November 2012 Issue 519 www.InternationalAccountingBulletin.com Nice to Tweet you What social media really means for the profession

● PKF UK and part of PKF China to join BDO International ● UK looking to shed 5% of its workforce ● Australia Survey: Market changes indicate a power shift ● South Africa survey: Expanding across the continent Give your students a business perspective of the world of . Give your students access to content they can trust. Give your students the edge. Subscribe to The Accountant

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conTenTs Give your students a business Joining forces news 02-03

■ Three regional hubs for PwC Africa. perspective of the world of ■ HLB International expands in China and Serbia. exactly is going on at member firms, and to ■ PKF UK and part of PKF China to Mergers of accounting firms are not a new accounting. join BDO International. thing by any means, but announcements understand whether their growth ambitions ■ Mazars UK could shed 5% of its made this month by network BDO give a are in line with network strategy. workforce timely insight into the current M&A climate. There will certainly be more accounting This month BDO UK and PKF UK firm M&A in the near future, as rising regu- FeATure 04-08 Give your students access to announced they are to merge next year, plac- latory compliance costs, intense fee pressure ing BDO UK neck and neck with the fifth- and challenging global economic conditions 04-10: socIAL medIA survey largest UK firm, Grant Thornton UK. Days put pressure on firms to do more in order Ana Gyorkos investigates if professional content they can trust. later, BDO International announced parts to generate business growth. After all, that services firms are getting on board with social media and what the benefits and of PKF China will join its Chinese firm (see growth can often be best achieved by tying hidden dangers are. page 3). This follows the summer’s round of up with another market player. When these Give your students musical chairs in Australia where BDO, hav- mergers occur, they will trigger a further ing lost its and firms to wave of absorptions as those who have lost counTry survey 09-20 Grant Thornton (see page 9), recovered its partners go looking for replacements among the edge. Subscribe to presence by merging with PKF East Coast. smaller networks. 11-15: AusTrALIA As always, mergers beget other mergers, A flurry of M&A activity is seeing a power shift under way in Australia. As and back in the UK, PKF International says The Accountant clients become more cost-conscious it is already actively looking to replace its social is global and undergo significant strategic and operational changes, firms need to UK firm. Nevertheless, finding the right fit One of the more popular ways to stay con- adapt quickly and smartly or face the in terms of size and client base might not be nected with member firms while building A subscription to The Accountant is the ideal accompaniment to an accountancy course of study. Including consequences. IAB reports. such an easy job. There are several strong brand awareness is social media, an issue we exclusive features and interviews with major figures in the accountancy sector, The Accountant will help 16-20: souTh AFrIAcA firms in the market, just to name a few: discuss in this month’s feature. Despite mild impacts of the Companies Saffery Champness, a Nexia member firm, We found there are a surprising number Act, South African firms are in a dif- your students to understand the real-world implications of the theory they are learning, and help improve ficult situation as growth stalls, regu- Morrison International’s member MHA of networks and associations that are still latory compliance demands increase MacIntyre Hudson, Geneva Group Inter- reluctant to make full use of social media their employability in a competitive jobs market. A weekly newswire gives you regular updates of all the big and high inflation pushes staff costs up. Ana Gyorkos finds opportunities national member Haines Watts and others. either because they doubt its value, lack the outside the country’s borders and non- All would be fine additions to PKF on paper, resources to put significant man-hours into stories, while IP access means students can view our content anywhere with access to the student portal. services driving growth but no amount of speculation will determine it, or fear the reputational risks involved. their likelihood of breaking their current This publication spoke to some of the affiliations, or their cultural and strategic fit industry’s top social media experts, who Subscribe to The Accountant for: SIGN UP FOR THE FREE NEWSWIRE with the PKF network. claim they have seen social media use bring This type of headhunting following mid- recruitment costs down, improve existing • IP access to our content. So your students can access our Get free weekly updates and free content. tier merger action highlights a perennial and potential client relationships, and build content campus-wide with one login Sign up here: pressure – that of ensuring member firms brand recognition. remain with a network. It’s a formidable The future is likely to bring additional • Content you can trust. We have 125 years of experience editorial Advisory board task, especially for smaller networks. cross-over between platforms as technology http://www.vrl-financial-news.com/system- Frank Arford, Crowe Horwath International CEO delivering accountancy news. pages/headernav/free-news.aspx Kevin Arnold, Nexia International executive The challenge posed by the need to moni- and data sharing speeds evolve. Even if you director tor closely and keep in regular contact with remain a social media sceptic, it’s hard not Geoff barnes, Baker Tilly International president • Truly global analysis. We cover a range of stories from around and CEO members when international budgets are to accept it as a marketing and communica- the world, so your students get a wide perspective of the sector. Graeme Gordon, Praxity executive director tight and resources are limited is creating a tions channel that’s here to stay, even if it’s stephen Jacobs, INPACT International president Jon Lisby, Kreston International executive level of vulnerability for smaller networks, hard to predict what its eventual role in the director whose members are attractive to larger, more world of business will be. James mendelssohn, MSI Global Alliance CEO christian mouillon, Ernst & Young global vice- resourced networks. chair, assurance Even as the world becomes far more con- Ana Gyorkos , Grant Thornton International CEO DON’T mISS OUT. Subscribe to The Accountant today. ed nusbaum nected, it’s still a challenge to know what michael reiss von Filski, Geneva Group Inter- [email protected] national CEO Contact our subscriptions team on +44(0)20 7563 5688 Liza robbins, Morison International CEO martin van roekel, BDO International CEO or email us at [email protected] to find out more. Jean stephens, RSM International CEO robert Tautges, HLB International CEO pauline wallace, PwC head of public policy and regulatory affairs www.vrl-financial-news.com www.InternationalAccountingBulletin.com November 2012 y 1 news round-up International Accounting Bulletin

IAB onLIne - november news round-up

Top 5 articles AFrIcA professionals. a PwC spokesperson said the KPMG first Big Four firm in Three regional hubs for pwc KPMG’s presence in Myanmar is the firm conducted its last audit Myanmar Africa first Big Four involvement in the of MF Global in March 2011 “in PwC has restructured its nation since PwC left the country accordance with professional BDO Hong Kong appoints chief in 2003. standards”. executive operations in 16 sub-Saharan countries to create an integrated The lawsuit said PwC US failed to chInA/serbIA BDO UK and PKF UK in merger business managed by new pan- examine MF Global’s controls over discussions African leadership. hLb International expands in customer funds, which amounted Three regional hubs have been china and serbia to professional malpractice and a Part of PKF China joins BDO HLB International has just signed breach of the auditor’s duties to International created by the reorganisation: West (Nigeria, Ghana and Angola); three member firms to its network. the company and customers. Three regional hubs for PwC East (Kenya, Uganda, Tanzania, Chinese firm, Liaoning Zhongheng uK Africa Rwanda, Zambia and Mauritius); CPAs, has 130 staff based in and South (South Africa, Namibia, Shenyang specialising in audit, tax mazars uK could shed 5% of most re-tweeted article Botswana, Zimbabwe, Mozambique, and consulting services. its workforce BDO UK and PKF UK in merger Malawi and Swaziland). In Serbia, Revizija and TM Mazars UK has confirmed it is discussions Suresh Kana, based in South Africa, Consulting joined the HLB network. launching a consultation process has been appointed Africa senior The two firms have 80 staff and with its employees, which could partner and Philip Kinisu, based in mainly specialise in assurance lead to redundancy of 5% of its read in 151 countries Kenya, becomes chairman of the services. workforce. governance board. The UK’s 10th largest network UK 28% us said in a statement: “Mazars US 14% myAnmAr pwc us added to customers’ has made significant headway Hong Kong 5% KpmG first big Four firm in suit against mF Global in the last few years, with good India 4% myanmar Former customers of MF Global organic growth and profitability. Malaysia 4% KPMG’s Thai operation has have added PwC US to the lawsuit However the continuing market Other 55% expanded with an office in against the failed broker, accusing conditions in the UK mean that, Myanmar, making it the only Big the accounting firm of failing to like most professional service Four company to have a presence in audit properly MF Global’s internal firms, regrettably we are obliged the country. controls over customer funds. to engage in a consultation process Myanmar, also known as Burma, is MF Global filed for bankruptcy across our business that may result considered as a possible emerging over a year ago, with an estimated in redundancies of up to 5% of our Asian economy, as recent easing $1.6bn of customer funds lost workforce”. of international sanctions against following its collapse. Mazars employs just under 1,200 the country has provoked interest The suit filed in the US District staff in the UK and its most recent from international investors. Court in Manhattan, seeking class revenues were £109m for the year KPMG’s Myanmar office will initially action status, also names former ending 31 August 2011. offer tax and advisory services, MF Global executives such as chief KPMG UK made a similar move a with plans for audit services to executive Jon Corzine, as well couple of months ago, announcing Join our online community come later, and will be able to draw as CME Group, which oversaw MF it is to shrink its workforce by 3% on the full capabilities of KPMG in Global. following challenging market According to US media reports, conditions. LinkedIn Group Thailand and its more than 1,200 World Accounting Intelligence

movers & shAKers Twitter WAI_News KPMG US has appointed Scott managing partner of tax. managing the firm’s non- Ozanus as deputy chairman and Ozanus has more than 30 years’ assurance practice prior to his Facebook page chief operating officer for the experience in Big Four firms appointment. World Accounting firm. and has held various positions of his appointment, Kong said Intelligence Ozanus succeeds Henry Keizer, in KPMG since joining the he was “honoured” and would who is retiring at the organisation in 2002. dedicate himself to “further end of the year. strengthening” the company’s scan our Qr code for quick Ozanus most bdo hong Kong has position in the accounting smartphone access to IAB recently held the appointed Johnson profession. position of vice Kong (pictured) as chair of KPMG’s its chief executive BDO International has appointed tax practice. officer. Jiandi Zhu, managing partner of Jeffrey LeSage Albert Au BDO in China, to its global board. will take over continues as the BDO International said the this position, firm’s chairman. appointment is the result of an while Laura Johnson, who has unanimous decision by the global Newinski will assume been at the hong Kong board members, as well as the LeSage’s former role as national firm since 1989, has been BDO council.

2 y November 2012 www.InternationalAccountingBulletin.com International Accounting Bulletin AnALysIs news

PKF UK and part of PKF China to join BDO International peculation that BDO UK and PKF nesses – will build upon our approach as accountancy firms and their networks and were in merger discussions was con- well as our position in these market seg - is largely a reflection of the ambitions of firmed earlier this month, with the ments.” the sub-Big Four networks to increase their two firms looking to finalise the Martin van Roekel, chief executive of share in a marketplace which is facing many S BDO International, said in an exclusive changes”. deal by early 2013. The newly merged firm will be a BDO interview to the IAB that the PKF addition Hofmann said that while the potential International member firm employing mainly strengthens the firm’s Beijing opera- loss of one of the network’s founder mem- 3,500 people with a projected revenue total tions. bers is significant, and the UK is a very of up to £400m. This will put the new BDO “A stronger in position in Beijing was important market for PKF International, UK neck and neck with Grant Thornton UK. welcome, and the acquisition of the teams “the PKF brand remains a highly attractive Grant Thornton UK generated revenues of from PKF brought this. The PFK teams proposition both in the UK and internation- £417m in the year to 30 June 2012. that joined us were dealing with a lot of ally”. BDO UK managing partner Simon state owned enterprises and listed compa- “We have already been approached by a Michaels said: “Our two firms share a close- nies in Beijing, and saw interesting aspects number of firms who would like to join ly aligned vision to lead in the mid-market, to working under the BDO brand,” he said. PKF International in the UK,” he said. as well as similar cultures and a commit- Roekel added that BDO China is100% “It is important to PKF that replacement ment to deliver exceptional client service. owned and managed by Chinese partners candidates are an appropriate fit in terms The merged firm will have a strong balance and has a strong brand and presence nation- of quality, size, technical capacity and sheet, as well as unrivalled sector and geo- ally. culture. While, clearly, there is a desire to graphic strength in many areas.” Chinese domestic firms have increasingly secure a replacement firm sooner rather PKF UK managing partner Martin Good- joined international networks and associa- than later, this process will not be rushed at child said: “This is a good strategic decision tion and in China the mid-tier networks and the expense of meeting PKF’s requirements,” for both firms who have a desire to lead, associations take up a bigger chunk of the he added. from a position of strength, the inevitable market than in economies such as the US, BDO UK’s move is likely to lead to consolidation of the mid-tier which is long UK and Canada. According toIAB data the a ‘musical chairs’ scenario in the UK as overdue.” And while the news in the UK mid-tier earns 45% of all fees in China. PKF looks for a new member that is likely was being processed, part of PKF China BDO International already has a strong already to be a member of another net - announced it is to leave the network in order presence in Greater China with 2011 rev- work or association. The newly merged to join BDO International. Approximately enues of CNY1,908.2m ($306.1m), closing firm is expected to close the gap between 350 PKF partners and staff will merge with up on the smallest of the Big Four, KPMG, Grant Thornton UK and BDO UK. React- BDO International Chinese member firm which earned CNY2,658m in 2011. ing to the news, Grant Thornton UK BDO Li Xin. This makes the revenues gap between the chief executive Scott Barnes said he is The move will mainly strengthen BDO Big Four and the mid-tier much smaller in not surprised by the move and wishes the China’s position in Beijing, Shenzhen and China than in most other countries. two firms success in finalising the deal. Wuhan.According to data from the latest “The merger of the two firms does not have International Accounting Bulletin China market change great significance on our firm and we were survey, however, the merger will leave PKF The departure of the UK firm will leave a gap expecting something like this when we set with more than 1,500 staff at the firm’s of around £140m and more than 1,600 staff our Ambition 2015 and a turnover target of remaining offices in China. In 2010, PKF in the PKF International network, while the $500m,” he said. “We did anticipate that by China joined forces with China’s sixth-larg- partial departure of Chinese partners is like- 2015 there would be some consolidation in est domestic CPA firm, Daxin, adding about ly to make a dent in PKF China’s revenues, the market.” 1,500 staff and $90m in fees to PKF China. which totalled $132m for the year ending 30 M&A and consolidation among mid-tier It is believed that the staff from Daxin have June 2012. Internationally the PKF network accounting firms has been a predicted trend remained with PKF and that it was the part- holds a strong position in the US, with firms as economies of scale become essential in ners from the original PKF China firm prior there bringing in just under $1.2bn of the order to tender for large global assignments, to Daxin, who have left the network. global $2.6bn total. and markets suffer the effects of the global Jiandi Zhu, managing partner of BDO PKF International chairman Wolf- economic downturn. in China and a recently appointee to the gang Hofmann said in response to both Recently an IAB survey looking at trends BDO global board, said: “The combined announcements that while it is always for 2020 showed that 34% of firm lead - expertise of our partners and staff with disappointing for networks to lose mem- ers believed their organisation will merge state-owned enterprises, as well as with ber firms, “our current situation reflects with another organisation of a similar size listed companies – including H-share busi- typical patterns of movement between by 2020. <

www.InternationalAccountingBulletin.com November 2012 y 3 FeATure socIAL medIA survey International Accounting Bulletin

The unstoppable march of social media Tweets, Facebook likes and posts, LinkedIn discussions and endorsements have entered our everyday vocabulary and social media has, almost overnight, become a reliable source of information. Ana Gyorkos investigates if firms are getting on board with the trend and what the benefits and hidden dangers are.

Which of the following social media sites does your organisation use? oing to a meeting with a notepad ■ whIch oF These socIAL medIA sITes does ■ whIch socIAL medIA pLATForms Are mosT and pencil has become a thing of your orGAnIsATIon use? ImporTAnT To your orGAnIsATIon? the past as we opt for our tablets instead. Smartphones have enabled % Responses YesNo 100 G 60 us to email, chat, browse, skype, monitor our diet and movements, as well as being able to ask our phone by voice recognition 50 80 how tall Tom Cruise is and be provided 40 with an instant reply. Newspaper com - 60 ments and news are merging with tweets and Facebook postings – and marking an 30 event, achievement or victory is incomplete 40 until we post an image on one of the social 20 channels. 20 Regardless of age, job and seniority no 10 one can escape the social media boom. 0 Individually people can try and hide, how- 0

ever corporates have had to adapt to new Twitter Twitter Google+ Youtube Facebook LinkedIn Facebook LinkedIn demands and embrace the new way of com- Source: IAB Source: IAB municating with clients, business partners and colleagues. leads to people engaging with that entity conversation they might say ‘hey, there’s While some professional services firms with greater ease, as they see that organi- this great blog we’ve just posted to KPMG. such as the Big Four have taken charge sation as open and transparent and willing com’ or suggest joining a LinkedIn group of social media and are well under way to work with people, rather than hiding because of conversations that are in line harvesting the benefits, some mid-tier behind their corporate veil,” Johnson says. with what was discussed at a meeting. That networks and associations are still a little Johnson says social media are a creates this connection between the online reluctant about using social media or suf- fer from a lack of resource to do so. Results of the International Account- ing Bulletin social media survey reveal “companies that use social media have seen tremendous returns in that more than 40% of responding firm brand trust. This leads to people engaging with that entity with say they believe they should be doing a lot greater ease, as they see that organisation as open and transparent more in terms of social media and list the lack of resources and concerns over moni- and willing to work with people, rather than hiding behind their toring social media as the two most com - corporate veil” mon barriers for using it. Eliot Johnson, KPMG Social media experts and marketing spe- cialist at the approached firms tell IAB that the benefits of using social media strongly outweigh the negatives. KPMG global complementary mechanism for the whole and the offline environment, so that you social media senior manager Eliot Johnson professional services cycle “from the initial have a holistic and wholesome relationship. says the firm views social media as another awareness stage to the purchase and reten- I think this is where the really true value of channel within the broader global market- tion of service phase”. social media is.” ing mix. “Face-to-face discussions won’t go away Grant Thronton UK national commu - “It is about giving our leadership a voice. and they are critical to our business; nications senior manager Paul Thomas Companies that use social media have seen however, social media fills gaps. When says there are a variety of benefits to using tremendous returns in brand trust. This a KPMG client and partner finish their social media and that in the long term it

4 y November 2012 www.InternationalAccountingBulletin.com International Accounting Bulletin socIAL medIA survey FeATure

■ TwITTer heAT mAp - number oF TwITTer FoLLowers by reGIon on LocAL TwITTer AccounTs oF The Top 10 neTworKs

52,833

88,781 61,407 9,659

21,935

North America Latin America Asia-Pacific (excl. Australia and NZ) 32,603 Australia and New Zealand Africa and the Middle East Europe (excl. UK) 22,360 UK

Source: I A B

should reduce recruitment costs, especially we felt it was time and we had the matu - something quite quick and gratifying for when it comes to finding trainees. rity to go forward. We needed to go there. I them. So it’s not just 140 characters in a “Our trainees set up and run their own think there’s no discussion about that any- tweet that need to be impactful, it’s what recruitment strategy and a large part of more,” he says. they get when they click through. And if that is based in social media,” says Thom- “It does feel for Mazars like we are fight- they click through to a white paper, well, as. “They share the experience of working ing with giants in the social media sphere there’s a chance they’ll download it. I for and training with Grant Thornton and and, in a way, punching above our weight. think, in this case, social is almost replac- everything in between. As advocates, they Hence, it’s more about using this oppor - ing email for that,” he says. are second to none and it’s no surprise that tunity to play on the same level, but with- “If you give people something interesting some client-facing teams are now looking out having the same means, which I think to look at, or interesting to do at the other to emulate their success.” proves the agility of the firm.” end of that link, they’re much more likely Thomas also says that social media has Callay d’Amato says the more open an to be engaged. Things like info-graphics or helped the firm increase its reach into new organisation becomes to the outside world, interactive elements for example.” areas. “It has the ability to level the playing the more ready it is to adapt to the market. field for companies of all sizes,” he says. PwC managing director of global and Targeted approach Similarly, Mazars’ head of e-media and US digital marketing Jack Teuber believes One of the biggest success stories among new technology Hubert Callay d’Amato professional services firms as a whole are professional services firms is says that using social media has signifi - not at the leading edge of social media Global’s Twitter group, which has more cantly cut the firm’s recruitment costs. uptake. He explains that the initial use than 77,000 followers, placing the firm “For experienced staff hires we mainly use of social media, the so-called first wave, strongly ahead of the competition. LinkedIn. It’s the agility and the speed with was about promoting the brand and talk- Jennifer Chico director of internet mar- which we find the right person through ing about firms’ traditional activities, and keting at Deloitte attributes the group’s that channel. It also saves costs.” making that information available to a success to its discipline about the con - Callay d’Amato says that there is not wider audience. “The problem with the tent it releases. “We don’t use a shotgun much choice for Mazars and that embrac- first wave is that you’re just in broadcast approach, which might be what some of ing social media is the only sensible move. mode,” he says. the other market players are using,” she “About 18 months ago, we devised a plan, a “What we have found recently is that peo- says. “We are very selective of our content global strategy for social media, because ple like clicking through if the reward is and I like to believe that if our followers

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get a tweet, it’s going to be about some - ■ ■ thing new and interesting. We also tie in do you pLAn To IncreAse your socIAL medIA how wouLd you rATe The use oF socIAL AcTIvITIes In The comInG 12 To 24 monThs? medIA AT your orGAnIsATIon? our tweets with timely events. We are not always necessarily pushing people back to Yes, we are making good use of it Deloitte.com. If we think there’s other con- Increase significantly tent elsewhere that’s relevant to them we We could be doing a bit more Increase a little share it with them.” There is a lot more we could be doing Chico adds the firm is making use of so- Maintain at the current level We don’t see value in using social media called guest tweeters, who are the firm’s 5.1% experts on specific subject matters. “The guest tweeter will tweet the group for a certain amount of time, like seven days, 37.2% and they’ll share with the group what they 24.4% might be engaged with and believe is of 24.4% interest to the group,” Chico says. For PwC Teuber says it’s important 37.2% to look at content from a perspective of whether it’s of value to someone. “There’s 33.3% an interesting distinction between what 33.3% we’ll put up on our social feeds versus our email inboxes,” he says. “If you send an

email there’s an expectation that I will Source: IAB Source: IAB receive it and make a decision to respond or not. I think with social media there’s no expectation that any one individual will pick it up. There’s a whole different “Our UK chief executive Scott Barnes “From a corporate point of view we want to mindset.” tweets from a personal account and we focus on Twitter, LinkedIn and Facebook, For Grant Thornton it’s all about peo - also have other board members tweet - except in countries where these tools are ple, according to Thomas. “We are in the ing. They don’t always necessarily talk not really used, like Russia and China, business of selling people and services. about the firm or any firm-related matters. where they have specific, local tools,” he Our social media communication mainly There’s a growing number of partners and says. comes from our people and not so much mangers using it.” “We use Facebook mostly to reach out from corporate social media accounts,” he Social media is not about technology, it’s to young people in countries where we says. about people, says KPMG’s Johnson. “We recruit lots of young graduates, LinkedIn learned very early on that it is all about the is for fostering relationships and connect- content and it’s going to be a big focus for ing people and Twitter is more for research, ■ Top 15 FAcebooK Groups by - mosT LIKed pAGes per us in the next year.” for watching what’s going on in the market, orGAnIsATIon and for influence.” rank organisation Likes which channel? KPMG focuses on Facebook when it 1 Deloitte 113,379 It’s not only about content it is also about comes to helping the recruitment effort, which channel to use with the ever- according to Johnson. “We are activating 2 Ernst & Young Careers 102,001 expanding list of social media on offer. our recruitment teams and getting them 3 PwC 88,986 Mazars, Callay d’Amato says, doesn’t trained on how to leverage Facebook,” he 4 KPMG 59,642 have unlimited resources so the firm has says. 5 Grant Thornton US Careers 4,666 to focus on the most important channels. “From a client service point, I’d say Twit- 6 Mazars 2,961 ter and LinkedIn were the most impor - 7 BDO International 1,731 tant channels, but servicing very different 8 Crowe Horwath 1,619 ■ Top 5 mosT succesFuL TwITTer AccounTs needs. Twitter is a real-time driven chan- 9 Baker Tilly International 1,446 rank organisation Followers nel, keeping people abreast of the latest updates and keeping the media updated 10 RSM International 568 1 Deloitte (global) 76,681 about the latest events and developments. 11 PKF International 534 2 E&Y News 36,023 LinkedIn, on the other hand, is where you 12 Kreston International 270 3 PwC US 28,338 can have that longer form of conversation 13 HLB International 249 4 KPMG US 25,338 within groups and company pages tackling 14 Nexia International 179 5 Deloitte US 24,398 very niche topics.” 15 Geneva Group International 118 Source: International Accounting Bulletin as of 13 November 2012 Johnson also mentions Google+, Source: International Accounting Bulletin as of 13 November 2012 which, he says, is a channel yet to reach

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and around the world you have a set of Using social media: 5 dos and don’ts common interests and risks that we need to be aware of – independence risk, legal do don’t risk and regulatory risk. And, quality risk • be active: There’s no point whatsoever in • sell: Social networks are for sharing, not – if somebody purports to say something being on a social media platform if you’re selling. If you are too ‘you’ focused you will about an area they work in that reflects not going to chat to people and make new simply turn off your audience. This is an badly on us that is a huge issue.” contacts. environment where selling doesn’t pay. In order to address this Teuber says the • spend time and effort creating a complete • be scared: Bad things rarely happen. firm has a public communications policy profile: If you hand someone a blank Facebook has one billion members and some rectangle of cardboard it isn’t the same as of them broadcast stupid stuff (moaning in place. passing them a business card. It’s the same about their job, having an affair etc) but “We’ve adapted to the modern age by online – a half-complete profile is barely any generally it’s a pretty safe environment to amplifying our attempts to educate and better than a totally blank one. hang-out! communicate. We’ve also put together a • be realistic: Your efforts probably won’t • spread yourself too thin: There are literally social policy comprised of policies that deliver business immediately, but persevere. hundreds of social networks. Pick the ones As your reputation increases over time, so will that are right for you and commit to them, already existed, because it’s not like social the number of people who want to talk to you with regular posts and conversations and media has fundamentally altered our views about business. daily use about what’s appropriate to speak about. • share: Everybody says that they’re good – • Think that you haven’t got time: You have. We’ve equipped our spokespeople to be these days you must prove you’re good. Take Once you have set up your profiles you’ll able to function in social as well.” your best advice and ideas and tell the world. probably find that 15 minutes each day will Although this may seem counter-intuitive, begin to deliver some big benefits quite Johnson says that KPMG’s social media don’t worry . Clients are generally unwilling or quickly. strategy, which actively encourages dia- unable to do your job (which is why they get • Think that the fact you’re there is enough: logue, opens up the firm, which could tra- you to do it). Like any aspect of business, the more ditionally be considered risk averse, to a • credit others: If you share somebody else’s professional you are, the more likely you whole new avenue. good work make sure that you credit them. are to get results. Measuring the number You certainly would want them to credit you of followers you are engaging and where “The risk management system for us with your efforts. they’re going is crucial if you really want to starts with guidelines on appropriate use get some big benefits from a social presence. of social media and being mindful of the This was prepared by social media specialist- blurred lines between professional and private. Other areas of risk management that we have introduced are around strong adolescence and adulthood. “But, as we employees to apply common sense when social media monitoring practice. We are have seen with Twitter and Facebook, using social media and understanding that actually actively looking to roll-out the organisations that get in early have a it’s a public forum just like any other, such monitoring practice across our member competitive advantage. Our focus within as a business event or conference. firms globally,” he explains. Google+ is around issues that matter most to that audience, which is technology, social media, digital and sustainability,” he explains. “From a client service point, I’d say Twitter and LinkedIn were In countries like China where the main the most important channels, but servicing very different needs. global social media channels are banned Johnson says the firm is present on local Twitter is a real-time driven channel, keeping people abreast of alternatives such as Weibo and Renren. the latest updates and keeping the media updated about the latest “And, we are also looking at Zing in Ger - events and developments. LinkedIn, on the other hand, is where many and VK in Russia as they are two you can have that longer form of conversation within groups and big channels with big local followings,” he company pages tackling very niche topics.” says. For sharing purposes such as videos, Eliot Johnson, KPMG presentations and info-graphics, inter - viewed organisations mainly use YouTube, SlideShare and Pinintrest. Teuber says we need to recognise we are “We are currently working with a vendor, monitoring social media in a new era. “Now we’re in a world where which advises us very quickly, almost in One of the main concern for firms is how everybody is a publisher, potentially, eve- real time, when there is a spike or there to monitor what’s being said on social rybody can be a broadcaster on YouTube, is a negative sentiment detected on social media about an organisation and how to everybody can comment on blogs,” he says. media. This can happen frequently and we address the risks that arise from using it. “How do you manage that? That’s obvi- have a response team that addresses any Social media experts say it’s about teaching ously a question we’ve asked ourselves issues,” he says.

www.InternationalAccountingBulletin.com November 2012 y 7 FeATure socIAL medIA survey International Accounting Bulletin

■ whAT do you ThInK Are The Three mosT ImporTAnT beneFITs oF usInG ■ whAT Are The mAIn chALLenGes In usInG socIAL medIA? socIAL medIA?

Attracting Liability talent concerns 40.7% Stakeholder 23.1% Misusing Increased communication Monitoring brand exposure 38.3% content 21.8% 71.6% 46.2% Disclosing Brand Free Resource sensitive building marketing shortages information 79.0% 39.5% 57.7% 23.1% Reducing recruitment costs 12.3%

Source: IAB Source: IAB

Such monitoring comes at a cost and bigger than they are, could be critical to usually leaves the price to be the only cri- Johnson says this has led to marketing their success.” teria upon which a client will decide on a and communications budgets changing for Social media specialist Adam Gray says accountant,” he explains. “Social media many companies and that there is a need it’s important for a firm to have a strate - enables them to have that added relation - to start investing in digital and specifically gy before embarking on the social media ship with a client.” social media. sphere. “You have to allocate time, effort Whether you are a social media sceptic or At Grant Thornton it is about making and money, you have to understand what an advocate, one thing is clear – social media sure people understand that what’s said on success looks like,” he says. “Assuming are here to stay. Perhaps, five years down the social media is permanent and that they that having 1,000 followers on Twitter line, we won’t be talking about Facebook or can’t just say anything they like, Thomas means 1,000 people read your posts is an Twitter, but some other channel. says. “We find that our people follow the code of conduct and apply common sense when they use social media. We have restricted the use of our logo and the name “you need to be able to analyse and measure who’s opening the across social media, but apart from that stuff you’re sending, who you can engage, and the effect on web we have not put any major restrictions in place.” traffic. It’s only when you start to join these dots that you get the picture of the great advantage of this; you can get it in real-time.” Getting started Adam Gray, social media specialist Large marketing and communications budgets and vast resources are not some - thing all accountancy firm or networks and associations have. However, a small invest- unreasonable assumption. You need to be Chico predicts social media will keep ment in social media can provide a unique able to analyse and measure who’s open - evolving. “I think we are to see ongoing communication channel for smaller market ing the stuff you’re sending, who you can collaborative and development between players. make sure NO segmentsengage, and the effect are on webblack! traffic.make It’s channels, sure notNO only segmentsdebating content, but are black! Johnson says that in the case of a smaller only when you start to join these dots that also sharing content and developing it,” firm he wouldif therebe thinking arevery seriously more you than get the picture four of ,the you great advantage willif there ha sheve says.are more than four, you will have about social media “as it does provide you of this; you can get it in real-time.” In the past decade the evolution of the an opportunityto to manually look a lot bigger then applyyou Gray the also believes colour using social mediato manually is internet has made apply the world thea lot more colour con- actually are”. more important for professional services nected and catapulted the speed and ease of “And, small businesses can use that to firms than it is for most others. “Corporate, accessing information. As the internet and their advantage. When they think about professional services are, by nature of what gadget technology evolves, social media how they can compete with a larger firm they do, very commoditised. Clients tend have provided the next step in connecting getting onto the digital space, using a blow- to make the assumption that any qualified the world and sharing information as well fish strategy, which can help them look accountant is good to get the job done. This as knowledge. <

8 y November 2012 www.InternationalAccountingBulletin.com International Accounting Bulletin AusTrALIA counTry survey

■ AusTrALIA At a glance

revenue

most revenue: PwC, A$1,5bn Least revenue: INPACT Asia Pacific, A Time for Execution A$1.7m highest growth: Kreston International, A fl urry of m&A activity is seeing a power shift under way in 153% Australia. As clients become more cost-conscious and undergo Lowest growth: Praxity, -27%

signifi cant strategic and operational changes, fi rms need to adapt sTAFF quickly and smartly or face the consequences. IAB reports. Largest workforce: PwC, 6,527 smallest workforce: INPACT Asia Pacific, 17 most partners: Deloitte, 520 he world has changed, the compe- shows we’ve made some good decisions.” most offices: Crowe Horwath Intr., 110 tition is much stronger and there- There has been a hive of M&A activity economIc IndIcATors fore any weakness in the business between firms. BDO Australia had to find model or in execution will be new members in Sydney and Melbourne Gdp: $1.4tr “ T as Grant Thornton Australia took over exposed.” So says Tony Schiffmann, man- Gdp growth: 3.3% aging partner of BDO Australia. those offices at the start of the year. In Gdp per capita (ppp): $40,847 If the country’s Big Four and mid-tier response BDO took on board PKF’s East Inflation (cpI): 3.4% firms fail to respond to the changing land- Coast practice in Sydney, Melbourne and current account balance: -2.2 of GDP scape for professional services in Australia, and additionally PFK’s firm in budget balance: -4.4% of GDP or make the mistake of waiting for condi- . unemployment rate: 5.1% tions to return to how they were three or “It probably enhances our presence gen- population: 22.4m four years ago, they are going to suffer the erally,” says Schiffmann, who used to run consequences. PKF’s East Cost Practice. IAB survery IndIcATors Giam Swiegers, chief executive officer of “From an Australia point of view, what revenue per employee: A$201,050 Deloitte Australia, is clear in his view that all the firms are doing is trying to achieve staff density: 1 accountant per 651 people innovation is essential if success is to be the right presence in the right markets.

achieved. “We have put a lot of effort into Ultimately, we have been able to enhance Notes: Totals apply to IAB surveyed data only. This includes our strategy,” he says, “and I believe it has our presence in all the major capitals in firms that belong to global networks and associations paid off, as can be seen by 18% growth. It Australia.” Source: International Accounting Bulletin, Timetric

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There will be further acquisitions too. emissions and mining, and consultancy expert in design thinking and we rethought “We do anticipate more,” he confirms. services are the main drivers of revenue, our approach to risk services. Suddenly, we “My view of the world is that, both in while the questions and concerns over dis- realised we would be fools to close it down Australia and globally, we are seeing the counting for audit services appear to have and it is now paying very handsome divi - rationalisation of the mid-tier. This partic- taken a turn for worse. dends.” ular transaction is part of that and we are Geoff Wilson, chief executive officer of In practice this involves being more in discussions with a number of firms at KPMG Australia, is pleased with the firm’s hands-on and engaged with clients. “Our the moment. For many years, people have performance over the past 12 months, approach to risk services means anticipat- been predicting some form of rationalisa- which saw revenue rise by 5% to A$1.1bn ing the risks that clients can’t necessarily tion and I think you will be seeing some ($1.15bn). “It has been a tough year but we see,” he says. “These could be the risks significant changes at all levels in our mar- have performed well,” he says. around digital disruption or cyber securi- ket in the next 12 months.” Despite strong growth by KPMG Aus - ty. They’re dangers that the average board But it isn’t just the mid-tier firms that are tralia, this year Ernst & Young (E&Y) member probably doesn’t understand as re-evaluating their strategies for growth. took over the spot of the second-largest deeply as experts.” At Deloitte, Swiegers declares an ongoing, firm in Australia. E&Y takes the lead by It entails assessing potential dangers or active interest in acquisitions, but he has just A$5m, indicating the small revenue strategic errors a business could be mak - also initiated a major programme which differences of the Big Four in Australia. ing. “We didn’t want to be silent on the risk has seen partners and key staff learn about Services around energy and natural of omission, as in the decisions you don’t design thinking and the way it encourages resources have been in demand, audit has take. Let’s say you were a retailer, and you innovation. grown, along with risk management, Wil- decided to build a new store and that was “It is teaching people the same skills that son says. a disaster, historically we would report on designers are taught to solve complex prob- “There are new challenges for business- that. lems, putting the customer at the heart of es so risk is an issue that is rising on the “However, if you decided to ignore online it,” he says. board agenda and for management teams,” retailing, that is not something the Big he says. “They want assistance on how to Four would traditionally comment on. Yet changing processes create action plans around risk.” you would be taking an enormous risk by So far, this has been applied for audit and Allied to this is the pressure on busi - omitting something that you should have risk advisory services, among others, with nesses to drive efficiencies, which has been doing. That is where we think we a double function of being used as a tool to seen a greater demand for services around can transform the industry – by looking at undertake a cultural shift within the busi- restructuring and improving supply chains what businesses are omitting.” ness. “I took 12 members of my executive and logistics. “Businesses generally have team to Berkeley [in California] for a week been looking at costs,” he says. surging demand [where this is taught]. To date, we have The firm has also strengthened its health For BDO, Schiffmann states that the trained 600 of our people in design think- care services. Wilson sees this as an impor- strongest areas have been tax and advi - ing and it is one of the toughest challenges tant area to focus on, given that both pub- sory. There has been a surge in demand for I have undertaken, getting to change the lic and private health care providers, like restructuring and insolvency services, and thought process and problem-solving pro- elsewhere in the world, are feeling the he comments that there was a reasonable cesses in a firm that has very established strain of tightening budgets and an ageing amount of corporate activity, mainly in the methodologies.” population. “It’s a strong play for us,” he area of M&A. Don Rankin, chairman of Baker Tilly says. The public sector in Australia has under- International’s member firm Pitcher Part- At Deloitte, which saw revenue leap from gone significant budget cuts and operation- ners, says that investment in IT is increas- A$935m to A$1.1bn, Swiegers attributes al changes, which has created an opportu- ingly important, such as developing web the double-digit growth to a robust port- nity for the mid-tier firm. “The public sec- portals and social media platforms, to folio of services, with the financial advi - tor is a large user of professional services,” enhance communication and interaction sory group doing particularly well, along says Schiffman. “We come from a reason- between clients and staff. with acquisitions that were made previ - ably low base, but we’ve been taking some “There is a lot of change going on in the ously appearing to pay off. “We acquired market share from others in that space; accounting profession with consolidation,” a leading economic advisory practice and we’re not as advanced as the Big Four in he tells IAB, adding that although growth an infrastructure consulting business and that area, but certainly we’ve had a fair bit has mainly been organic, “small tuck-in in these difficult times that gave us a com- of success.” mergers” are on the table, especially in petitive edge in areas that have suffered in Rankin of Pitcher Partners, which grew Sydney where there is a need for the firm most other firms,” he says. by 6% to A$152.7m, observes that all of to grow critical mass. He is particularly pleased with the deci- the firm’s services performed robustly for This year’s IAB survey of Australia sion not to collapse the risk services divi - year-end 2012, including audit and assur- shows that firms are working hard to sion into audit. ance services, business advisory, tax con- achieve organic growth. As ever, tax, “We were considering it and then we sulting and transaction services. including new tax legislation on carbon went to Europe and worked with a leading “There has been a growing interest from

10 y November 2012 www.InternationalAccountingBulletin.com International Accounting Bulletin AusTrALIA counTry survey

■ AusTrALIA Networks- fee dAtA Fee split (%)

corporate Fee income Growth Audit & Tax management corporate recovery/ Litigation rank name (A$m) rate accounting services consulting finance insolvency support other year-end 1 PwC*(1) 1,478.9 3% 35 23 - - - - 48 Jun-12 3 Ernst & Young*(1) 1,125.0 7% 42 31 - - - - 27 Jun-12 2 KPMG* 1,120.0 5% 35 19 - - - - 46 Jun-12 4 Deloitte* 1,102.0 18% ------May-12 5 Crowe Horwath 353.2 1% 67 5 - 2 - - 26 Jun-12 International* (2) 6 Grant Thornton 232.2 52% 25 37 6 7 17 1 7 Jun-12 International* 7 BDO* 209.0 -2% 57 17 3 10 8 2 3 Jun-12 8 Baker Tilly International* 152.7 6% 61 11 8 4 11 - 5 Jun-12 (3) 9 RSM International* (4) 135.0 8% 59 13 13 - 11 - 5 Jun-12 10 Moore Stephens 134.0 15% 71 11 - 3 3 - 12 Dec-12 International* 11 PKF International* (5) 121.9 -8% 70 13 2 3 11 - 2 Jun-12 12 Kreston International* 91.5 153% 43 25 9 1 20 - 2 Oct-11 13 HLB International* (6) 90.4 2% 72 10 1 3 5 - 9 Jun-12 14 Nexia International* 82.2 54% 70 10 2 2 4 4 8 n/a 15 UHY International* (7) 37.7 5% 55 25 19 - - 1 - Jun-12 16 Reanda International* (8) 2.8 4% 47 33 20 - - - - Jun-12 Total revenue/growth 6,468.5 9%

Notes: **Disclaimer = Only data from the named member firm or the exclusive member firms within a network/association is included. Data relating to correspondent and non-exclusive member firms is not included. (1) Other includes advisory services; (2) Crowe Horwath International is represented in Australia by WHK Group; (3) Baker Tilly International is represented in Australia by Baker Tilly Pitcher Partners; (4) RSM International is represented in Australia by RSM Bird Cameron; (5) PKF International revenues include the PKF East Coast Practice as the deal to leave the network was finalised after 30 June 2012. If the revenue were not to include PKF East Coast Practice it would be at an estimated revenue of AUD27.7m; (6) HLB International is represented in Australia by HLB Mann Judd; (7) UHY International is represented in Australia by UHY Haines Norton; (8) Reanda International is represented in Australia by Business Intellect Group; Source: International Accounting Intelligence

■ AusTrALIA AssoCIAtIoNs- fee dAtA Fee split (%)

corporate Fee income Growth Audit & Tax management corporate recovery/ Litigation rank name (A$m) rate accounting services consulting finance insolvency support other year-end 1 Praxity* (1) 72.5 -27% 59 14 11 6 2 1 7 n/a 2 AGN International* (2) 54.3 1% 25 10 - 2 62 1 - Jun-12 3 PrimeGlobal* 44.0 27% 36 20 8 28 - - 8 May-12 4 DFK International* 40.7 18% 45 34 14 1 - - 6 Sep-11 5 BKR International* (3) 36.1 30% 18 68 4 1 6 3 - Jun-12 6 IAPA* (4) 33.8 1% 44 22 6 - - - 28 Jun-12 7 MGI*(5) 33.2 6% ------Jun-12 8 Morison International* (6) 31.5 3% 42 21 21 16 - - - Jun-12 9 Alliott* 25.5 9% 12 59 5 19 - 5 - Jun-12 10 GMN International* 23.5 9% 56 37 6 1 - - - Jun-11 11 KS International* 17.3 5% 73 10 9 - - - 8 Jun-12 12 Integra International* 17.1 47% 40 35 25 - - - - Sep-12 13 MSI Global Alliance* 14.2 31% 55 45 - - - - - Jun-11 14 INPACT Asia Pacific* 1.7 6% 67 18 2 5 - - 8 Dec-11 Total revenue/growth 445.4 4%

Notes: *Disclaimer = Only data from the named member firm or the exclusive member firms within a network/association is included. Data relating to correspondent and non-exclusive member firms is not included. (1) Praxity’s year end is the latest available year end of participating firms; (2) AGN International is represented in Australia by Shine Wing Hall Chadwick; (3) BKR International is represented in Australia by the network Walker Wayland Australasia; (4) IAPA is represented in Australia by the association Madison Accounting Group; (5) MGI revenues include MGI practice as the deal to leave the network was finalised after 30 June 2012. If the revenue were not to include MGI Perth practice it would be AUD22.8m; (6) Morison International is represented in Australia by Hayes Knight. Source: International Accounting Intelligence

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■ AusTrALIA Networks - stAff dAtA

Total staff Growth partners professional staff Admin staff offices rank name 2012 2011 rate 2012 2011 2012 2011 2012 2011 2012 2011 1 PwC* 6,527 5,379 21% 450 411 - 4,029 - 1,223 10 10

2 KPMG* 5,340 5,379 -1% 400 395 3,798 3,828 1,142 1,156 13 13

3 Deliotte* 5,306 5,121 4% 520 509 3,805 3,667 981 945 16 16

4 Ernst & Young* 4,900 4,823 2% 405 396 - - - - 6 6

5 Crowe Horwath International* (1) 2,346 2,205 6% 237 246 1,388 1,244 721 715 110 110

6 BDO* 1,295 1,327 -2% 156 157 984 980 155 190 12 13

7 Grant Thornton International* 1,270 778 63% 143 91 721 562 249 125 8 5

8 Baker Tilly International* (2) 926 895 3% 85 82 684 663 157 150 5 5

9 Moore Stephens International* 886 843 5% 113 99 613 589 160 155 18 18

10 RSM International* (3) 817 767 7% 85 77 584 541 148 149 28 28

11 Kreston International* 592 295 101% 86 45 414 198 92 52 29 20

12 HLB International* (4) 550 592 -7% 77 83 362 392 111 117 11 11

13 Nexia International* 520 324 60% 71 52 363 207 86 65 7 6

14 UHY International* (5) 252 234 8% 35 33 175 161 42 40 11 10

15 PKF International* 99 89 11% 99 89 469 468 136 178 12 12

16 Reanda International* (6) 19 20 -5% 8 8 8 9 3 3 2 2

Totals 31,645 29,071 9% 2,970 2,773 14,368 17,538 4,183 5,263 298 285

Notes: *Disclaimer = Only data from the named member firm or the exclusive member firms within a network/association is included. Data relating to correspondent and non-exclusive member firms is not included. (1) Crowe Horwath International is represented in Australia by WHK Group; (2) Baker Tilly International is represented in Australia by Baker Tilly Pitcher Partners; (3) RSM International is represented in Australia by RSM Bird Cameron; (4) HLB International is represented in Australia by HLB Mann Judd; (5) UHY International is represented in Australia by UHY Haines Norton; (6) Reanda International is represented in Australia by Business Intellect Group. Source: International Accounting Intelligence

■ AusTrALIA

AssoCIAtIoNs - stAff dAtA

Total staff Growth partners professional staff Admin staff offices rank name 2012 2011 rate 2012 2011 2012 2011 2012 2011 2012 2011 1 Praxity* 447 688 -35% 54 89 322 470 71 129 5 12

2 PrimeGlobal* 297 252 18% 45 44 188 162 64 46 11 10

3 DFK International* 294 220 34% 37 31 192 147 65 42 16 14

4 BKR International* (1) 249 178 40% 42 30 171 119 36 29 17 11

5 IAPA* (2) 221 214 3% 29 28 82 82 109 103 9 9

6 Alliott* 188 177 6% 18 18 125 117 45 42 4 4

7 GMN International* 177 175 1% 25 25 114 112 33 32 9 8

8 Morison International* (3) 175 169 4% 24 23 123 118 28 28 6 6

9 AGN International* (4) 171 154 11% 12 12 126 110 29 28 4 4

10 MGI* 160 251 -36% 34 35 178 165 48 51 10 10

11 Integra International* 129 75 72% 19 17 84 44 26 14 4 3

12 MSI Global Alliance* 118 72 64% 19 18 78 43 21 11 5 4

13 K S International* 101 102 -1% 18 17 70 69 13 16 3 3

14 INPACT Asia Pacific* 17 11 55% 5 2 10 7 2 2 2 1

Totals 2,744 2,738 0% 381 389 1,863 1,765 590 573 105 99

Notes: *Disclaimer = Only data from the named member firm or the exclusive member firms within a network/association is included. Data relating to correspondent and non-exclusive member firms is not included. (1) BKR International is represented in Australia by the network Walker Wayland Australasia; (2) IAPA is represented in Australia by the association Madison Accounting Group; (3) Morison International is represented in Australia by Hayes Knight; (4) AGN International’s is represented in Australia by Shine Wing Hall Chadwick. Source: International Accounting Intelligence

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our clients for business improvement and Schiffmann says: “The behaviour is Tomasi makes the point that the emphasis business management advisory services,” short term and unfortunate in many on procedure, process and documentation he says. “We have also continued to expe- respects as audit is an important function. may create a box-ticking mentality, where rience an increased appetite for our wealth Discounting is happening at a time when “perhaps the professional judgement and management and investment advisory the requirements of directors are more gut feel that comes into auditing is lost”. services.” challenging and complex, so they need For Schiffmann, the economies of scale Tony Fittler, chairman of HLB Mann more support from their auditors, but pric- currently at work do raise long-term con- Judd, which saw revenue climb by 2% to ing is becoming even keener.” cerns for the audit. He explains: “The real- A$90.4m, argues that it remains largely a ity is that all of the major firms do have a flat market for audit, accounting, tax and market challenges fairly robust quality assurance process and wealth management services. Rankin agrees, identifying a variety of fac- there is close scrutiny from regulators, so “Services connected with mining, includ- tors at play. “The market for audit services I am definitely not saying that quality has ing floats, have seen significant growth, does remain extremely competitive in Aus- been compromised, but that is the ultimate but outside of Perth, it is steady,” he says. tralia,” he says. “This has primarily been concern. As would be expected, those firms with driven by a lack of growth in the market “Regulators around the world are wor - offices in Australia’s economic hotspots, resulting in excess capacity within audit ried that there may not be enough compe- such as in parts of Western Australia firms. Competition has also been exac - tition in the audit market. I suppose what where the mining boom shows no sign of erbated by the growing belief by clients could come out of this situation, as firms abating, are going to be better positioned that audit does not always add value and make a decision of where to invest, is that if to capitalise on growth. so they are inclined to appoint an auditor pricing becomes so bad, then there may be David Tomasi, chairman of UHY Haines based on price alone. The recent consolida- some firms that may wonder if it is some - Norton, which saw revenue increase by tion in the middle market in Australia has thing they want to do. I am not suggesting 5% to A$37.7m, observes that the regional increased pressure on firms to win more that BDO will be one of them, but it could differences are a factor when looking at fees too.” lead to a worsening of the situation.” KPMG’s Wilson acknowledges the mar- ket for audit services is competitive, espe- set fees possible “competition has also been cially with companies drilling down on Another possibility is that set fees are put exacerbated by the growing costs, but he insists that quality is abso - in place in order to create stability. “It’s a lutely key. “We wouldn’t compromise on tough one,” admits Schiffmann. “I like to belief by clients that audit does that,” he says. think that, as professional services firms, not always add value and so A similar point is made by Swiegers at which is how we present ourselves to the they are inclined to appoint an Deloitte. “It is a very competitive market market, firms could act professionally.” auditor based on price alone” and we have seen some strange pricing sug- It’s no secret firms in Australia have long gestions. I would never allow our people Don Rankin, Pitcher Partners to compete on the same basis. I believe

we have to price it at a point where we ■ AusTrALIA know we can deliver a quality audit. Once top 10 fIrms - fee dAtA which offices performed strongly during you stop being able to make a profit, I do rank Fee income Growth the past 12 months. He does point to audit have concerns about how sustainable that (Audm) rate (%) and assurance services having done well approach can be.” 1 PwC 1,478.9 3% across the board for the firm, which won It comes at a time when regulators 2 Ernst & Young 1,125.0 7% “significant new work”. Beyond that, like expect more from auditors, as can be seen 3 KPMG 1,120.0 5% Fittler, he concedes that business services by the federal government recently releas- and taxation were relatively flat. ing guidance on the form and content of 4 Deloitte 1,102.0 18% As with elsewhere in the world, the pro- the annual transparency reports which 5 WHK Group (1) 353.1 1% fession in Australia has not escaped the audit firms are now obligated to produce. 6 Grant Thornton 232.2 52% issue of unsustainably low-priced audit It comes as part of the reforms on audit Australia services. “There is fee pressure and you do quality contained in the Corporations 7 RSM Bird 135.0 8% Cameron wonder if people are cutting off their nose Legislation Amendment (Audit Enhance- to spite their face,” says Tomasi. ment) Act 2012, designed to enhance best 8 Baker Tilly 93.6 6% Pitcher Partners There are partners in the mid-tier who practice. Melbourne accuse the Big Four of driving this market Aside from the question of whether or 9 William Buck (2) 28.4 133% trend. The Big Four, in turn, vehemently deny not such reports are necessary, it’s anoth- 10 Bentleys 23.2 6% such behaviour and stress the importance of er example of firms having to respond to Brisbane (3)

the audit and the absolute need for quality. regulators calling for greater rigour, mak- Notes: (1) WHK Group is part of Crowe Horwath International; (2) William Buck (SA) Pty ltd is one of the six firms which are part or Praxity; (3) Bentleys Clearly, however, something is wrong, with ing internal systems and reviews tighter, Brisbane is part of Kreston International; discounts cited of as much as 50%. but without a corresponding hike in fees. Source: International Accounting Bulletin

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■ AusTrALIA LeAdINg ACCoUNtINg fIrms, Networks ANd AssoCIAtIoNs: who’s who Firm contact details region head/ contact Alliot Group Tel: +44 (0)203 330 111; Fax 0870 870 2652; email: [email protected]; website: www.alliottgroup.net James Hickey

baker Tilly pitcher partners Tel: +61 (0)3 8610 5000; Fax: +61 (0)3 8610 5999; email: [email protected]; Don Rankin website: www.pitcher.com.au/www.bakertillyinternational.com bdo Tel: +61 (0)7 3237 5977; Fax: +61 (0)7 3221 9227; email: [email protected]; website: www.bdo.com. Tony Schiffmann au bKr International / walker wayland Tel: +61 (0)2 9951 5400; Fax: +61 (0)2 9951 5454; email: [email protected]; website: www.wwnsw. Stephen Roger Australasia com.au crowe horwath International / whK Tel: +61 (0)3 9522 0888; Fax: n/a; email: [email protected]; website: www.crowehorwath.com.au John Lombard Group deloitte Tel: +61 (0)2 9322 7576; Fax: n/a; email: [email protected]; website: www.deloitte.com Vessa Playfair

dFK Australia Tel: +44 (0)207 436 6722; Fax: +44 (0)207 436 6606; email: [email protected]; website: www.dfk.com Martin Sharp

ernst & young Tel: +61 (0)2 9248 4321; Fax: n/a; email:[email protected]; website: www.ey.com.au Rob McLeod

Gmn International Tel: +(0)1 818 525 2185; Fax: +(0)1 818 566 6571; email: [email protected]; website: www.gmni. Michael Wilford com Grant Thornton Australia Tel: +61 (0)2 8297 2400; Fax: +61 (0)2 9299 4445; email: [email protected]; website: www.grantthornton. Robert Quant com.au shinewing hall chadwick Tel: +61(0)2 9263 2600; +61 (0)2 9263 2800; Fax: n/a; email: [email protected]; website: www. David Kenney hallchadwick.com.au hLb mann Judd Tel: +61(0)2 9020 4000; Fax: +61 (0)2 9020 4181; email: [email protected]; website: www.hlb.com.au Tony Fittler

IApA / madison Accounting Group Tel:+61 (0)398 402 200; Fax: +61 (0)398 401 188; email:[email protected]; website: ww.hmh.com.au Alan Muir

InpAcT Asia pacific Tel: +8 (52) 2806 3923; Fax:+8 (52) 2104 3282; email: [email protected]; website: www.inpactap.com Derek Lai

Integra International Tel: +1 (604) 817 1500; Fax: +1 (604) 939 1872; email: [email protected]; Richard Purcell website: www.integra-international.net KpmG Tel: +61 3 9288 5613; Fax: n/a; email: pnash@.com.au; website: www.kpmg.com.au Peter Nash

Kreston International Tel: +44 (0)1245 449266; Fax: +44 (0)1245 462882; email: [email protected]; website: www.kreston.com Jon Lisby

Ks International Tel: +44 (0)20 7566 400; Fax +44 (0)20 7566 4010; email: [email protected]; website: www.ksi.org Martin Burchmore mGI Tel: +44 (1) 1932.853393; Fax: +44 (1) 932.854323; email: [email protected]; website www.mgiworld.com Jonathan Farrow moore stephens Australia Tel: +61 (0) 3 8635 1800; Fax: +61 (0) 3 8102 3400; email: [email protected]; Marco S. Carlei website: www.moorestephens.com.au morison International Tel: +44 (0) 207 638 4005; Fax: +44 (0) 207 638 4006; email: [email protected]; website: www. Liza Robbins morisoninternational.com msI Global Alliance Tel: +44 (0)20 7583 7000; Fax: +44 (0)20 7583 7577; email: [email protected]; w ebsite: www. James msiglobal.org Mendelssohn nexia International Tel: +61 2 9251 4600; Fax: +61 2 9251 7138; email: [email protected]; website: www.nexia.com.au Ian Stone

pKF Australia Tel: +66 81 846 5376; Fax: n/a; email: [email protected]; website: www.pkf.com Stephen Darley

praxity Tel: +44(0)20 8774 4020; Fax: +44(0)20 8774 4029; email: [email protected]; website: www.praxity.com Græme Gordon

primeGloblal Tel: +1 (678) 417 7730; Fax: n/a; email: [email protected]; website: www.primeglobal.net Kevin Mead

pwc Australia Tel: +61 (0)2 8266 2000; Fax: n/a; email: n/a; website: www.pwc.com.au Luke Sayers

reanda International / business Tel: +61 2 9999 5611; Fax: +61 2 9999 4200; email: [email protected]; website: bizintel.com.au Peter Polgar Intellect Group rsm bird cameron Tel: +61 (0)8 9261 9100; Fax: +61 (0)8 9261 9108; email: [email protected]; website: www.rsmi.com. Kim Hutchinson au uhy haines norton Tel: +61 8 9444 3400; Fax: +61 8 9444 3430; email: [email protected]; website: www.uhyhn.com David Tomasi

Source: International Accounting Bulletin

14 y November 2012 www.InternationalAccountingBulletin.com International Accounting Bulletin AusTrALIA counTry survey

been troubled by training staff only to see natural resources and proximity to China of cash that needs to be invested, so I think them take their skills to work in other and India, both of which are driving sig - there will be some transactions.” parts of the world, giving an added twist nificant foreign direct investment into Tomasi detects a turning point has been to a fierce battle for talent as professionals the country, the hope is that markets will reached. “From where I see it, we got to the commanded high fees for their services. improve, relatively speaking, over the com- bottom a while ago. After a while, people Unsurprisingly, this has cooled off sig - ing 12 months. realise they have to do something. It’s not nificantly. “It is competitive, but not like KPMG’s Wilson admits to being puz - like we’ve had the European banking cri - it was 12 months ago,” comments Swieg - zled by the European-style despondency sis or the sovereign debt issue; it did weigh ers. “There are more young professionals in Australia at present. “The mood of the on business confidence for some time, on the market than we have seen before. It business community at the moment is not but I think most people have put that is a good time to recruit some interesting something I have seen before,” he says.” behind them and are focusing on our own talent.” There is a crisis of confidence when the economy.” Rankin says: “Although the economy is fundamentals aren’t that bad. We have still slow, there are opportunities out there low inflation, low unemployment, a solid execution is key for strong performers. During these times, banking system and strong corporate The next 12 months will not be easy for the we tend to target potential candidates who accountancy profession in Australia. There are not actively looking but may consider “It wasn’t really hard to grow a may be a marginal pick-up in corporate the right opportunity, as they may be in a firm organically between 2000 finance activity as management teams put ‘holding pattern’ in their current jobs wait- growth plans into action, but there won’t ing for things to improve before they make and 2008/09. people achieved be any easy client wins. Indeed, the differ- a move.” 15 or 20% growth just by doing ence between success and failure will come Losing talent was, admits Schiffmann, nothing.” in the execution. the number one issue for the firm. “Prior Tony Schiffmann, BDO Australia. “We need to retain our focus on being to the last couple of years, we were losing innovative,” says Swiegers. “Our goal is a lot of people, who went overseas. Our to create 30% of our revenue from things training is world class and Aussies are gen- we didn’t do two years ago. Last year, we erally held in high regard around the world balance sheets, so they could easily do managed to get 26% of our revenue from for their skills and work ethic. During the deals.” new approaches. If we can maintain some- heady days before the financial crisis we It’s an assessment which many partners where between 25% and 30% of our rev- were losing lots of people to overseas mar- agree with. “The mood of the business enue from new things every single year, we kets, but we now have a lot of people com- community is far more downbeat than it will continue to do very well as an organi- ing back.” needs to be,” says Swiegers. “Those busi- sation.” The question is how to use the talent nesses that are optimistic will come out of Tomasi says: “Putting any M&A activ - available and capitalise on the opportuni- this far stronger because they have made ity to one side, most of our offices are ties out there. Although conditions may be the right investments and, although the expecting an increase to some degree tough, Australia is in a relatively good spot capital markets are slow, I believe there are over the coming year. Averaging across economically, with GDP growth of 3.7% some very interesting assets that compa- the network, we expect between 5% and in the year to June. Given its abundance of nies are looking at right now. There is a lot 6% growth, but there are some highs and

■ AusTrALIA lows among the different regional offices in there.” fIrm movemeNts It’s a case of being agile enough as an NETWORK/ASSOCIATION FIRM ADDITIONS, MERGERS & ACQUISITIONS organisation to respond quickly to clients BDO Merger: with PKF East Coast Practice (Sydney and Melbourne); Added: BDO East Coast that are undergoing enormous change, be Partnership; Lost: BDO Sydney and Melbourne to Grant Thornton it via convergence, the need to globalise,

BKR International Added: Power Tynan (Toowoomba), MCS (Canberra) and DVT (Sydney) as independent or shrinking markets. Schiffmann says: members of Walker Wayland Australasia network “If I compared Australia to other parts of Grant Thornton International Merger: with BDO Sydney and Melbourne office the world, up until two or three years ago INPACT Asia Pacific Added: Cheng & Co Australia (Perth) we had an amazing run and, to be slightly facetious, some firms grew despite them- Integra International Merger: Watson Business Accountants merged with Banks Group; Added: The Peak Partnership (Brisbane) selves. It wasn’t really hard to grow a firm Kreston International Added: Bentleys firms (Adelaide, Perth, Brisbane, Perth and Sydney) organically between 2000 and 2008/09. MSI Global Alliance Added: Hattam McCarthy Reeves (Adelaide) People achieved 15 or 20% growth just by doing nothing.” Nexia International Added: A firm in Perth and Melbourne For the foreseeable future, the strategy PKF International Lost: PKF East Coast Practice of firms has to be exactly right and the Praxity Lost: Bentleys firms (Adelaide, Perth, Brisbane, Perth and Sydney) challenge will be to convert the opportuni- Source: International Accounting Bulletin ties that do arise. <

www.InternationalAccountingBulletin.com November 2012 y 15 counTry survey souTh AFrIcA International Accounting Bulletin

Challenges ahead for the Rainbow nation Despite mild impacts of the Companies Act, South African firms are in a difficult situation as growth stalls, regulatory compliance demands increase and high inflation pushes staff costs up.Ana Gyorkos finds opportunities outside the country’s borders and non-audit services driving growth

outh Africa has been pushing regu- ly in Europe is making the ability of inves- ■ souTh AFrIcA latory compliance and advocated tors – who see opportunities in the African strongly on corporate integrated continent and South Africa – more difficult At a glance reporting, but, as the country brac- in terms of having investment capacity to revenue S come into the continent,” she says. es for an election next year, the economic issues such as high unemployment and Davis explains that another reason the most revenue: PwC, ZAR3.8bn inflation take centre stage. firm has done well is because of its inte - Least revenue: Integra Intr., ZAR34.6m The country’s high inflation has been grated practice across Africa. “South Afri- highest growth: Integra Intr., 111% attributed to a number of factors, nota - ca does have the biggest economy across Lowest growth: MGI, -24% bly rising fuel and electricity costs due to the African continent,” she said. “Mature increased pay for workers, higher food markets want to enter into Africa and are sTAFF and oil costs, and a weaker rand which looking for opportunities via South Africa. Largest workforce: PwC, 4,483 has resulted in imports becoming more But we are also seeing emerging markets smallest workforce: HLB Intr., 81 expensive. wanting to invest in South Africa. It’s about most partners: PwC, 285 For accounting firms it was more of the trying to get Africa to realise its potential most offices: PwC, 19 same this year as average growth among as growth agent for the global economy.” surveyed firms reached 10% for the second In the mid-tier arena, the sixth-largest economIc IndIcATors year running. With inflation at an average network, BDO South Africa, increased 6% the growth could be perceived as lower its earnings by 15% to ZAR348m. BDO Gdp: $390.9bn than in previous years. South Africa chairman John Spencer says Gdp growth: 2.6% Market leader PwC reported the last year was tough, saying “ are Inflation (cpI): 5.0% ZAR3,846m (£440.6m) in annual rev - difficult, margins are very tight, and we’re current Account balance: -3.3% of GDP -2.1% enues in the year to 30 June 2012, up 11%. finding tremendous competition, par - budget balance: 23.9% PwC South Africa senior partner Suresh ticularly from the bigger firms where they unemployment rate: Khana says the firm is happy with what come, in some cases, probably below cost population: 50.6m was achieved in the past fiscal year, espe - because they can do the work when they’re IAB survery IndIcATors cially with regards to the broader economic quiet.” context. A big chunk of BDO’s growth also came staff density: 1 accountant per 2,353 from mergers in the past 18 months. In people organic growth 2011 BDO South Africa merged with Cam- Notes: Totals apply to IAB surveyed data only, this includes Deloitte, the second-largest firm in South eron & Prentice in Cape Town and with firms that belong to global networks and associations

Africa, reported revenues of ZAR3,286.7m, the Johannesburg office of Moore Stephens. Source: International Accounting Bulletin, Timetric up 13%, making it the highest-growing Big “The growth has really been through merger Four firm. activity, not really from an increase in fees,” Deloitte chief operating officer Allen says Spencer. The fees have gone up a bit, among surveys associations was 6% in the Swiegers says all the firm’s growth was but it’s mostly from inflationary increases.” past fiscal year. organic. “We’ve fortunately had our major Among associations, Morison Inter - In 2011 when the revised Companies Act growth came out of our non-audit busi - national is at the helm, with its member came into effect there was a lot of nervous- ness,” he says. SizweNtsaluba Gobodo being the fifth- ness in the air, especially in the mid-tier The smallest of the Big Four, Ernst & largest single firm in the country with arena, over what the Act will signal. The Young (E&Y), earned ZAR2,100m in fees revenues of ZAR470m, overtaking Grant Companies Act brought about the classifi- and the firm’s chief operating officer Val Thornton South Africa by a few million. cation of a statutory audit, which has been Davies says it was a very positive year in SizweNtsaluba Gobodo was formed restricted to listed and public interest enti- terms of opportunities for the firm in South in early 2011 when SizweNtsaluba VSP ties only, while large and mid-sized private Africa and also across the broader conti - merged with Gobodo, creating the nation’s companies are now only subject to an inde- nent. Davies says: “Obviously the crisis in largest firm owned by black African pendent review. The very smallest compa- some of the more mature markets, especial- accountants. In general, average growth nies are exempt altogether. All companies

16 y November 2012 www.InternationalAccountingBulletin.com International Accounting Bulletin souTh AFrIcA counTry survey

are classified according to a ‘score’ which Adam says, like any big legislation, it’s still Accountant: “The new Companies Act dif- rises according to the size of the organisa- early days. “We’re settling into expecta- ferentiates between what an audit is and an tion along with other factors, such as a com- tions and there are interpretation issues independent review. That has created a lot pany’s turnover, the number of employees around certain things. It will be a gradual of confusion as to who is qualified to do and shareholders, and the extent to which adjustment rather than a spike, “Adam says. an audit and who is qualified to do an it is indebted. The interpretation issues Adam refers to independent review.” A year into the adoption of the Act the are mainly around the clarification over For BDO South Africa, as it is mainly in effects have been minimal and it is expected which professionals can carry on a review. competition with the large market play - that it will take another two to three years South African Institute of Chartered ers, Spencer says clients have been slow to before any real changes and consequences Accountants chief executive Matsobane change from having a formal audit to just a will be felt. Nexia SAB&T director Bashier Matlwa tells IAB’s sister magazine The review. “A lot of clients still want an audit

■ souTh AFrIcA

Networks - fee dAtA Fee split (%)

corporate revenue Growth Audit & Tax management corporate recovery/ Litigation rank name (ZArm) rate accounting services consulting finance insolvency support other year-end 1 PwC* 3,846.0 11% 54 10 36 - - - - Jun-12 2 Deloitte* 3,286.7 13% 45 9 30 3 - - 13 May-12 3 KPMG* 2,678.0 8% 45 11 39 5 - - - Aug-12 4 Ernst & Young* 2,100.0 11% 42 11 44 3 - - - Jun-12 5 Grant Thornton* 416.8 1% ------Sep-12 6 BDO* 348.9 15% 64 15 4 5 - - 12 Dec-11 7 PKF International* 334.2 14% 74 11 8 1 - - 6 Jun-12 8 Mazars* 308.4 1% 86 9 - 4 - - 1 Aug-12 9 Nexia International* 192.3 32% 64 12 8 2 1 1 12 Feb-12 10 Moore Stephens 172.5 3% 74 10 - 7 - - 9 Dec-12 International* 11 RSM International* (1) 114.7 9% 75 12 4 - - - 9 Jun-12 12 Baker Tilly International* 99.0 2% 77 10 2 3 - - 9 Feb-12 13 Crowe Horwath 91.6 0% 66 10 7 4 - 6 7 Feb-12 International* 14 HLB International* 36.6 5% 72 16 5 1 - - 6 Dec-11 Total revenue/growth 14,025.7 10%

Notes: *Disclaimer = Only data from the named member firm or the exclusive member firms within a network/association is included. Data relating to correspondent and non-exclusive member firms is not included. (1) RSM is represented in South Africa by RSM Betty & Dickson. Source: International Accounting Intelligence

AssoCIAtIoNs- fee dAtA Fee split (%)

corporate revenue Growth Audit & Tax management corporate recovery/ Litigation rank name (ZArm) rate accounting services consulting finance insolvency support other year-end 1 Morison International* (1) (e) 470.0 14% ------Dec-12 2 Praxity* 291.7 -4% 86 9 - 4 - - 1 Aug-12 3 MGI* 81.5 -24% ------Jun-12 4 GMN International* 73.3 5% 74 14 10 - - - 2 Feb-12 5 PrimeGlobal* 64.7 45% 71 17 6 1 - - 5 May-12 6 BKR International* 54.8 25% 69 18 9 - - 1 3 Mar-12 7 MSI Global Alliance* 52.5 14% 75 25 - - - - - Jun-12 8 IAPA* (2) 51.2 1% 50 30 5 - - - 15 n/a 9 Integra International* 34.6 111% 50 25 25 - - - - Jul-12 Total revenue/growth 1,174.3 7%

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

www.InternationalAccountingBulletin.com November 2012 y 17 counTry survey souTh AFrIcA International Accounting Bulletin

as they don’t perceive it will be a big sav- raising fee pressure for a few years and this under pressure when it comes to smaller ing if they go from a formal audit down year is no exception and with high inflation, family-owned businesses that have recently to a review,” he says. “It also gives them pricing has become even more challenging. opted for a listing. “With those assignments comfort that the numbers in their balance Additionally staff costs have gone up and you have a lot more compliance to cope sheets and income statements are right and regulatory compliance cost is high. with, things like IFRS and stock exchange that their partners can rely on whatever it Spencer says there is “huge fee pressure” regulation. It is extremely difficult to get a might be.” and that clients are looking to retender in proper increase on those fees, because the Khana says that PwC has very few chang- order to get a lower price. However, it is client can’t understand what the added es among SMEs as a result of the Act and challenging to offer a lower price as most of value is.” that banks and loan providers still ask for a the firm’s costs are fixed. “In South Africa As the firm won’t compromise on quality, full audit in most cases. we take a lot of our staff on a three-year Spencer says they need to accept that losses Assurance services bring in 62% of all contract because they are trainee account- will be made on such an assignment. fees earned among surveyed firms, making ants and you can’t just get rid of staff over- Sekese says fees are being cut as clients it the most important service line for most. night if you don’t have the work,” he says. are undergoing a rigorous cost-cutting pro- South African firms have been subject of Spencer says fees have been especially cess, looking to save on audits and other

■ souTh AFrIcA

Networks - stAff dAtA

Total staff Growth partners professional staff Admin staff offices rank name 2012 2011 rate 2012 2011 2012 2011 2012 2011 2012 2011 1 PwC* 4,483 4,206 7% 285 259 3,625 3,374 573 632 19 19 2 Deloitte* 3,777 3,695 2% 258 254 2,995 2,943 524 498 8 8 3 KPMG* 3,130 3,246 -4% 257 259 2,319 2,409 554 578 11 11 4 Ernst & Young* 2,244 2,169 3% 163 154 1630 1,561 451 454 6 10 5 PKF International* 1,057 943 12% 66 68 798 664 66 68 8 8 6 Grant Thornton* 871 824 6% 66 67 606 568 199 189 7 7 7 Mazars* 716 715 0% 46 46 496 515 174 154 8 8 8 BDO* 649 668 -3% 60 62 467 460 122 146 4 4 9 Moore Stephens International* 533 564 -5% 34 33 408 450 91 81 10 10 10 Nexia International* 523 488 7% 38 35 408 360 77 93 11 11 11 RSM International* (1) 293 303 -3% 26 25 209 221 58 57 4 4 12 Baker Tilly International* 262 282 -7% 18 18 194 189 50 75 3 3 13 Crowe Horwath International* 198 212 -7% 24 26 48 52 40 41 2 2 14 HLB International* 81 82 -1% 6 5 51 52 24 25 2 2 Totals 18,817 18,397 2% 1,347 1,311 14,254 13,818 3,003 3,091 103 107

Notes: *Disclaimer = Only data from the named member firm or the exclusive member firms within a network/association is included. Data relating to correspondent and non-exclusive member firms is not included. (1) RSM is represented in South Africa by RSM Betty & Dickson. Source: International Accounting Intelligence

AssoCIAtIoNs - stAff dAtA

Total staff Growth partners professional staff Admin staff offices rank name 2012 2011 rate 2012 2011 2012 2011 2012 2011 2012 2011 1 Morison International* (1) 895 882 1% 55 59 748 729 92 94 11 10 2 Praxity* 714 715 0% 51 46 489 515 174 154 8 8 3 GMN International* 335 285 18% 32 33 18 22 71 69 16 16 4 MGI* 200 308 -35% 19 23 14 21 167 264 3 5 5 PrimeGlobal* 198 104 90% 13 12 143 34 42 58 3 3 6 BKR International* 154 159 -3% 13 13 119 111 22 35 3 3 7 Integra International* 128 79 62% 8 3 82 51 38 25 5 2 8 MSI Global Alliance* 117 122 -4% 8 8 86 97 23 17 3 3 9 IAPA* 115 115 0% 11 11 9 9 95 95 3 1 Totals 2,856 2,769 3% 210 208 1,708 1,589 724 811 55 51

Notes: *Disclaimer = Only data from the named member firm or the exclusive member firms within a network/association is included. Data relating to correspondent and non-exclusive member firms is not included. (1) Morison International is represented in South Africa by SizweNtsalubaGobodo; (e) Morison International estimate. Source: International Accounting Intelligence

18 y November 2012 www.InternationalAccountingBulletin.com International Accounting Bulletin souTh AFrIcA counTry survey

professional services. “Clients are expect- Exchange (JSE). “There are 54 countries in the African con- ing more and more work for less and less Swiegers says that most companies are tinent with different tax legislations and fee,” he says. Nevertheless, Sekese’s firm, still trying to get their head around inte - companies investing either in South Africa SizweNtsaluba Gobodo, has had a good grating reporting. “There is no consistency across the continent but also companies year as the firm won a big audit engagement. around the country at this stage. Integrated investing into the African continent and “One of our biggest highlights was gaining reporting is a great thing, a great devel - wanting to operate in various jurisdictions the Transnet account and winning the ten- opment, but it still needs to develop and are finding it a challenge and we see oppor- der to audit their accounts in South Africa,” mature,” he says. tunities is assisting them,” she says. he says. “Normally such large tenders go to “The thing we see as a result of King III is Grant Thornton national chairman the Big Four firms. We are the first in South the change in behaviour among non-exec- Deepak Nagar the firm has made signifi- Africa to take on such a large assignment.” utive directors and their reluctance to sign cant investments in tax over the past two PwC’s Khana says that, with audit, there off on non-audit services. In other words, years and this has started paying dividends. are demands for high standards and increas- if we do the audit of a company, and we “Being part of a global organisation ing people costs. “Inflation is bringing up now want to do other legally and regulator ensures that the firm has had its fair share wages and people are expecting a minimum approved non-audit services, we find that of revenue from the areas of transfer pric- 6% increase which is in line with inflation. non-executive directors under King III are ing and international tax. If the market Keeping costs in line with revenues is a big reluctant to sign off on those services and conditions improve and we have a lot more challenge,” he says. prefer to go the ‘safer route’ and go with certainty from government regarding pol- another firm.” icy, then there is no doubt this will result Lead partner rotation Adam says that despite the majority of in increased capital flows into the country.” Another requirement of the Companies integrated reporting being dominated by Swiegers says that, for the first time, the Act is lead partner rotation every five years the Big Four at the moment, Nexia SAB&T firm’s consulting practice earned over a which, in line with other requirements, perceives it as a future growth area. billion rand, which is a big achievement. has not yet had a big effect on the market. Tax compliance is becoming more chal- “Separately from the consulting practice Davies says that regardless of a company’s lenging in South Africa given the moderni- we also have a risk advisory practice spe- size, partner rotation is going to create sation of the South African revenue services cialising in data analytics, forensic services, some level of disruption for the business, and the increased drive from a tax collec- IT security, internal audit and corporate the profession and the clients. “At a big firm tion perspective, according to Adam. governance services, which have all been we can accommodate that in terms of the “What has fuelled the 2.9% growth in our performing well,” he says. “We are offering ability to plan well in advance to make sure tax services is the number of international these services to non-audit clients because we’ve got the right people coming on at the enquirers we’re getting into South Africa. ■ souTh AFrIcA right time,” Davies says. People looking to expand into Africa look top 10 fIrms: fee dAtA “I do see it’s going to be a significant dis- at South Africa in order to enter the conti- advantage for smaller firms that find it dif- nent,” he says. rank Fee income Growth (ZArm) rate ficult to have the critical mass and be able to Spencer agrees and says international tax (%) respond to these rotational requirements,” work has had quite a good run and also ex- 1 PwC 3,846.0 11% she says. pat services, which is looking after people’s 2 Deloitte 3,286.7 13% Additionally, Davies notes the audit mar- tax when they leave South Africa and go 3 KPMG 2,678.0 8% ket is very stagnant, which has led to the elsewhere in Africa or to Europe. 4 Ernst & Young 2,100.0 11% firm increasingly offering advisory services A challenge in tax services is that most of within assurance, such as forensic and sus- the work is “the so-called loose flyer work. 5 SizweNtsalubaGobodo 470.0 14% (1) tainability services. You don’t know at the beginning of the year 6 Grant Thornton 416.8 1% “Forensics involves advising companies what is going to come.” International and charities in fraud detection and also For PwC, tax services contribute 11% of 7 BDO 348.9 15% preventing fraud. Climate change and all fees earned and Khana says it’s a robust 8 Mazars 308.4 1% sustainability is around making sure that business. 9 Nexia SAB&T 132.8 51% they are compliant, but also that our clients “We have seen growth in international have appropriate strategies around climate and transfer pricing growth as tax authori- 10 PKF Johannesburg 106.0 3% change. It’s an advisory offering within the ties applying pressure on companies and the 11 Greenwoods (2) 49.4 -9% assurance business.” level of compliance has increased,” he says. 12 Logista International 33.8 26% In the same time frame as the Companies “The African continent is a huge opportu - (3) Act another regulatory measure came into nity for growth, as many companies are 13 HLB Barnett Chown 28.4 7% effect, King III corporate governance rec - expanding to Africa and they are increas- 14 Charles Orbach & 26.5 35% ommendation. King III provides guidance ingly seeking tax and other advice.” Company (4) on companies’ sustainability reporting as Davies agrees and says tax compliance 15 Baker Tilly Morrison 23.0 0% Murray well as mandatory integrated reporting for presents a big opportunity for E&Y, specifi- Notes: (1) SizweNtsalubaGobodo is part of Morison International; (2) Greenwoods companies listed on the Johannesburg Stock cally for companies expanding into Africa. is part of Baker Tilly International; (3) Logista International is part of BKR International; (4) Charles Orbach & Company is part of Baker Tilly International; Source: International accounting Bulletin

www.InternationalAccountingBulletin.com November 2012 y 19 counTry survey souTh AFrIcA International Accounting Bulletin

of independence concerns.” there are a lot of opportunities in those mar- In terms of transactions, Swiegers says the kets especially because of national resources firm has found its niche market, which is in and our South African clients are more and the mid-cap market and that there is also an more looking into those economies.” group editor: Fred Crawley Tel: +44 (0)20 7406 6704 increase in so-called BEE transactions. “Black BDO South Africa has undergone several Email: [email protected]

economic empowerment (BEE) transactions mergers recently in order to improve market deputy editor: Ana Gyorkos have been driven by the government and it share. Tel: +44 (0)20 7406 6707 All the news that matters... means that a company sells 30% of its busi - “If you want to do work with listed com - Email: [email protected] ness to a black group. We are expecting an panies, you must have a certain size, critical survey researcher/reporter: Carlos Martin Tornero Tel: +44 (0)20 7406 6706 increase in these types of transactions,” he mass, otherwise you can’t afford all the tech- Email: [email protected] says. nical departments, the risk departments, the Cover Image: Jernej Zumer in one click Davies says there is also a lot of inter - compliance, all the experts you have to have group publisher: Andy Cook est in M&A transactions to allow for the stock exchange regulation,” Spencer Tel: +44 (0)20 7406 6561 investment into the African continent. says. Email: [email protected] “It’s perceived as lower risk and higher return “We have to be bigger than we are at the Chief sub-editor: Nick Midgley sub-editor: Kev Walsh if inbound investors –particularly from the moment to pay for those expenses, so it can be mature markets, but also from emerging mar- spread over more fees. Our fees are ZAR380m sales & marketing director: Sarah Wootton A concise round-up of: Tel: +44 (0)20 7406 6541 kets specifically India and China – can acquire and we want to grow to ZAR600m.” Email: [email protected]

existing assets, networks and infrastructure, There is no end, it seems, to the chronic Campaign solutions manager: Keri Farrell rather than having to do start-ups in many shortage of skilled staff in South Africa. While Tel: +44 (0)20 7406 6548 • The latest news Email: [email protected] small countries across Africa. This is a big most firms are keeping staff number at bay driver for M&A, the ability of companies to because of high inflation resulting in staff cost subscription enquiries: Jeannie Lam Tel: +44 (0)20 7406 6579 • Staff moves enter the African continent and experience the increase, the shortage of staff presents a very Email: [email protected] growth of the African continent through exist- real threat for the future. ing companies,” she says. Sekese says universities are still not For more information on VRL, visit our website at www.vrlfinancialnews.com • Regulatory and legislative changes producing enough accounting gradu - For more information on accessing ates to meet the industry demand. International Accounting Bulletin content market consolidation and expiation online, including a five-year archive, please While transactions have been a bit slower due “We have started seeing a decline in some uni- telephone +44 (0)20 406 6579 or email to the global economic downturn, consolida- versities of students registering for accounting [email protected] tion among firms in South Africa is a trend as studies. This will exacerbate the situation for London office Straight to your inbox well as expanding across the country’s board- the industry in future,” he says. 40-42 Hatton Garden, London EC1N 8EE, United Kingdom ers building a strong presence on the continent. Davies agrees and says there are not enough Tel: +44 (0)20 7936 6400 Adam says South African firms are fairly accounting students, especially a lack of black Fax: +44 (0)20 7406 5601 well established and predicts there will be accounting students. She says: “It’s not only Asia office a drive to expand in the rest of Africa, and about the number of people coming into the 20 Maxwell Road thinks the South African practice will be key profession, but also about retaining them. #04-02J, Maxwell House Singapore 069113 to that. “We’re always on the lookout for That is a challenge for all of the Big Four firms. Tel: +65 6383 4688 acquisitions, as and when smaller firms or Identifying people to bring in, but once they Fax: +65 6383 5433 groupings of partners,” he says qualify, keeping them in the organisation and Email: [email protected] S eke s e says t here h as b e en a lot of con sol id at ion. make them see the profession as a desirable Financial News Publishing Ltd, 2012 “We have made acquisitions of some smaller place to make their careers.” Registered in the UK No 6931627 ISSN 0265-0223 practitioners. This is partly because of the Spencer says one of the issues is that train- Unauthorised photocopying is illegal. The contents of this publication, either in whole or part, may not struggle coming from the Companies Act. The ees join the firm and the firm trains them to a be reproduced, stored in a data retrieval system smaller practitioners are struggling as a result high standard and once they qualify they leave or transmitted by any form or means, electronic, mechanical, photocopying, recording or otherwise, of the changes,” he says. to pursue a career in commerce. “The skills without the prior permission of the publishers. The Big Four players already have well con- we are mostly after at the moment is on the nected or integrated practices across South IT side, mostly things like data analytics and Africa, however the trend to expand beyond forensic accountancy. And, also, tax special- South Africa is also present among the mid- ists,” he concludes. tier. Sekese says: “SizweNtsaluba Gobodo is These are not easy times for the rainbow Sign up for our free newswire today at very active in the Southern African region, nation; however firms are aware and geared specifically in Namibia, Swaziland and Leso- up for the challenges ahead. tho. Our firm is operating there with affiliate Consolidation among mid-tier players and www.vrl-financial-news.com/signup firms and we mainly collaborate with them on partnerships and cooperations across Africa specialised projects, mainly to do with ICT. offer a lot of opportunities for firms and “We are planning to further expand into makes it an interesting market for future East Africa. And, also, Ghana and Nigeria as growth. <

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