bidding for always a month or a couple of months old. In this era of multinational assignments. “ instant information, historical numbers are becoming less Kreston International chief executive Jon Lisby

www.InternationalAccountingBulletin.com January 2013 y 19 world survey International Accounting Bulletin

Superpowers lock horns over audit papers

The US Securities and Exchange Commission (SEC) establish some form of mutual inspections, but the He continues that an agreement is “ultimately in began proceedings last month against the Chinese SEC is refusing to comment. everybody’s best interest”, but that “it should be the arms of all Big Four firms, as well as that of BDO, Ed Nusbaum, chief executive of Grant Thornton respective authorities that come up with a solution”. charging each with violating the SEC Act and the International, says his firm has “a good relationship Paul Gillis, professor of practice and co-director of Sarbanes-Oxley Act. with both the PCAOB and the Chinese government”. the IMBA programme at Peking University’s Guanghua The action stems from allegations that the firms However, ultimately “it’s up to them to resolve the School of Management, and a member of PCAOB’s failed to provide audit working papers and other political side of the issues”. Standing Advisory Group, says both sides have documents for nine Chinese companies listed on Ernst & Young global chief operating officer John “reasonable positions, but they are incompatible.” the US Stock Exchange, which are themselves being Ferraro adds that his firm wanted to help, but it’s “a He says: “China is right to resist foreign regulators investigated by the SEC. tough spot to be in”, as it has to respect the laws of enforcing foreign laws on Chinese soil against While the SEC maintains the five firms are at fault, countries in which it operates. Chinese people. However, if Chinese companies wish the firms claim they can’t release the information “Hopefully,” he says, “we can work towards a to raise capital in the US, they must be subject to US without violating Chinese secrecy laws. Instead, common standard we can measure against.” regulation.” they say, the SEC needs to discuss the issue with the Global chief executive of BDO International Martin While the SEC can’t “make an exception” for relevant Chinese authorities to find a profession-wide van Roekel says it is “business as usual” in China China, the country has to “compromise on issues of solution. and that the firm will “continue to cooperate with national sovereignty and state secrets”, or remove its Negotiations are understood to be taking place to regulators in the US and China”. companies from the US stock exchanges.

Timetric's world economic outlook for 2013

The prospects for the global economy in 2013 which was an important factor dragging global ■■ Timetric’s growth forecasts for main have improved but the economic environment growth last year, should moderate in 2013. global economies in 2013 remains complex. Although the chances of an Sufficient policy action by economic authorities extreme event affecting international financial in the second half of 2012, particularly central 2012 2013 markets – such as a disorderly break-up of the banks including the ECB and the US Federal China 7.8 8.1 ▲ eurozone – have diminished, the risks for global Reserve, has contributed to stabilise financial India 4.9 6.9 ▲ financial stability remain high. markets and restore investor confidence, and this In the advanced economies, the scope is poised to continue in 2013. Indonesia 6.0 5.9  for monetary loosening is limited and fiscal However, three major downside risks to global Thailand 5.6 5.4 ▼ constraints are poised to remain in place in growth persist. First, while the ECB has given the years ahead, hindering the capacity of an important leap forward to curtail future debt Colombia 4.3 4.5 ▲ economic authorities to react to new episodes crisis by announcing the launch of a public debt Saudi Arabia 6.0 4.5 ▼ of instability. Meanwhile,these economies will purchase programme in secondary markets – Turkey 3.0 3.5 ▲ continue to undergo a deleveraging process known as OMT (Outright Monetary Transactions) which translates into weak growth and social and – the mechanism still needs to be implemented. South Africa 2.6 3.5 ▲ political pressures. This poses a significant challenge amid a context Korea 2.7 3.4 ▲ Growth in the emerging world has decelerated where austerity measures will continue to act as a Mexico 3.8 3.4 ▼ across many of the main economies as a result of drag on growth. diminished international trade and investment Secondly, the US Congress effectively reached Russia 3.7 3.3 ▼ flows. This has triggered a downgrade of growth a last-minute compromise to avoid the so-called Brazil 1.5 3.2 ▲ prospects affecting many important economies, “fiscal cliff”, which would have triggered a surge Taiwan 1.3 2.9 ▲ particularly China, India and Brazil. However, in taxes and a cut in subsidies equivalent to 4% of domestic demand remains resilient which will GDP. However, the underlying structural debt and UAE 4.0 2.7 ▼ allow these economies to continue to drive global fiscal problems persist and this could trigger a Argentina 2.6 2.5  growth. new episode of volatility by the end of the year.  According to Timetric, the outlook for the Finally, China seems to be recovering from a Poland 2.4 2.3 global economy is for a moderate recovery in testing economic period, amid a key leadership US 2.2 1.9 ▼ 2013, with momentum improving from mid-year transition that introduced new government Canada 1.9 1.8  onwards and paving the way for a broader upturn authorities after a decade of the previous of global GDP in 2014. Global growth is expected administration. Growth is expected to pick up Iran -0.9 1.8 ▲ to pick up slightly from 3.2% in 2012 to 3.5% in slightly to 8.1% in 2013, up from a ten-year UK -0.4 1.2 ▲ 2013. low of 7.8% in 2012, but the economy is calling Japan 2.2 1.0 ▼ The main reason supporting this cautiously for a vital rebalancing towards more domestic optimistic outlook is that policy uncertainty, consumption in order to achieve sustainable France 0.1 0.9 ▲ growth in the years ahead. While policy Germany 0.9 0.8  action adopted in 2012 will kick in this year, boosting economic activity, downside risks to Netherlands -0.5 0.4 ▲ growth persist. All in all, the main advanced Belgium 0.0 0.3 ▲ and emerging economies will probably show Italy -2.3 -0.6 ▲ improvements in their key macroeconomic indicators, although only some of them – albeit Spain -1.5 -1.3 ▲ the majority – will deliver stronger growth in (Timetric is a provider of online data, analysis and advisory services) 2013. < Source: Timetric

20 y January 2013 www.InternationalAccountingBulletin.com International Accounting Bulletin World survey

■■ WORLD SURVEY 2013

Firm movements

NETWORK/ASSOCIATION FIRM ADDITIONS, MERGERS & ACQUISITIONS

AGN International Added: Dass Gupta & Associates (New Delhi, India); Shanghai Linfang Certified Tax Agents (Shanghai, China); Horwich Coleman Levin (Chicago, USA); De Neef & Partners Auditors (Sint-Niklaas, Belgium); Faisal Naseem & Co (Kabul, Afghanistan); Jimenez Rodriguez & Asociados (Caracas, Venezuela); Munt Auditores (Barcelona, Spain); Mugo & Co (Nairobi, Kenya); Betham & Co (Lalovea, Samoa);

Lost: Kanzlei Höfer & Göller (Bolzano, Italy); Audit & Accounting Company (Sofia, Bulgaria); AG Jimenez (Caracas, Venezuela); Wright Vigar (Lincoln, UK); Heinfeld Meech (Tucson, Phoenix, Flagstaff in Arizona and Albuquerque in New Mexico, US)

Alliot Group Added: Estudio Lussich Torrendell (Uruguay); Advisor in Management Solutions Limitada (Chile); Vohora & Co (Vancouver, Canada); Elite Consultancy (Bahrain); Villegas y Asociados (Mexico);

Lost: VHL (Germany); Centr Audit (France); CPA Denetin (Turkey)

Baker Tilly International Added: Baker Tilly Slovakia (Slovakia); ACN (El Salvador); Baker Tilly Andah & Andah (Ghana); Studio Maurizio Godoli (Italy); Baker Tilly St Maarteen (St Maarteen); Meralis Rwanda (Rwanda); Baker Tilly Turkmenistan (Turkmenistan); Baker Tilly Liberia (Liberia); Baker Tilly MKM Bahrain (Bahrain); Baker Tilly MKM Qatar (Qatar); Baker Tilly Kosovo (Kosovo);

Lost: Consultax (Slovakia); Interaudit International (Slovakia); Dr Arietti & Associati (Italy); Baker Tilly Algeria (Algeria); Baker Tilly QACF (Qatar); Intercontinental Trust (Seychelles); Steingarten (Canada)

BDO Mergers: PKF East Coast Practice (now BDO East Coast Partnership) joined BDO (Sydney, Caringbah, Tuggerah and Melbourne in Australia); PKF Brisbane joined BDO in Brisbane; The following firms merged with BDO Canada: Marc Faubert, Perry Krieger & Associates, Spencer Cotton, Sharon Stapley, Belanger Clarke Follet and McGettigan Chartered Accountants, BFM Chartered Accountants, Ammar Cousineau Télio Hadid. (Canada); Soriano, Martinez & Asociados merged with BDO Ortega & Asociados (Dominican Republic); SOVEC merged with BDO France (Lyon, Gap, Briançon, Embrun, Guillestre, Die, Valence, Grenoble, Chambéry, Aix-les-Bains, Annecy, Annemasse, Cluses, Bonneville in France); Crowe Horwath Limerick merged with BDO (Limerick, Ireland); Crowe Horwath merged with BDO AS (Oslo, Gjøvik, Fagernes, Gardermoen, Fredrikstad, Eidsvold, Beitostølen in Norway); Grant Thornton Pretoria merged with BDO South Africa (Pretoria, South Africa); NporM and TECUM merged with BDO Auditores (Vigo and Valencia in Spain); REK Revision AB (now BDO Uppsala) merged with BDO AB (Uppsala, Sweden); Asset Limited and EVC merged with BDO Turkey (Istanbul and Ankara in Turkey);

Added: BDO Armenia CJSC, formerly Ameria Audit CJSC (Yerevan, Armenia); BDO Barbados, formerly Ward, Patel & Co Chartered Accountants (Bridgetown, Barbados); KON (Milan, Florence and Rome in Italy); BDO Tax Co, formerly Hongo Tsuji Tax & Co. (Tokyo, Akita, Aomori, Fukuoka, Hachinohe, Ito, Joetsu, Kichioji, Kyoto, Morioka, Nagoya, Odawara, Oita, Okinawa, Osaka, Sendai, Tatebayashi and Yokohama in Japan); BDO Jordan, formerly Samman & Co (Amman, Jordan); BDO Al Nisf and Partners (Sharq, Kuwait); BDO Macedonia, formerly Dimitrov Revizija (Skopje, Macedonia); BDO Montenegro (Podgorica, Montenegro); BDO Puerto Rico, formerly Scherrer Hernandez & Co (San Juan, Puerto Rico); BDO spol s.r.o., formerly The Edison Consulting Group (Bratislava, Slovak Republic); BDO Vietnam (Hanoi and Ho Chi Min City in Vietnam);

Lost: BDO NSW/VIC (Sydney and Melbourne in Australia); BDO Jordan (Amman, Bethlehem, East Jerusalem, Gaza and Ramallah in Jordan and Palestine); BDO Senegal (Dakar, Senegal) BDO, s.r.o. (Bratislava, Slovak Republic); BDO Vietnam Co and Bien Dong Vu Financial Consulting (Can Tho City, Hanoi and Ho Chi Min City in Vietnam)

BKR International Mergers: Salibello & Broder (New York) merged with BDO;

Acquisitions: several BKR member firms acquired smaller firms;

Added: members in Gent (Belgium); New York, (US); Sachaan (Liechtenstein); Toronto (Canada); Vienna (Austria); Zürich (Switzerland);

Lost: members in Beijing (China); New York (US); San Salvador (El Salvador); Sfax (Tunisia); Ulaanbaatar (Mongolia) Crowe Horwath International Merger: Crowe Horwath Norway with BDO Norway; Added: Cogefis & Associés and Dupouy & Associés (France); Mak Azerbaijan & Baltic Caspian Audit (Azerbaijan); Macro Auditoria (Brazil); Ark & Co (Japan); Ah & Associates (Maldives); Ecofin Audit Services (Moldova); BK Agrawal & Co (Nepal); Ramon Garcia & Company (Philippines); Gajma & Co (Sri Lanka); IGL Audit (Vietnam)

CPA Associates International Added: Lievens Accountancy Services BVBA (Brugge, Belgium); DeNeef & Partners Accountants & Belastingconsulenten BVBA (Sint-Niklaas, Belgium); AJCA Auditores Independentes SS (Curitiba, Brazil); Chronus Auditores Independentes SS (Recife, Brazil); Asia Pacific Certified Public Accountants Co. (Shenzhen, China); Auditchart Limited (Limassol, Cyprus); Del Partners SPRL (Kinshasa, Democratic Republic of Congo); Jendyk Schnellhardt & Partners (Gronau, Germany); Optim Consulting (Bucharest, Romania); Intuit Management Consultancy (Dubai, United Arab Emirates); Estudia Kaplan Consultores Tributarios Auditores (Montevideo, Uruguay); The Vroman Group (West Des Moines, Iowa, US); Lost: Anders Minkler & Diehl (St. Louis, Missouri, US); Null-Lairson (Houston, Texas, USA) DFK International Merger: Addere Revision merged with AP Statsautoriserede Revisorers office in Koge, a former Moore Stephens member (Denmark); KNV Chartered accountants merged with Nordahl Craig Cummings and Gares (Vancouver, Canada);

Acquisition: WBLI acquired Edwards Dean & Company (Bedford, Novia Scotia in Canada); Royce Peeling Green acquired Stockport office (UK);

Partnership: Partner-Audit from Pskov and Finaudit from the Moscow Region created the partnership Group of Companies Korsakov and Partners (Russia);

Added: Fiduciarie du Moyen Orient, (Lebanon); VCLJ (Belgium); Chonquing Heqing CPA (China) and Topsun CPA Partnership (China); Korsakov and Partners (Russia) and Erkon (Russia); ACT (Greece);

Lost: Right Company (Belarus); C&M Consultores (Colombia); Navarro Guevara y Asociados (El Salvador); Carlos R. Galvalisi y Asociados (Uruguay); Hegott Duvall Stack (Canada); DFK, De Jesus Almeida & Asociados (Dominican Republic); A.M Shah (Kenya); Mars (Puerto Rico); Karra (India); Z.I.G Albania (Albania)

www.InternationalAccountingBulletin.com January 2013 y 21 world survey International Accounting Bulletin

■■ WORLD SURVEY 2013

Firm movements

NETWORK/ASSOCIATION FIRM ADDITIONS, MERGERS & ACQUISITIONS

Deloitte Acquired: Caritat Strategic Analytics Group (France); iFed, CRG Partners, Aggressor, Übermind and Intrasphere Technologies (US); Skura Business Intelligence Group and AJM Petroleum Consultants (Canada); Murli & Asociados (Spain); Inter Revisjon, Haugesund Division (Norway)

ECOVIS International Added: ECOVIS BBT (Dublin, Ireland); ECOVIS Kapital SMMM (Istanbul, Turkey); ECOVIS Quibrera Saldana (Escandon and Santa Fe in Mexico); ECOVIS ConFidas (Belgrade, Serbia); E.C. Ortiz & Co (Chicago, USA); ECOVIS Idris & Sudiharto (Jakarta, Indonesia); ECOVIS STT Vietnam, (Hanoi and Ho Chi Minh City in Vietnam); ECOVIS AHL (Kuala Lumpur and Skudai Johor in Malaysia)

Ernst & Young Opened branch offices in seven new countries (Bosnia, Papua New Guinea, British Virgin Islands, Kosovo, Cameroon, Bangladesh, and South Sudan); Acquired: True Partners Consulting (Chicago, US); Axia Value Chain (Brazil, Dec-12); Q-Core Consulting (Johannesburg, South Africa); Expert Comptables Associes of Cameroon (Cameroon); Jeffrey Parker & Associates (Philadelphia, USA, July 12);

EuraAudit International Added: Alok Sinhal & Co (New Delhi, India); Kap. Budiman, Wawan, Pamudji & Rekan (Jararta, Indonesia); Pik Audit (Minsk, Belarus); Balikli Audit & Korfez (Izmir, Turkey); nH EuroConsult (Tirana, Albania); Dral Contexpert (Breaza, Roumania); Vargas & Ramos (La Paz, Bolivia); Audit Conseil Service (ACS) (Antananarivo, Madagascar); Lost: Fidalsex-Linsing (Mulhouse, France); Castro Parra & Asociados (Caracas, Venezuela); OOO Silar (Minsk, Belarus); OOO Silar Plus (Minsk, Belarus); Walkiers & Co. (Anvers, Belgium); Primaska Audit (Prague, Czech Republic); Cajal, Sem. Azune y Cia; Feria Santos Guerrero; Castillo Zumaya; and D&C Asociados (Mexico City, Mexico)

Geneva Group International Added: Audit Service Kft (Budapest, Hungary); Limes International-former Baker Tilly Berk (Leiden, The Netherlands); Zirkzee & Den Os International Tax Lawyers / Accountants & Auditors (Leiden, The Netherlands); VILAR RIBA (Vic, Spain); VIR AUDIT -GROUP VILAR RIBA (Vic, Spain); Human Capital Services BVBA (Dendermonde, Belgium); PALMER Corporate Finance (Milan, Italy); Greystone (Douglas, Isle of Man); Greystone Trust Company (Douglas, Isle of Man) ASnetwork -Accounting Solutions (Athens, Greece); Aksonova & Associates (Kiev, Ukraine); MDM Revizija (Belgrade, Serbia); CSWP Audyt Spolka z ograniczona odpowiedzialnoscia (Warsaw, Poland); Stromson Revisionsbyra (Stockholm, Sweden); OHM & Co Auditores y Consultores (Guayaquil, Ecuador); Maddin, Hauser, Wartell, Roth & Heller (Detroit, US); Moodys Tax Advisors (Calgary, Canada); Shea Nerland Calnan (Calgary, Canada); Vizcaino, Gitlin & Zomerfeld, Certified Public Accountants (Florida, US); Lopez Levi & Associates, P.A. Accountants and Business Consultants (Florida, US); Funaro & Co. (New York, US); Prager and Fenton (New York, US); AGH Aarons Grant & Habif (Atlanta, US); Lawler Warburtons (Tamworth, Australia); Zinzuwadia & Co. CA (Ahmedabad, India); Triple i Consulting (Makati City, Philippines); JungJin (Seoul, Korea); TSIAR FINANS (Tashkent, Uzbekistan); Al Shayeb Auditing & Accountancy Corporation (Bethlehem, Palestine); Ahmed Ghattour & Co. Certified Public Accountants and Auditors (Tripoli, Libya); Ashwani & Associates, Chartered Accountants (Ludhiana, India); Lawler McGillivray (Perth, Australia);

Lost: Pustorino, Puglisi & Co. (New York City, US); EisnerLubin (New York City, US); Rays Chan & Co. (Hong Kong); Fischer & Partner (Hergiswil, Switzerland); Financial Transaction House (Jeddah, Saudi Arabia) "

GMN Mergers: Los Angeles firm split and formed a new firm (US); Barcelona firm merged with another firm (Spain); Added: firm in Egypt, Dubai, Lebanon, Sri Lanka, Italy and Russia; Lost: firms in (Australia) and Sweden

Grant Thornton International Added: Rimess Baltic (Estonia, Latvia, Lithuania); Silar (Belarus); Experts Conseils et Associés (Haiti); Grant Thornton Appraisal (Kazakhstan); VKM (Kenya); ACCORD (Paraguay); CICE (Senegal); Legis Group (Ukraine);

Merger/Acquisition: Solic Algerie (Algeria); BDO NSW/VIC (Australia); A.C. Poirier & Associates (Canada); Green Hunt Wedlake (Canada); Stout & Company (Canada); Tien Rostad (Canada); Ascenda CPA (China); HLB FAST & ABS Auditores y Consultores (Colombia); Theill Andersen (Denmark); AACE (France); ADG (France); PVA (France); Lo & Lo (Hong Kong); GNV Consulting (Indonesia); Uniaudit (Italy); Eisho Audit (Japan); Masters Trust (Japan); Management Toolbox (New Zealand); FPA Group (Poland); Oporto (Portugal); Gotlands Revisionsbyra (Sweden); Foretagarbyran i Kristianstad (Sweden); Esho Audit (Tajikistan); Thomas May & Co (UK); Audigence (US); CCR (US); Computer Technology Associates (US); Computer Technology Associates' Health Division (US); K Professional Accountants (Vietnam); Lost: Grant Thornton Dominican Republic, Grant Thornton Belgium

HLB International Added: Vinken Görtz Lange und Partner in Duisburg; RTG Revisions und Treuhand in Ludwigshafen; GBZ Revisions und Treuhand in Kassel and Marburg; Scheidle & Partner in Augsburg; PwC LOEBA Treuhand in Lörrach (all in Germany); HLB Onix (Brazil); Sichuan Zhongfa, Baicheng Tax and Liaoning Zhongheng (China); Makary Consulting (Egypt); Finance Management Group (Georgia); HLB Hellas (Greece); P Ryan & Co and Sheehan Quinn (Ireland); Rafajlovski Audit DOO (Macedonia); Beau & Co (Switzerland); Konsaudit-Adolat (Uzbekistan); Lost: Fast Auditores (Colombia); COGEP (France); HLB Schippers (The Netherlands); Kjelstrup & Wiggen (Norway); HLB Morales Padillo & Co and PSC (Puerto Rico); Anchin & Anchin and Blackman Kallick (USA)

IAPA Added: Magnussen & Partner (Oslo, Norway), Hock & Co (Palo Alto, USA), Sibley & Co Dallas, USA), Paredes, Saravia & Ass (Guatemala City, Guatemala), Bestpoint (Cuenca, Ecuador), Fathalla & Co (Alexandria, Egypt), Gucbir Bagimsiz Denetim (Afyon, Turkey), Cowgill Holloway LLP (Bolton, Manchester, Liverpool UK), Remi Oyekola & Co (Lago, Nigeria), AFK Audit (St Petersburg, Russia), Kooshamanesh Auditing (Tehran, Iran), UTA Audit (Almaty, Kazakhstan), Altair Consultores (Barcelona, Spain), Cagdas Bagimsiz (Istanbul, Turkey), Taesung Accounting Corporation (Seoul, Korea);

Lost: Despacho Munir Hayek (Mexico); FW Stephens (London UK); Latin Professional (Bogota, Colombia); Sonntag Partners (Augsburg, Germany); Gross Hendler & Frank (Cape Town, South Africa); Berenfeld Spritzer Sheer (Coral Gables, USA); Cordovano & Honeck (Colorado, USA); BWS Graf Westphalen Busch & Partner (Freiburg, Germany); InterRevision (Copenhagen, Denmark); Woodvale Associates (Nairobi, Kenya); Nepriklausomas Auditas JSC (Vilnius, Lithuania); Chavez Asociados (Salamanca, Peru)

IECnet Added: firm in Moscow, Buenos Aires, Shanghai, Beijing, Guangzhou (China), Hong Kong, Lugano (Switzerland), Milan (Italy), El Salvador - San Salvador, Santa Tecla, La Paz (Bolivia)

Lost: Lubljin (Poland), Göteborg (Sweden)"

INPACT Added: Mahdi Meyer Steyn Chartered Accountants Incorporated (South Africa); AMB Consulting (Moscow, Russia); New Dawn Chartered Accountants (Maresu, Lesotho); SUMMA (Maputo, Mozambique); Mibzar Castañon CPA (Ciudad de Guatemala, Guatemala); Bermudez & Asociados (Panama); Lost: six firms: Austria, British Virgin Island, Italy, Norway, Sweden and UK

22 y January 2013 www.InternationalAccountingBulletin.com International Accounting Bulletin World survey

■■ WORLD SURVEY 2013

Firm movements

NETWORK/ASSOCIATION FIRM ADDITIONS, MERGERS & ACQUISITIONS

Integra International Merger: Watson Business Accountants and Banks Group (Sydney, Australia); Added: The Peal Partnership (Brisbane, Australia); The Red Flag Group (Hong Kong); NK Contabilidade (Sao Paulo, Brazil); Levy Casey Carter MacLean (Halifax, Canada); Thesorafisc (Brussels, Belgium); Audit Ucetnictvi (Brno, Czech Republic); Planning Assessors Fiscals (Girona, Spain); Studio Commerciale Tributario Dr Vittorio Carelli (Livorno, Italy); Capstone Group (Swatar, Malta); Partner Revisjon (Oslo, Norway); JIB Group (Moscow, Russian Federation); Taxgroup (Ljubljana, Slovenia); ABC Audit sro (Bratislava, Slovakia); C2M Chartered Accountants (Cape Town, South Africa); Russel James & Co (Johannesburg, South Africa); SKM International (Dubai, UAE);

Lost: SM Group (Dominican Republic); Herald Trust Company (Jersey); Assmann & Associates (Sao Paulo, Brazil); SIA Latmira (Riga, Latvia); Cabinet Rmil Meriem (Marrakech, Morocco); Sofirec (Casablanca, Morocco); A Cont Assistance (Bucharest, Romania); Affiniti (Antwerp, Belgium); Audit Garantija (Moscow, Russia); Castle Corporate Finance (Tonbridge, UK) JHI Association Acquired: GPL acquired Crossfield & Associates, HWI acquired Bannan Consulting and Leighton Consulting, Hayes Stewart Little acquired Huggins & Co., Wilson Morgan acquired Briskin & Mullin

KPMG Acquired: Valani Consulting (Toronto, Canada); BrainNet Supply Management Group (Germany); Alliance with Apptio and acquisition of Thomson Reuters’ ONESOURCE (US);

Added: NIMM Audit, (Mongolia); opened an office in Burma/Myanmar; *Converted China operations from a joint venture to a special group partnership with limited liability; opened a technology centre in Bangalore, India; Kreston International Added: Nkonki (Johannesburg, Cape Town, Durban and East London -South Africa); Thompson Penner & Lo (Calgary, Canada); G.P. Agrawal &Co (Kolkata, India); HMDP Partnership (Warsaw, Poland); MB & Partners (Doha, Qatar); CCP Accountancy Services (British Virgin Islands); Yaesu Audit (Tokyo, Japan); VRC Bedrijfsrevisoren and Slabbinck ICS (Belgium); Baat Accountants & Adviseurs (The Netherlands); Firma Internacional de Auditores, Consultores y Contadores Públicos (Managua, Nicaragua); Hunan Tianping Zhengda CPAs (Changsha, China); Duncan & Toplis (East Midlands, UK); KS INTERNATIONAL Added: DNP Audit Limited (Athens, Greece); Allguer & Sturm (Feldkirsh, Austria); Sloan Partners (Toronto, Canada); Boyum & Barenscheer (Minneapolis, USA); Cofagest (Lyon, France); IAG International and its member firms (115 offices worldwide. IAG firms have not been included in this survey as 82% of the IAG revenues emanate from Legal practices);

Lost: Alali (Doha, Qatar); Terrazas Lopez and Calvo Nicholau Y Marquez Cristerna (Culiacan and Mexico City in Mexico); Manohar Chowdhrey (Chennai and Southern Indian cities in India) LEA Global/Leading Edge Added: Adams, Brown, Beran & Ball (Kansas,US); HLB Morales Padillo & Co (San Juan, Puerto Rico); Consulting Moscow & St. Petersburg (Russia); Alliance Kazakhstan Consulting (Almaty and Aktau in Kazakhstan); Ukraine Consulting (Kiev, Ukraine); Consulting Warsaw (Warsaw, Poland); Belarus Consulting (Minsk, Belarus); Pro-Marketing & iTools OÜ (Tallinn, Estonia); Jia-Wei Co, CPAs (New Taipei City, Taiwan); BGL Asesores Legales y Fiscales, (Montevideo, Uruguay); Expertline, (Tbilisi, Georgia); Lost: Kostin Rufkess (US); Hartford, CT, Hongo (Tokyo, Japan)

MGI Added: members in Belgium, Finland, Ghana, Indonesia, Mexico, USA, Indonesia, Russia, Egypt and El Salvador. Lost; members in Belgium, USA, South Africa, Bolivia, Egypt, Indonesia and India

Moore Stephens International Merger: Doeren Mayhew with MFR P.C. (Houston and Michigan in US); Added: Moore Stephens Valdivia & Asociados (Santa Cruz de la Sierra, Bolivia); Moore Stephens Vector Auditores (Brasilia, Brazil); Moore Stephens IFI (Bujumbura, Burundi); Moore Stephens ULA (Santo Domingo, Dominican Republic); Moore Stephens AL Saleh & Co (Safat, Kuwait City, Kuwait); Access (Doha, Qatar); Moore Stephens MWM and Moore Stephens Risk Services (Johannesburg and Stellenbosch in South Africa); Moore Stephens Luzern (Lucerne, Switzerland); Lost: MS-Revisor (Oulu, Finland); ICR Interconsult und Revision (Stuttgart, Germany); TickMark (Milan, Italy); Mohler, Nixon & Williams (Campbell, Marlton, Palo Alto, Philadelphia, San Francisco in US)

Morison International Added: Interfides (Vienna, Austria); Euroconsulting (Rijeka, Croatia); Ehler Ermer & Partner (Flensburg and Rendsburg in Germany); Boscolo & Partners (Trieste, Treviso, Prata di Pordenone in Italy); De Hooge Waerder (DHW International) (Alkmaar, Amsterdam, Haarlem, Beverwijk and Heerhugowaard in the Netherlands); APSIS Consultoria e Avaliações Ltda (Rio de Janeiro, Brazil); Pedabo (Abuja and Lagos in Nigeria); Lost: Van Havermaet Groenweghe (Belgium) MSI Global Alliance Added: Certus (Norway); FG Audit (Malta); Balakrishna Consulting (India); Divakar Vijayasarathy and Associates (India); Hattam McCarthy Reeves (Australia); The Renaissance Group (Canada); Finance Plus Consulting (Montenegro); PriceKubecka (US); Gunnip & Company (US); Magdy Abdel Malek & Co. Accounting & Auditing (Qatar); Lost: Hikmat Sleem Certified Public Account (Lebanon); Bison Financial Services Group (British Virgin Islands); Accounting Services Tilimatic (Finland); Simione Macca & Larrow (US); Bakashvili & Co Georgia, Tejeda Martinez (Dominican Republic); Dr Mohd Maher (Abu Dhabi, United Arab Emirates); Easi Accounting (Korea); Rivero Hernandez & Asociados (Mexico)

Nexia International Mergers: CliftonLarsonAllen (before Clifton Gunderson & Larson Allen) and CohnReznick (previous JH Cohn & Reznick) in the US; Added: Edward Marshall (Australia); Clifton Gunderson and Reznick (US); Vega Prieto y Associado (Mexico); Nexia Perth (Australia); Hua Qing (China); Traynor Group (UK); Saha Mazumber & Co (Bangladesh); Sevillia Audit (Mongolia); Lost: O'Connor & Drew; Harb Levy; Catrakilis; and Hansen Jergenson (US); Haydon Brown (Ireland); NIMM Aduit (Mongolia); Controlgest (Switzerland); SCI Essell (Mauritius); Finor (Tunisia); Pedrosa Lagos (Spain); Interaudit (Slovakia); UTC (UAE); Piccardo & Cia (Argentina)

Parker Randall International Added: Abdullatif Al-Majid & co (Kuwait); Gutierrez & Thompson Associados (Bolivia); Gnosis Professional Services (Miami); Parker Randall (Cyprus); Jezl Contadores Auditores (Ecuador); Barreto, Araque & Associados (Venezuela); Replaced: Climax Consulting (Yemen); Parker Randall KAP Gideon Ikhwan Sofwan (Indonesia); Karman Bagimsiz Denetim (Turkey); TP Transfer Pricing (Switzerland);

Lost: correspondent member Anntkjaer Janson & Partner (Denmark). PKF International Added: PKF Corti (Graz, Austria); PKF Auditia SARL (Nantes, France); PKF Gottschalk, Becker & Partner (Saarbruecken, Germany); PKF Wulf & Partner (Stuttgart, Germany); PKF Amit, Halfon (Tel Aviv, Israel); PKF Zimbabwe, (Harare, Zimbabwe); Kross-Border (Mauritius); PKF Osaka Auditing Corporation (Osaka, Japan); DoOne Accounting Corporation (correspondent, Seoul, South Korea); MBMG Accounting & Tax Advisory (exclusive correspondent, Bangkok, Thailand); Lost: PKF Vietnam (Hanoi, Vietnam); Lamusse Sek Sum & Co (Mauritius); PKF East Coast Partnership (Sydney, Melbourne, Brisbane, Australia); PKF Revisjon AS (Oslo, Norway)

www.InternationalAccountingBulletin.com January 2013 y 23 In association with world survey International Accounting Bulletin

■■ WORLD SURVEY 2013

Firm movements

NETWORK/ASSOCIATION FIRM ADDITIONS, MERGERS & ACQUISITIONS Group Editor: Fred Crawley Tel: +44 (0)20 7406 6704 Email: [email protected] Praxity Merger: Plante Moran merged with Blackman Kallick (Chicago, US); Added: Nobani and Co (Jordan); Certified & Registered Auditors, ICRA (Greece); Data and Analysis Editor: Ana Gyorkos Tel: +44 (0)20 7406 6707 Lost: a member firm to Grant Thornton International (with presence in Estonia, Lithuania Email: [email protected] and Latvia); Bentleys to Kreston International (Australia). Survey Researcher/Reporter: Carlos Martin Tornero Tel: +44 (0)20 7406 6706 PwC Acquired: Avantis (Australia), ASCURE (Belgium), S&V Management Consultants Email: [email protected] (Belgium), Robichaud Conseil (Canada), Infotech (USA), Trueconomy (NL), Proxyon (NL), Accountonit (Norway), Insolvency division to Mazars (UK); Contributors: Paul Golden, Peter Johnstone

Group Publisher: Andy Cook Lost: Sale of Landwell Solicitors to Beauchamps Solicitors (Ireland) Tel: +44 (0)20 7406 6561 Reanda International Added: Drs. Bernardi & Co (Indonesia); SCI Essell Associates (Mauritius); Reanda MC Email: [email protected] International CPA Partners’s Sapporo and Fukuoka branches (Japan); Reanda CPAs’s Chief Sub-editor: Nick Midgley AnHui and Shan’Xi branches (China) Sub-editor: Kev Walsh

Sales & Marketing Director: Sarah Wootton Russell Bedford International M&A: PMB Helin Donovan (Austin, Texas, USA) merged with Vink Teague & Associates Tel: +44 (0)20 7406 6541 (Dallas, TX, USA); Added: Benito Asesores y Abogados, S.L. and Stella Iuris, S.L. (Madrid, Email: [email protected] Spain); Cornejo & Umaña (El Salvador); Shanghai JiaLiang CPAs (Shanghai, China); Job, Báez, Soto y Asociados (Dominican Republic); FBL Comptables Agréés (Québec, Canada); Campaign Solutions Manager: Keri Farrell Tel: +44 (0)20 7406 6548 Boucinhas & Campos (São Paulo, Rio de Janeiro and Belo Horizonte, Brazil); Rose, Snyder Email: [email protected] & Jacobs LLP (Los Angeles, USA); Action Auditing S.A. (Athens, Greece); AlHoshan CPAs (Riyadh, Saudi Arabia) Subscription Enquiries: Jeannie Lam Tel: +44 (0)20 7406 6579 Lost: TBO Treuhand (Zurich, Switzerland); Autonome de Revision (Luxembourg)." Email: [email protected]

UC&CS AMERICA Added: AB Despacho de Consultores (Mexico City); ABC Transfer Pricing (Mexico City, For more information on VRL, visit our website Monterrey, Hermosillo, Guadalajara, León, Puebla, Queretaro); Apaez Melchor Otero y Cia at www.vrlfinancialnews.com (Mexico City); Corporativo de Consultoria Acceso (Mexico City, Astorga Yañez y Rodriguez, For more information on accessing Culiacan); Garcia Landa Becerril y Asociados(Mexico City); PSC Consulting (Cancun); International Accounting Bulletin content MSST Consulting (Tijuana); Correa León y Asociados (Panama); Gomez Orozco y Asociados online, including a five-year archive, please (Guatemala); Audit Bureau (Quito, Ecuador); Tax Bureau (Quito, Ecuador); UC&CS Chile telephone +44 (0)20 406 6579 or email InternatIonal accountIng IntellIgence (Santiago de Chile) [email protected]

UC&CS Global Added: Oxford Management (Limassol, Cyprus); Oxford Management (London, UK); London Office Oxford Management (Bucharest, Romania); Oxford Management (Athens, Greece); 40-42 Hatton Garden, London Analyse performance. Keep track of the competition. Oxford Management (Dubai, UAE); Correa León y Asociados (Panama); Gomez Orozco y EC1N 8EE, United Kingdom Asociados (Guatemala); Audit Bureau (Quito, Ecuador); Tax Bureau (Quito, Ecuador); Tel: +44 (0)20 7936 6400 International Accounting Intelligence is an accounting data tool which gives you instant access to the most UC&CS Chile (Santiago de Chile); AB Despacho de Consultores (Mexico City); ABC Transfer Fax: +44 (0)20 7406 5601 Pricing (Mexico City, Monterrey, Hermosillo, Guadalajara, León, Puebla, Queretaro); comprehensive database of accounting firm financial and staff data in the world. Asia Office Apaez Melchor Otero y Cia (Mexico City); Corporativo de Consultoria Acceso (Mexico City); 20 Maxwell Road Astorga Yañez y Rodriguez (Culiacan); Garcia Landa Becerril y Asociados (Mexico City); #04-02J, Maxwell House PSC Consulting (Cancun); MSST Consulting (Tijuana) Singapore 069113 Produce external reports with ease, monitor your rivals and analyse your own firms’ performance with this versatile Tel: +65 6383 4688 Fax: +65 6383 5433 : Enrique Campos & Asociados (Spain); MDG Corporate Services (Barbados); UHY research product. UHY International Added Email: [email protected] Bain & Associates (Bahamas); UHY Botello & Marquez (Panama); UHY CNBA (Tunisia); UHY Eki revizija (Serbia); UHY Paredes y Asociados (Peru); UHY Saman Audit & Corporate Financial News Publishing Ltd, 2012 International Accounting Intelligence lets you: Services Co (Thailand);UHY Tashkent (Uzbekistan); UHY Yongyuth Accounting and Son Co Registered in the UK No 6931627 (Thailand); ISSN 0265-0223 • Produce external reports with ease Unauthorised photocopying is illegal. The contents Lost: Audiram Serviços de Contabilidade (Portugal); CAPEC (France); EBS (Ukraine); JSC of this publication, either in whole or part, may not trY our Free DeMo be reproduced, stored in a data retrieval system • Monitor your rivals Jungtine auditoriu kontora (Lithuania); Maceda Farnacio & Co (Philippines);UHY Orients or transmitted by any form or means, electronic, Visit: (Belarus); UHY Santivañez Guarniz y Asociados (Peru) mechanical, photocopying, recording or otherwise, • Filter complex accounting data to your without the prior permission of the publishers. InternationalAccountingIntelligence.vrl-financial-news.com/iaidemo RSM Added: GARCH Auditoria e Consultoria (Angola); Hodico (Croatia); MBV (France); specifications Capto Group (Georgia); Merhels Revidenti Konsultanti SIA (Latvia); Solis Ibarra & for a free demo of this exciting new product. Associados (Nicaragua); SIOA (Nigeria); Minocon (Sweden); Bellerive Financial Services • Gain unprecedented access to Country, (Switzerland); GVA audit SA (Switzerland); RSM DTL Auditing Company (Vietnam); Consulting Africa, Correspondent (Chad); Zambia, Censum, Correspondent (Macedonia); World and Regional Surveys IEF, Correspondent (Serbia); Aguirre Nunez & Asociados (Honduras); Ahmed Al-Juboori & Co, correspondent (Iraq); Suleiman & Co (Palestine) available in three streams for flexible data delivery, prices start from £795 for a Single-Viewer licence. SMS Latinoamérica Acquired: Estudio Zgaib (Río Negro, Argentina); Estudio Lasquera (Jujuy, Argentina ); Grupo ANTU (Santa Cruz, Argentina) contact us at [email protected] or on +44 (0)20 7563 5688 to find out more.

y www.InternationalAccountingBulletin.com 24 January 2013 www.vrl-financial-news.com In association with

InternatIonal accountIng IntellIgence Analyse performance. Keep track of the competition. International Accounting Intelligence is an accounting data tool which gives you instant access to the most comprehensive database of accounting firm financial and staff data in the world.

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available in three streams for flexible data delivery, prices start from £795 for a Single-Viewer licence.

contact us at [email protected] or on +44 (0)20 7563 5688 to find out more.

www.InternationalAccountingBulletin.com y www.vrl-financial-news.com January 2013 25 In association with

InternatIonal accountIng IntellIgence Analyse performance. Keep track of the competition. International Accounting Intelligence is an accounting data tool which gives you instant access to the most comprehensive database of accounting firm financial and staff data in the world.

Produce external reports with ease, monitor your rivals and analyse your own firms’ performance with this versatile research product. International Accounting Intelligence lets you: • Produce external reports with ease • Monitor your rivals trY our Free DeMo • Filter complex accounting data to your Visit: specifications InternationalAccountingIntelligence.vrl-financial-news.com/iaidemo for a free demo of this exciting new product. • Gain unprecedented access to Country, World and Regional Surveys

available in three streams for flexible data delivery, prices start from £795 for a Single-Viewer licence.

contact us at [email protected] or on +44 (0)20 7563 5688 to find out more.

www.vrl-financial-news.com