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PRIMEGLOBAL IN THE PRESS

Press clips of PrimeGlobal 2020/21 PR coverage

St e ve H e a t h c o t e s p e a k s at the D i gi tal A ccou n tancy F or u m a b o u t t h e i m p o rtan ce of tech an d adv i sor y

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St e ve H e a t h c o t e i n t e r v i e w on the i mpor tan ce of E S R i n i ti ati v e s a n d h o w a c c o u n t a n c y fi r ms can h el p mi ti gate cl i mate chan ge t h ro u g h i n c re a s e d b usi n ess di scl osure an d repor ti ng

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P r i m e g l o b a l m e nt ions o n s o c ia l m e d ia

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Pr i m e Glo b a l l a u n c h e s t h e D E I i n i ti ati v e and CE O A cti on P l edge, a n d dis c u s s e s i t s i m p o r t an ce for the accoun ti n g fi r ms wi th the I n t e r n a t i o n a l A ccou n tin g Bu lletin

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P r i m e g l o b a l m e nt ions o n s o c ia l m e d ia

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P ri m e G l o b a l p re s s release re n ew m em ber f rom N e p a l pu bl i shed by IA B

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P ri m e G l o b a l p re s s release re n ew m em ber f rom N e p a l pu bl i shed by IA B

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P ri m e G l o b a l p re s s release re n ew m em ber f rom U z b e k i s t an pu bl i shed by IA B

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n t ry Repor t - Gh an a

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n t ry Repor t - Gh an a

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n t ry Repor t - Gh an a

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n t ry Repor t - Gh an a

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n t ry Repor t - Ken y a

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n t ry Repor t - Ken y a

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n t ry Repor t - Ken y a

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n t ry Repor t - Ken y a

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n t ry Repor t - Ken y a

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n t ry Repor t - Ken y a

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u ntr y Repor t - U S

IAB Rankings feature | THE US

prospects for

optimism across the us accounting industry Despite ongoing problems, there are clear signs that business optimism is returning among clients in the world’s largest economy. Paul Golden speaks to key figures in the US to find out more

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he Q4 2020 CPA Outlook Index published by AICPA found that positive sentiment had risen by a third since the middle of the year. Nearly half (49%) of the CPAs surveyed were optimistic about the prospects for their own organisation on the back of improving consumer demand and the stock market rebound. Average revenues are projected to increase by 1.2% in 2021 with a small increase in profitability of 0.2% and reported spending plans also showed improvement. “We now know for certain that we can be productive in serving our clients while working remotely and we are actively assisting clients in adapting to do the same, implementing new technology and establishing secure workplace environments for their own employees,” says Bill Hagaman, CEO and managing partner at HLB International member firm Withum. Kurt Gresens, managing partner at Allinial Global member firm Wipfli, observes that the remote working environment meant the firm’s recruiting efforts were not limited to specific regions. “We could attract talent from across the country and hire our most diverse new hire class to date, bringing greater diversity of thought and perspective to our teams,” he says. A December 2020 EisnerAmper survey of business leaders found that 70% said productivity either increased or stayed the same in a virtual work setting, and that 60% would let staff continue to work remotely post-pandemic. Sheila Enriquez, CEO and managing partner at HLB International member firm Briggs & Veselka Co, observes that government provided significant options for businesses through the crisis, primarily in the

form of the CARES Act and the Paycheck Protection Programme (PPP). “These offered businesses attractive loan options and loan forgiveness plans to help them survive and maintain employees on staff,” she says. “We recognised early on that these programmes were major benefits for our clients and immediately made efforts to help them understand the intricacies. We have enabled over $60m in PPP loan forgiveness through our consulting efforts.”

RETURNING TO WORK BKR has explored additional ways it can provide value to members in the form of resources and insights, such as providing members with a ‘back to work’ survey, to share with their employees in order to help them understand how employees were feeling about remote work and returning to work. “We have also created a toolkit around client accounting services to help firms accelerate their growth of these services,” says Jim Schmidt, vice-chair of the BKR Americas regional board. “Firm revenue is up according to our latest member survey, but we are witnessing some consolidation, which impacts membership long term.” CEO Jim Powers says Crowe is thankful it had the infrastructure in place to operate in the sudden ‘virtual first’ environment, but knows that it is not a sustainable long-term business model. “The delays to tax due dates and estimated tax payments certainly had a significant impact on our clients and our business,” he explains. “What used to be a 15 April date turned into a 15 July date and so on. Overall, this past year’s legislation and response to Covid-19 brought big changes in terms of timing, work and taxation.”

In terms of new opportunities, Gary Levy, chief strategy and growth officer at Nexia member firm CohnReznick, says it has expanded its restructuring and bankruptcyrelated capabilities and resources and is seeing a major need for transactional and capital markets advisory services as the investment community and companies in many different industries look for growth post-pandemic. “We are carefully watching the new administration to measure the impact of stimulus programmes as well as potential tax law changes,” he says. “We especially see opportunities in community development and renewable energy, while increasing legalisation of cannabis at state level has promoted growth in that industry.” From an M&A perspective, getting through a transaction is more difficult now suggests David Sutton, principal advisory services at HLB International member firm GHJ. “Many prospective buyers want to meet people face to face,” he says. “Much of it relies upon how businesses operated pre-Covid and how they have been able to respond to a change in consumer behaviour.” This is also true for the real estate sector says GHJ principal and real estate practice leader Richard Wu. “Multi-family residential seems to be the most successful at the moment, and emerging markets – states such as Arizona, Colorado and Texas – are very optimistic,” he says. “Quite possibly we did the best and most important work of our careers over the last 12 months,” says John Garvey, CEO at PrimeGlobal member firm Bland Garvey. “We had to step up as business leaders and provide the guidance and counsel our clients needed, which included budgeting and cashflow forecasting, assistance with PPP and

24 | March 2021 | Int ernat ional Account ing Bullet in

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u ntr y Repor t - U S

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Economic Injury Disaster Loan programmes and employee retention tax credits.” Jason Ferguson, managing partner at PrimeGlobal member firm Calvetti Ferguson, says it gained a significant number of middlemarket clients that chose to move from Big Four accounting firms, and recorded an increase in revenue due to Covid legislationrelated services. “One issue encountered was fee compression,” he continues. “While we expect to receive full payment from clients, as business partners, we worked with those who struggled to pay the full fee due to challenges brought on by the pandemic.” Ferguson notes that when there is economic disruption in the market there is an opportunity to initiate acquisitions and the firm closed two acquisitions at the start of this year. Talent acquisition also proved to be an area of success, with staff numbers growing by more than 20% year over year. From a regulatory perspective, specific areas that Nexia member firm CliftonLarsonAllen will continue to watch include capital markets, privacy and security, trade, immigration and taxation, notes CEO Jen Leary. “The outlook for this year varies depending on our clients’ industries and geographic locations, but it is fair to say that many are highly optimistic about the ability to return to growth by mid to late 2021,” she says. Michael Breit, vice-chair – strategic relationships at Allinial Global member firm EisnerAmper, says it has noted regulatory activity with respect to data protection, employee status, and fintech regulation. Potential state and local tax issues related to remote working must also be considered. “Clients may be subject to payroll tax, withholding changes as well as income tax filing requirements if staff are working in

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states other than where the company is located,” explains Howard Hoff, partner-incharge commercial business group at Morison KSi member firm Marks Paneth. “Our clients have been informed of these potential issues and are striving to address them.” Many companies will need to complete a single audit for the first time this year. The single audit must be completed by most organisations that expend $750,000 or more in federal funds in one fiscal year and is intended to ensure an organisation is using its federal funds correctly and is in compliance with all requirements and regulations. “Single audits can be complex affairs and require trained and experienced auditors,” explains BDO USA CEO Wayne Berson. “This is just one example of the regulatory and compliance issues companies are going to need to be aware of this year.”

ECONOMIC PROSPECTS Hagaman says that while President Biden is expected to advance tax increases, his stated goal is not to increase taxes on the middle class. For example, he proposes to increase the corporate tax rate from 21% to 28% and the maximum individual tax rate from 37% to 39.6%, but only for individuals earning more than $400,000 per year. On the question of how clients feel about the country’s economic prospects for the remainder of 2021, Paul Rudoy, partner at MGI Worldwide CPAAI member firm H2R, says the major overall concern is rolling out a more aggressive vaccine plan. “In western Pennsylvania, vaccine distribution is moving very slowly but hopefully with the new administration’s commitment to distribution that will improve,” he says. “There is also concern from

Michael Breit, EisnerAmper

Bill Wright, Shea Labagh Dobberstein

clients about how future tax increases will impact businesses as the discussed proposals would impact the ability to accumulate wealth.” Client feedback compiled by Allinial Global member firm KNAV suggests pent-up demand will lead to much higher growth this year. The Biden administration’s immigration policy is also expected to have a major impact as it is likely to take a more liberal approach. The firm’s clients generally expect the revised corporate tax rate to be 25% and anticipate changes are also expected with respect to GILTI or global intangible low-taxed income. The Biden administration is expected to do away with the 50% deduction available under IRC section 250 against the GILTI inclusion for taxpayers and the GILTI calculation is expected to be revised to a country level calculation – as against the current method which cumulates all the countries for calculation purposes. Talk of a rise in minimum wage is contributing to concerns among clients and reduced confidence in the near-term economic future that could result in slowdown – fiscal policy aside – adds Gresens, noting that large companies have said they are updating their scenario planning and forecasts for the year due to these possible changes. Bill Wright, principal at DFK member firm Shea Labagh Dobberstein, strikes a cautious note given that government programmes and forbearance on the part of their lenders and landlords staved off disaster for many businesses last year. “It is not clear how these clients will fare in 2021,” he concludes. “Some may not survive. In terms of new business opportunities for the firm, few companies initiated proactive moves to switch professional service providers in 2020, all of which may have an impact on our growth this year.”

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n tr y Repor t - U A E

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n tr y Repor t - U A E

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n tr y Repor t - U A E

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n t r y Repor t - Tu r k ey

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n t r y Repor t - Tu r k ey

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Stev e H e a t h c o t e j o i n s P r i m e G l o b al A l l i ance P ar tner In fl o for a shor t int erview dis c u s s i n g h o w D i g i t al A udi t wi l l i mpact the professi on

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P r i m e g l o b a l m e nt ions o n s o c ia l m e d ia

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In te r na t i o n a l A c c o u n t i n g Bu lletin i nter v i ews S tev e Heath co t e o n ho w m e m b e r fi r m s are offer i n g a r an ge of ser v i ces t o h e l p p o s i t i o n t h e msel v es as bu si n ess arch i tects industry focus | advisory

Advisory Firms

help business to build back better PrimeGlobal CEO Steve Heathcote explains how member firms are offering a range of services – including corporate recovery, restructuring, insolvency, business valuation and forensics – to help position accounting firms as business architects, providing advice to focus on building the parts of a business that have the capacity to prosper in the future

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usinesses worldwide face huge challenges which require hard decisions about their ongoing viability. To build back better, a business needs to have long term resilience, be able to anticipate demand, have the capacity to be agile and an ability to scale. Entrepreneurs have the drive and creativity to adapt and find new opportunities. However, businesses often do not have the know-how to make it happen. PrimeGlobal member firms offer a range of established services to help, including corporate recovery, restructuring, insolvency, business valuation and forensics. However, it has been critical for firms to understand what is unique about each business and blend their services accordingly. Firms are increasingly acting as business architects and structural engineers, providing advice to focus on building the parts of a business that have the capacity to prosper in the future. Over the next stages of the pandemic, and recovery, this role will be even more critical as businesses face fundamental choices.

MAKING A DIFFERENCE Over the course of the pandemic, firms have helped businesses stabilise their operations. Tom Murray, partner at Irish firm Friel Stafford, compares his firm’s role to that of an air traffic controller. He notes: “We have helped firms understand and anticipate the danger ahead, moving them into a holding position – helping them streamline, receive government support and reduce cost, so they are in the best position as the fog begins to clear.”

Philip Armstrong, restructuring advisory partner at UK firm FRP, observes that government support has helped to prevent a significant rise in insolvencies. This has provided an opportunity to help business anticipate and adapt. FRP’s ‘Review. Adapt. Evolve.’ solution has helped business leaders prepare for the future by tailoring advice from a range of specialists. Support has included helping businesses focus on their core proposition, renegotiating debt and obtaining additional equity. For some, priorities have changed: they have considered options to realise the value of their business. Advisory firms have supported owners to secure sales of assets which then help to build other growing businesses. Murray believes advisory firms play a crucial role to help recycle business, so assets are in the right place to meet future demand. Advisory firms are proud of the difference they have been able to make during the pandemic. Armstrong highlights how FRP helped save viable businesses and keep people in their jobs. One example is UK restaurant chain Carluccio’s, where FRP secured a sale of 31 sites – saving 872 jobs. Richard Pollack, director-in-charge of forensic and advisory services at US firm Berkowitz Pollack Brant, comments that the firm was able to complete several equity sales and help creditors recover debt throughout the pandemic. Miguel Angel Sepúlveda González, managing partner at Mexican firm Traust, notes that his firm has helped clients transform their finance functions so that they are able to get up-to-date information. This has enabled businesses to control cash and develop essential financial scenarios.

TURBULENCE AHEAD Businesses are going to be facing huge turbulence in the coming months, as government support diminishes, landlords take enforcement action as rental holidays end, and banks get tougher on credit terms. In addition to having less financial support, businesses will have to start paying back debt generated through government support schemes, while operating with less revenue and reduced staff. The environment will continue to be uncertain and volatile. There is a risk of a huge number of insolvencies impacting thousands of workers. Armstrong comments that there is clearly a problem if costs are not matched by operating revenue because of the need to pay deferred liabilities that have built up over the pandemic. The media often comments on the risk from unviable companies having been kept alive through government funding. However, there is a bigger risk that good companies will not be able to survive because of insufficient working capital. Advisory firms can help ensure that business has a strong understanding of working capital requirements; adequate cash will buy time and allow for more options. Advisory firms can create forecasting models to anticipate pressure points, stress-test and identify solutions. Murray comments that there could be a significant increase in demand as lockdown restrictions reduce and consumers rush to enjoy services that have been denied for so long. Businesses need to avoid overtrading, but also ensure that they can scale up securely to meet demand.

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Pollack agrees, noting that the biggest impact they can have for their clients, and wider society, is to focus on their people, so they are ready to support clients. He says: “Our people are what makes the difference. From the start of the pandemic, we ensured they felt secure in their jobs and despite uncertainty we did not reduce staff – in fact, we have recruited. We ensure staff have access to mentors and coaching so they never feel alone. We have created a team spirit through regular meetings and having fun – for example, taking part in virtual escape rooms. The whole team share a collective passion and celebrate success together.” The focus on team building within advisory firms is essential for well-being and to create a collaborative culture which brings together the right expertise to support clients.

Philip Armstrong, FRP

PREPARE TO ACT

Richard Pollack, Berkowitz Pollack Brant

Sepulveda feels that his firm is ready to complete business health checks, helping firms anticipate and pivot its business to meet new demand. He is proud of how it has helped manufacturing clients move production to support the health sector. Business will need help to operate with agility as conditions continue to change rapidly. A key consideration for businesses is to consider whether releasing equity will provide them with capital to overcome short-term challenges and respond to opportunity. Private equity has significant levels of capital to invest, which is likely to be released as lockdowns eases. This could allow businesses to obtain the capital they need and build back for the long term. Many business owners fear losing control if they sell equity; however, as Armstrong says: “100% of nothing is a lot worse than 80% of a very strong business.” Advisory firms help a business assess whether to divest non-core parts of their operations in cases where it will reduce cost and help focus on building the core business. When attractive assets are put on the market, investors are moving quickly. For some business owners an exit route might suit their position. Advisory firms provide advice to ensure a successful outcome

Miguel Angel Sepúlveda González, Traust

for the owner and the long-term viability of the business. The circumstances of each business are different, advisory firms understand the unique needs of the owners and business and assign staff with the right experience across service lines to help. To attract the capital needed to build for the future, the firms help ensure that a business can demonstrate it is resilient, the earnings are maintainable, and it has the potential to grow.

READY TO BUILD Advisory firms’ teams have been exceptionally busy over the pandemic. Professionals have worked hard for their clients, working long hours to help them survive and give advice to help them adapt and remain viable. Business will need their help more than ever over the coming year. It is critical, therefore, that the firms’ teams feel energised and are ready to support business. Murray notes that they have played an important role to “talk owners down from the ledge, providing encouragement, empathy and counselling”. Ensuring that the team feels energised and equipped to do this is important.

For business it is important to act now to be ready for the challenges and opportunities ahead. Engaging an advisory firm gives time to assess the issues and consider a range of possible options. Armstrong uses the analogy of pruning plants – removing dead branches and leaves to create light and oxygen so other plants can grow. The firm will help business look at the big picture and align capital and attention to the parts of the business which will flourish. He notes that they help negotiate win-win arrangements; for example, rent payments linked to revenue – the rent drops in difficult times and increases when the business is growing. The landlord maintains reliable tenants, and the business can manage its working capital effectively. Sepulveda and Murray comment that it is critical businesses speak to firms as early as possible, to ensure they can work on scenarios together. Pollack notes that being a member of PrimeGlobal is key, as the association enables his firm to connect and collaborate with other firms to provide clients with the advice, expertise and help they need. The critical role advisory firms have to build viable businesses is not always visible or well understood. Advisory firms help to calm even the most severe of storms. They deserve recognition for the essential role they play. We can all be confident about the future, knowing these firms are ready to work side by side with business. During difficult times, the whole accounting profession can be proud of the difference it is making.

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In te r na t i o n a l A c c o u n t i n g Bu lletin i nter v i ews S tev e Heath co t e o n P re s i d e n t Bi den ’s Gl obal Tax Refor ms

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In te r na t i o n a l A c c o u n t i n g Bu lletin i nter v i ews S tev e Heath co t e o n t h e A c c o u n t i n g In du str y ’s Gl obal F u ture

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In te r na t i o n a l A c c o u n t i n g Bu lletin i nter v i ews S tev e Heath co t e o n t h e A c c o u n t i n g In du str y ’s Gl obal F u ture

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International Accounting Bulletin interviews Steve Heathcote on the performance and growth of global accounting associations despite the pandemic

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International Accounting Bulletin interviews Steve Heathcote on the performance and growth of global accounting associations despite the pandemic

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In te r n a t i o n a l A c c o u n t i n g Bu lletin repor ts on P r i meGl obal m a k i n g a s i g n i fi c an t Break th rough i nto Ch i na

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Mo o re s R o w l an d repor ts on P r i meGl obal m a k i n g a s i g n i fi c an t Break th rough i nto Ch i na

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Mo o re s R o w l an d repor ts on P r i meGl obal m a k i n g a s i g n i fi c an t Break th rough i nto Ch i na

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Ins i d e P u b l i c A c c o u n tin g i n ter v i ews M i ch el l e A r nol d on t h e A c c o u n t i n g A s s o c i a t i ons chal l en ges an d conti n u ed i mpor tance t o c u r re n t a nd prospecti v e member s

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Ne w P r i m e G l o b a l m e m b e r a n n o unc e m e n t s

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Ne w P r i m e G l o b a l m e m b e r a n n o unc e m e n t s

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A cc ou n t i n g We b i n t e r vi ews S tev e Heathcote on the fu ture o f a c c o u n t i n g a n d fi n a n ce ov er the n ext months and y ear s

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A cc ou n t i n g We b i n t e r vi ews S tev e Heathcote on the fu ture o f a c c o u n t i n g a n d fi n a n ce ov er the n ext months and y ear s

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A cc ou n t i n g We b i n t e r vi ews S tev e Heathcote on the fu ture o f a c c o u n t i n g a n d fi n a n ce ov er the n ext months and y ear s

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In te r na t i o n a l A c c o u n t i n g Bu lletin i nter v i ews S tev e Heath co t e o n t h e A c c o u n t i n g In du str y ’s Gl obal F u ture

world survey | outlook

reimagining the

accounting industry’s global future After a tumultuous year for the global economy, there is a sliver of hope that the roll-out of Covid-19 vaccination programmes may enable the accounting industry to plan a more certain road ahead. Zoya Malik spoke to the industry’s global CEOs to get a feel for how they have coped with and assessed pandemic challenges, and the new initiatives they have set for 2021

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xactly what the post-pandemic landscape will look like is open for debate, but there is no doubt that restoring the health of the world’s economic and commercial engine is our next priority. To this end, while the accountancy industry is as susceptible to the vagaries of the course of the ongoing pandemic as any other, firms are planning and implementing strategies for survival today and growth tomorrow. Clients have come to expect their auditor to have a global purview, but combining this reach with consistency in providing excellence, along with a dedicated methodology, is often a fundamental challenge. Core to solving this challenge is giving auditors a clear, specialist career path. The exit of smaller accounting and advisory firms and the growing pressure towards consolidation on smaller market participants has been playing out for some time, and pushed along by the global emergency, the competitive landscape is changing dramatically. In business, as in other areas of life, the most difficult decisions often concern people, and from the outset of the pandemic, the biggest concern for every CEO has been ensuring that their colleagues can continue to work safely, efficiently and happily while maintaining business continuity and a highquality service delivery. Moving significant numbers of people over to an entirely remote working model almost overnight has been a challenging task for everyone.

first is the need to adjust to the ‘new normal’, changing business models and strategies. Second is adopting – or in many cases, accelerating – the adoption of new technology to continue providing traditional services in a more efficient manner. Third is adjusting future resource planning, both human and physical, to what will suit this brave new world.

AUDIT

Ted Verkade, Baker Tilly

Apart from the pandemic, other significant geopolitical events have affected the global economy throughout 2020; the final postBrexit trade agreement between the UK and the EU, Joe Biden’s election victory and the subsequent further polarisation in US politics, China’s growing influence in all corners of the world, the inexorable march of rightwing politics in India, race relation debates enflamed by the death of George Floyd etc. These and many other factors affect businesses and livelihoods, and combined with the disastrous economic effects of Covid-19, companies across the globe are having to look at three key areas. The

One cornerstone of the accountancy industry, the audit function, has been undergoing something of a transformation over the past few years, with an emphasis on making it a specialist service unit to achieve a type of independence while maintaining quality. Audit and assurance is crucial for the efficient functioning of all economies and capital markets. It may become even more relevant as sustainability and climate performance come into greater focus, and the related societal demands for transparent and reliable reporting in those areas increases. The collapse of Enron 20 years ago acted as a wake-up call to the accounting profession, and impacted several aspects of the industry: auditing, regulatory oversight, off-balance sheet entities, lack of strong internal controls and conflicts of interest between advisory and auditing services. Starting with the passing of the Sarbanes Oxley Act, continuing with the introduction of new internal accounting control continues on page 16

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In te r na t i o n a l A c c o u n t i n g Bu lletin i nter v i ews S tev e Heath co t e o n t h e A c c o u n t i n g In du str y ’s Gl obal F u ture

world survey | outlook

perhaps, reduce the amount of advisory work done for attestation clients.” One size does not fit all, and the pandemic has brought that into sharp relief. For example, Rhys Madoc, CEO at UHY International, is also concerned about the problem of maintaining quality and states: “Standards and robust communication are the development blocks for audit practices working internationally. For UHY, each member of our network is independent and, therefore, must be compliant with their local regulatory bodies. Additionally, we participate in the Forum of Firms and members must also comply with IFAC’s International Standard on Quality Control 1 which provides a framework for independence quality control.” Similarly, Allinial Global president and "|;r_;m vঞmķ " ;mvom 7 bvouv CEO Mark Koziel focuses on the fact that increased scrutiny does not necessarily legislation in Europe, Asia and Australia, and change what has always been done globally. culminating in the birth of the PCAOB in He explains: “Regarding audit and nonthe US and other similar oversight boards audit work, the advantage of associations of in the EU, the public accounting profession independent firms like Allinial Global is that had started to take a serious look at the they can easily provide separation between role of corporate governance, and that of the firms that provide audit and non-audit audit committees in particular. This led to services.” a decrease in restatements and audit failures, There is broad agreement among industry until Wirecard in 2020. The scandal at the leaders that training and specialisation is German fintech company only helped to key. As BDO’s global CEO, Keith Farlinger, emphasise that at the heart of the audit states: “In pursuing high-quality audits, we function is regulation and quality. The new ISQMs, published by the IAASB at the end of 2020, are a positive development in this direction, and present firms with an opportunity to improve and harmonise quality assurance. As Baker Tilly CEO Ted Verkade puts it: “Auditor independence continues to be important and we keep a close watch on the ongoing debate over audit regulation in the are focused on hiring specialists who can UK and, in the aftermath of Wirecard, are support our engagement teams in serving evaluating the threats and opportunities of our key clients, for instance in the areas of different scenarios for our member firms.” information technology security, valuation Baker Tilly’s approach is to rely on a and sustainability.” standardised Global Audit Methodology, Dr Christian Gorny, CEO at ETL Global, providing members with a platform for goes so far as to say: “General practitioners delivering consistent high-quality audits. will not survive.” This, rather chilling, Stephen Austin, CPA managing partner statement also highlights one of the biggest at Integra International member firm challenges for the audit profession, especially Swenson Advisors LLP, adds: “Wirecard will post-Covid 19; how do you repurpose be an example that due diligence by top personnel for specialist tasks? management is critical and that advisory Of course, firms can hire their way to services can impact the clarity of the audit success, but the key may be in what Gorny performed. The lack of strong regulatory goes on to say, that “adding technological oversight allows fraud to perpetrate, coupled capabilities to the academic education of our with the complexity of a digital world. The member firms’ audit professionals will clearly Big 4 are cognisant of this weakness and the differentiate their audit services from those of need to bolster their independence rules and,

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the competitors and attract talented staff in the future. Member firms must grow external as well as in-house training, with continuous e-learning becoming more prevalent.” PrimeGlobal CEO Steve Heathcote adds that its approach is similar, in “helping firms share good practices, by introducing them to technology through partnerships with data analytics and AI software companies, by providing training through our remote auditing courses, and by supporting secondments between firms.

Standards and robust communication are the development blocks for audit practices working internationally This “sharing” of experience, by deploying individuals from one firm to another, points to a potential solution for the problem of redundancy which, ironically, is partly being driven by the spread of the same technology helping to propel digital training courses and partly by the need to develop specialist skills. RSM International CEO Jean Stephens appears to underscore this trend by explaining: “As part of the roll-out of our global audit methodology and supporting platform, which scales according to client complexity and circumstance, we hosted hundreds of partners and managers globally in a series of ‘train the trainer’ sessions. We also facilitated a number of inter-firm secondments for our best and brightest auditors, prior to the pandemic hitting.” continues on page 18

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world survey | outlook

during the pandemic, with its disruptive impact, came from specific industries. It laid bare the vulnerability of globalisation and global supply chains as clients sought advice on how to navigate through the crisis – services such as financing, tax, government incentives, recovery, restructuring and human resource issues. Of course, the pandemic was not the only show in town: other political and societal events and changes over the past year have also been keen factors. “Last year, we saw accountants demonstrate incredible resilience, empathy, passion and delivery,” says Russell Bedford International CEO Stephen Hamlet. “Businesses looked at accountants as the front line to those under immense financial pressure, as much as the nurses who were looking after those medically Mark Koziel, Allinial Global affected. “Following the initial fire-fighting and The crisis has highlighted the value of assisting clients with specific Covid-related audit. Audit reports are being scrutinised, and stimulus packages, clients needed support there is an opportunity to provide a wider with restructuring and strategic planning to range of assurance covering sustainability and ensure businesses survived.” governance matters. Audits require differing There has not been much regional variance. approaches; for example, PIEs have more Markets have been influenced by the restrictions and audit practices need strong evolution of the pandemic and government technical and quality departments to advise interventions. The real difference has been on the best approach. They also need trained between industries, with healthcare and staff and robust, consistently applied audit methodology. The major upcoming issue for firms is the introduction of the Quality Management Standards, which further encourage firms to proactively manage quality and ensure ethics and independence are addressed appropriately. In that process, it is possible that firms will proactively manage the risk profile of their audit client base which could lead to some hospitality at opposite ends of the spectrum. entities looking for new auditors. Madoc adds that an additional worry has Training, retraining and a commitment been that cybersecurity continues to cause to continual education seem to be a postconcern for their clients leading to increased Covid priority, especially as the industry demand in that area. looks to avoid significant layoffs. Kreston The spotlight, throughout 2020, has firmly International CEO Liza Robbins sums it up been on the IT sector. Farlinger explains: best when she says the key to success, going “IT services have shown solid growth across forward, will be learning how to work in a all markets as firms have shifted to remote remote environment and “the appropriate working, needing robust systems with upexercise of professional scepticism”. to-date solutions. M&A and other corporate finance services saw an initial impact as the pandemic erupted in the spring of 2020, but has subsequently rebounded.” Geopolitical and regulatory trends are, Verkade adds: “M&A, transaction advisory, typically, interrelated. The current pandemic valuation and all technology-related areas has thrown up significant economic, have been in high demand on the advisory regulatory and societal challenges and events side, but from a corporate finance perspective, like these tend to offer excellent business investment companies like private equity opportunities. funds, have high levels of dry powder The greatest demand for advisory services

Keith Farlinger, BDO

unallocated and are looking for investments. Even before large parts of the world were forced to work from home, companies were looking at some form of digital transformation, seeking guidance on systems upgrades and business intelligence help.” Although each country’s situation is based on a set of specific circumstances and differentiated legal frameworks, firms from several jurisdictions have been collaborating

M&A, transaction advisory, valuation and all technology-related areas have been in high demand on the advisory side

ADVISORY

to construct strong digital consulting capabilities with a constant exchange of knowledge and expertise. The impact on revenue has been felt across the board. For example, globally, RSM grew by 9.2% in 2020, taking revenues to $6.3bn and consulting services saw the highest growth with an increase of 15%, Audit 10% and 6% in tax. As Stephens explains: “North America and Asia-Pacific experienced the greatest growth, particularly in consulting services driven by significant demand for management and business consulting, IT consulting and risk management as middle market businesses responded to the pandemic, reorganised their business operations and rapidly digitised their infrastructure. Europe and the Middle East also saw solid growth. However, growth in the emerging economies of Africa and Latin continues on page 20

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world survey | outlook

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America was more static as these markets have been somewhat challenged by a decline in international investment.” Koziel adds. “Technology advisory was still strong in 2020, as many companies needed help moving to the cloud and putting additional controls in place. I’d include client accounting services in that category; it was a high-growth area for firms that embed advisory into their transactional client accounting.” Broadly, however, other advisory services declined in 2020 as companies tightened up on spending and focused on must-have services. Perhaps the most interesting aspect of this is how the advisory market is playing out in the two biggest economies in the world, and the opportunities that this rivalry is creating. For lease accounting advisory services to implement a very complex standard in the US, Topic 842, takes a substantial amount of time and effort to identify and properly account for trillions of dollars of ‘off balance sheet’ liabilities and have them properly stated on the global corporate balance sheets. Austin expounds: “The movement towards greater digitisation will continue to require additional expertise, with companies looking to improve their efforts to meet their customers’ expectations and yet still provide transparency for others to look into the accuracy of the accounting records. There is growing concern that big techs, which can own your cloud-based records, may not always act as friendly partners, and they are flexing their muscles in the US.” Conversely, China, as it seeks to extend its global influence, has managed to propel Alibaba Cloud to the point that it is now the

third-largest cloud provider for Infrastructure as a Service (IaaS) in the world, and number one in Asia for cloud services, as compared with AWS in the US. The Chinese appear to have bigger technological and monetary muscles to flex, and although audit is still dominant, hitherto deficient off-the-shelf technology solutions are emerging, and with them demand for advisory services. Across the board, clients are demanding increased support with regard to the optimisation of their businesses, and assistance with the digitisation of business processes. With the profession implementating new technologies, as well as restructuring processes within existing business models, some projects are even triggering product innovation and new business models for clients. Of course, until tourism resumes and travel bans are lifted there will be little that travel and hospitality firms can do, but when they do, it will be a matter of assisting clients with safety procedures and technology protocols in the new normal.

TAXATION Despite the pandemic, demand for advice in direct and indirect taxation remains strong as a consequence of globalisation in trade and manufacturing, even for small-scale businesses. Perhaps accelerated by the global emergency, 2020 has seen an increase in the pace with which online services have emerged, whether B2B or B2C, and this is creating potential new avenues of business for tax specialists.

Steve Heathcote, PrimeGlobal

With air travel coming to an effective standstill, individuals who were typically globally mobile and had personal tax affairs organised accordingly, now find themselves having to address the implications of being ‘stuck’ in one country for a prolonged period. This potentially has permanent establishment implications, which has created further opportunities. Taxation advisory has always been fraught with challenges. Some are ever present such as territorial variances depending on the domestic economic and political factors at play. For example, in the UK there has been increased demand for indirect tax services and structuring advice because of the 11th-hour uncertainty surrounding Brexit. Similarly, the impact of US tax reform in 2017, which made changes to individual income tax,

There is growing concern that big techs, which can own your cloud-based records, may not always act as friendly partners Other factors that are leading to the increased demand for tax advisory services and support are the rise of nationalism, more stringent tax enforcement, the ubiquity of global tariff and trade disputes, increased digitisation of tax systems and processes, and an era of hyper-legislation. Unsurprisingly, there has also been universal demand for assistance in accessing grants, relief and government support packages in relation to the pandemic.

estate tax, corporate tax, and even non-profit organisations, is still being felt, and with a new president in place, there is potential for further change on the horizon. As Farlinger opines: “Companies have changed their approach to tax governance in response to scrutiny from tax authorities. Tax assurance and risk management services are growing to meet this demand.” Austin adds: “The highest number of questions we deal with are to do with VAT continues on page 22

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world survey | outlook

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in the EU, transfer pricing and DAC 6 reporting issues. Our primary growth area is dealing with new tax regulations based on BEPS OECD.” According to Stephens, RSM members recorded a 6% increase in revenue from the provision of tax services in 2020. This was predominantly fuelled by increased demand for tax advisory services addressing the complexity of a changing legislative landscape caused by the Covid-19 crisis. Demand also accelerated for tax advice regarding M&A opportunities for strategic deals and, in the latter part of the year, restructuring and

increased requirement of firms to engage in transfer pricing and to understand VAT and its equivalent in counties with which they do business.” The other great challenge for the industry is in the digitisation of taxation regimes and services. Therefore, because jurisdictions have different tax requirements and regulations, a one-size-fits-all technology solution is difficult to achieve. There are other potential obstacles, such as the specification of some software products requiring the updating of IT hardware, local providers offering favourable competitive pricing to global licenses, localised product training at times being difficult to achieve, the availability of advice, guidance and instructions in multiple languages, gaining buy-in from all offices to the benefits of a new software package, and ensuring that the software is up to date and capable of dealing with multiple types of business structures in multiple jurisdictions. How does one begin to deal with such a daunting list? “Western economies often use similar packages which can be integrated through APIs,” states Heathcote. “US firms often partner with UK firms as packages are similar and the UK can make connections to Europe, despite Brexit”. Gorny says ETL deals with the development and implementation of tax-relevant technologies by having an IT company, eurodata, as a 100% subsidiary

US firms often partner with UK firms as packages are similar and the UK can make connections to Europe, despite brexit transaction support as businesses looked for recovery opportunities. Transfer pricing is an important area of focus at this time, with the drive by many governments to protect their tax base. Andrew Collier, director of quality and professional standards at Kreston International, believes that VAT and GST are a major drive for entities as there can be significant costs if supply chains are not planned appropriately. The exit of the UK from the EU is expected to increase demand for these services for businesses that operate within the EU and the UK. MSI Global Alliance CEO Tim Wilson reinforces this view, stating: “We have seen an

in the ETL group and, thereby, seeking to achieve its tech goals efficiently and effectively in-house, without being dependent on external sources. For anyone attempting to implement technological solutions, the starting point has to be to look for commonalities in processes. For example, the process of filing an individual tax return is similar across many territories, and that is a process that naturally lends itself to Robotic Process Automation (RPA) technology. Research and development tax regimes have commonalities in their structure and claiming requirements, lending themselves to automation and eventually machine

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learning technologies. Of course, to make these connections it is important to have the right skill set within your teams, people who appreciate disruptive technologies but who also have an understanding of taxation. The industry is seeing a trend in the recruitment of tax technologists across the board, with one firm even reporting that every tax professional it recruits is matched with a technology recruit in the same team. Additional priorities tend to differ in importance, depending on the region in question. For example, in North America recruiting and retaining the necessary talent to implement technology is key, while in Asia-Pacific it is about redefining roles and responsibilities. Automating routine processes and redefining workflows are one thing, but keeping up with the rapid pace of change across multiple jurisdictions is the real challenge. The key, for many in the industry, will be partnering with software companies to unlock the full potential that disruptive technologies offer in order to make the delivery of tax advisory services more efficient and more profitable. In order to successfully implement new technologies, a common and collaborative approach is critical to ensure that, irrespective of the software and tools used, client service delivery is cohesive.

RECRUITMENT Attracting and integrating new talent is one of the greatest challenges that companies have to face in order to meet organisational needs, and this has not changed during the pandemic.

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world survey | outlook

problem-solving. Last year taught the profession that flexibility is key, and strong ability in advisory is vital. Those firms who were able to adapt, promptly and effectively, are those that did well.” Farlinger agrees, adding: “Recruiting people with the right academic or technical backgrounds is still important, but we also focus on intangible skills, such as communication, collaboration, flexibility, creativity and management abilities. Also, the potential of a candidate, and their natural ‘fit’ with the organisation’s DNA is oftentimes more important than past experience.” Hanging like a dreaded spectre over any discussion these days is the shadow of automation. Touching every sector of the economy, most of us no longer talk about ‘what if?’ rather than ‘what now?’ This is an "|;r_;m -lѴ;|ķ ! vv;ѴѴ ;7=ou7 m|;um-ঞom-Ѵ important juncture for all societies, because it allows us to take practical, meaningful steps In practical terms, interviews and forward. Accountancy is no different from presentations cannot always take place in any other sector and, in combination with a person and therefore have to be replaced by strong legal and regulatory framework and virtual solutions. Most ‘traditional’ faceattention to improving processes, the industry to-face recruitment events, such as campus can take full advantage of the technological recruitment, can no longer take place. The advances on offer. main challenge has been to fill this gap with Koziel talks about a studied approach to creative alternatives, whereby firms can automation, stating: “While automation continue to reach and attract new candidates, and AI may replace lower-level tasks, they convey a sense of a firm’s culture, and ensure create greater opportunity to become trusted a positive candidate experience. advisors to our clients. I think it’s best to Across the profession, recruiting has break this down by service line. For audit, softened slightly during the pandemic automation could eliminate mundane, because many firms are unsure of what lower-level tasks, but having access to 100% the future looks like. Globally, firms have of client data provides the opportunity to struggled to find talent in the mid-level work differently and spend more time in risk experience range, from manager to director assessment and auditing for the areas that level, but training, onboarding and getting matter most. Plus, blockchain will continue new talent accustomed to the firm’s culture to grow and increase opportunities for firms. were the greatest challenges. “Similarly, as firms automate indirect tax Accountants may traditionally have been filings, they are finding that clients have viewed purely as numbers specialists, but even more need for advisory. Finally, client a range of skills has always been valued. accounting, potentially, has the greatest Professionals require a strong mix of growth opportunity. A firm can offer numeracy, commerciality, technological automated transactions that eliminate adaptability, understanding of data science, client staff and then move upstream to offer and strong soft-skills such as critical thinking, additional data insights and advisory services.” compassion and understanding as they assess Digital investment should, therefore, be the human impact of business decisions. viewed as a medium- to long-term strategic In today’s environment, having a good benefit, as opposed to a necessary evil, which level of emotional intelligence is extremely is how it has been perceived in the past. If important. Hamlet alludes to this when anything, 2020 has shown just how essential he says: “I believe the term ‘traditional technology is in conducting day-to-day accountant’ will soon be something of the business. Of course, automation, ML and AI past; if not already. Firms are now seeking will replace some processes and, ultimately, individuals from IT backgrounds to cope jobs. Often however, rather than replacing with the adaptability of new technologies, roles, technology is doing the tasks that free in addition to those with skills in strategy, up people to add greater value in other areas. decision-making, communication and

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As Robbins says: “Roles are not being replaced on a significant level, although the skill mix is changing with the need for more recruits to have digital skills. Digital investment is aimed at improving quality and effectiveness, including improving the client experience.”

CONFERENCES AND EVENTS In the midst of the pandemic, virtual events have been all that are really possible, and many firms are finding that for the mental well-being of their staff, having these gettogethers is paramount. Many have reaped the benefits of being able to work from home; it saves time and money, keeps people safe, and has enabled firms to explore new ways of doing things. Many of the meetings that had previously been conducted in person are proving to be as effective, or even more so, in a virtual environment, which could mean that once society moves back to in-person contact, that time could be used to evolve discussions to more sophisticated levels. This situation has also given the industry the opportunity to open some network-wide activities to a far greater pool of individuals. Many organisations are in the process of planning hybrid events so they can maintain that level of increased engagement after the pandemic, and this change is likely to become permanent as technology improves. Wilson affirms this when he says: “Virtual meetings have been really successful within MSI, especially our international conference which had 1,900 registrants, thereby increasing our reach into firms. These virtual

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world survey | outlook

meetings will continue in 2021 and beyond but will be augmented by physical ones in due course. The physical ones are essential to really build relationships and trust.” Heathcote agrees, adding: “Our teams worked remotely before the crisis, so we managed well. We have got to know our members even better as partners are more accessible and we will offer a mixed model moving forward. We will continue to provide virtual opportunities to engage, targeting those with common interests to connect while in-person events will seek to create relationships that generate opportunities.” The numbers that can participate online are mindboggling, as Stephens highlights when talking about RSM’s annual World Conference. She says: “We rebranded the event as the Festival of Reimagination, and what was previously available to just a few hundred was opened up to all 48,000 of our colleagues, resulting in phenomenal attendance levels, never before experienced.” The big question, to which probably no one has a clear answer, is when in-person events, whether standalone or as part of a hybrid strategy, will resume. Culture and a sense of community are, typically, critical for the well-being of any individual and instrumental in delivering against a global strategy. Finding a new way to replace office culture with personal culture as we now connect, for the most part, from our homes and not as large groups in person, will be critical for the industry going forward. Everyone is learning how to use their time differently and harness new technologies in order to stay connected. Undoubtedly, even when the pandemic is over, working routines will be different as a result.

FUTURE INITIATIVES On new initiatives that are ready for roll-out in 2021 to streamline operations, business referral and lead generation, Farlinger confirms that Rethink will remain ETL’S global framework and business model. He adds: “Despite continued focus on digital acceleration and increased investments in marketing technology, we remain a people business. Throughout the firms you will see a continued focus on culture and purpose, and investment in our Advisers of the Future project, making sure our people have the right new skills to advise and support clients.” Gorny concentrates on IT investment, mentioning that initiatives include the implementation of central services for

areas for our ongoing development as we move forward.” On technological initiatives, she adds: “The technological advances that were made in 2020 – for example our new global learning management system, the new client collaboration portal, and other data analytics tools – will continue to evolve to achieve even greater successes long into the future.” Heathcote talks about operational improvements to PrimeGlobal’s digital capability for professionals across firms to find and make relevant connections, on profiling firms and professional’s expertise and automating back office functions. For Wilson, the priorities lie with plans for a new website to assist member collaboration and with its referrals. MSI Global Alliance Tim Wilson, MSI Global Alliance will also look to improve its L&D offering. Madoc confirms initiatives surrounding member firms, the set-up of an IT hub for virtual networking sessions with an increased Eastern Europe as well as continued efforts use of dedicated mobile apps to support onin communications to increase visibility and the-go and quick turnaround to clients’ needs market recognition. and questions. The network will further aim Farlinger comments that 2021 will be a to provide the ability to support cross-border year to communicate the full implementation client work and to be familiar with those who of the new lease accounting standard, and are undertaking the work. drive to provide low-cost solutions and For new initiatives to be set on course and methodology from lessons learned with achieve success within professional services public companies. He says: “The same is true or otherwise, the biggest issues are around for revenue recognition. Topics such as 606 how best to strike a balance, prioritise scarce and IFRS 15 must all be streamlined, and fees resources for the most impact, understand lowered. The rapid digitisation of accounting

The paradox in the crisis is where to accelerate and where to pause – it requires a combination of both systems will require new and innovative tools to provide deliverables almost overnight”. Stephens delineates a number of programmes, stating: “For 2021, one of our core objectives is to foster even greater collaboration on lead generation, as we leverage our business development programme and share knowledge and contacts in order to unlock new revenue streams. Following the appointment of our global COO in the second half of 2020, much work is underway to streamline and reimagine our business operations. “In the fourth quarter of 2020 and running over the first half of 2021, we launched a global programme involving over 80 of our leaders, collaboratively working together to Reimagine Our Future and consider strategic

where efficiencies can be made, and how to ignite new revenue channels. Stephens’ thoughts on striking this balance and on leadership challenges that she has faced sum up the forward-looking views voiced by many participants in this article. She concludes: “In a crisis, ‘perform’ can quickly become ‘survive’, and that can instil fear and provoke knee-jerk reactions. Leaders have been faced with their toughest ever leadership challenges. “It is very easy to convince yourself ‘I have to act; I have to move forward,’ but sometimes, in order to thrive and transform, one must slow down, recalibrate and reimagine. The paradox in the crisis is where to accelerate and where to pause – it requires a combination of both.”

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IAB Rankings feature | the uk

uk accounting industry

adapts and evolves to meet client expectations Audit quality and industry diversity continue to be key themes for the UK accounting profession, despite high-profile recent concerns around the short- and long-term impact of coronavirus and post-Brexit regulation. Paul Golden reports

ne of the most notable findings from the FRC’s recent audit quality reviews was that audit firms did not challenge the management of audited entities effectively on the significant judgements they had made. Firms say they are taking steps to improve the situation. For example, many of PrimeGlobal’s member firms focus on ensuring that senior experienced partners have the necessary time and space to consider the issues, are using AI software to better analyse risk, and that an independent view is provided within the firm from outside the audit team. “The time partners spend discussing risks with their clients is helping them understand their own business position more fully, which helps with areas of judgement,” says PrimeGlobal CEO Steve Heathcote. “This brings an advisory element to the audit, but at the same time firmly maintains independence. It is also important for auditors to share experiences and learn from each other, so they feel better equipped to challenge.” According to HLB International member firm Beever and Struthers partner Sue Hutchinson, the audit profession needs to create audit teams with the confidence, mindset and professional behaviour to ask the right questions and raise concerns, as well as continuing to embed the right technical processes, including: • Training and coaching across all levels of the team; • Senior team involvement in risk assessment of the significant judgements and expectations; • Ensuring timely review procedures through effective project management;

•

Carrying out appropriate consultation and using specialists for key judgements and complex areas.

LEVELS OF SOPHISTICATION For clients with more sophisticated accounting functions, the challenge is often around judgements made in areas which may not be covered by an accounting standard or where provisions on the applicability or implementation in certain situations are not included within a standard. In some cases more than one set of accounting principles are applicable. For clients with less sophisticated accounting functions, the difficulty may lie in the appreciation by the client that they have made a significant judgement, suggests Sarah Jenkins, partner at MGI Worldwide CPAAI member firm Milsted Langdon. “Owner-managers often have little formal accounting training, and whilst they are used to making judgements in running their business, they do not always appreciate that this may be significant for the purposes of accounting information,” she adds. “It is seen as just being a part of the day-to-day running of the business and is almost certainly not documented. Why these decisions need to be justified to the auditor may not necessarily be understood.” The key to being able to challenge management judgements is ensuring that a detailed understanding of the outcome, the process by which it was arrived at and alternatives considered in these judgements is established. Once established, audit teams can consider any shortfalls in this process, including the reliability of management judgements in past years, and also consider if

an alternative course of action could result in a more accurate answer. Having these results to hand allows for a more robust, evidence backed challenge of management. “In order to do this, audit teams should have discussed the areas where management use judgement pre-audit to ensure areas are covered, but it also needs a training process for auditors that encourages independent thought and thinking on your feet,” says Mark Taylor, head of international tax at Kreston International member firm Duncan & Toplis. Improving the effectiveness of challenges requires evolving from a background of rules-based procedures. The basic accounting principles are well established, but not so easily applied to new business models often driven by new technologies and developing markets. That is the view of Peter Manser, head of audit and assurance at Kreston Reeves, who observes that an asset measured at fair value poses a very different challenge to an auditor as this will ultimately be a matter of judgement. “In order to support a judgement, the collection of audit evidence is by necessity nuanced with subtleties such as experience, objectivity, and possible manipulation,” he adds. “Evaluation of such subjective evidence requires different skills, and documenting the evaluation is a further challenge.” It is also important that regulators offer clear, practical guidance using case studies so the profession and companies are fully aware of the expectations and how they should apply. Firms need to strike an appropriate balance between quality, commercial considerations and relationships in order to drive greater consistency across the profession. “Firms need the right level of scepticism and challenge embedded into their culture and

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n tr y Repor t - U K

iab rankings feature | the uk

for some that will take time,” acknowledges Chris Neale, partner at Kreston International member firm BHP. “They need to conduct gap analysis between the current quality of their work and what is deemed ‘good’ by the regulator and then identify what drives behaviour internally.” A focused training programme is important and should be backed up by recognising success through personal objectives, appraisals, promotion, and bonus decisions. He suggests that firms also need to be brave with their clients on pricing since juggling commercial and quality against low margin audits invariably leads to poor quality. According to Stuart Hinds, head of audit and business assurance at Ecovis Wingrave Yeats, ISA 540 (Revised) ‘Auditing Accounting Estimates and Related Disclosures’ applicable to 31 December 2020 year-ends should assist when it comes to documenting the risk of material misstatement associated with a particular judgement and driving more detailed testing, validation and documentation as to how the risk has been addressed. “These procedures should increase the quality of discussion with management in challenging judgments made,” he says. “We can expect greater use of external data in benchmarking and greater use of technology, including data analytics tools, which should enhance audit quality significantly.”

DIVERSITY MATTERS The FRC’s 2019 Key Facts and Trends in the Accountancy Profession report found that at the largest firms less than one-fifth of partner positions are held by women. “Having teams with differing backgrounds, perspectives and skills are important elements in bringing rigour and challenge to the audit process and, ultimately, improving quality,” says Crowe UK chief executive Nigel Bostock. His organisation has developed a women’s empowerment programme and is committed to the Women in Finance Charter. Female representation currently stands at 24% in the partner group, 40% in the executive team, 33% in the supervisory board, 40% in the strategic sector head group leadership team, and 50% in the service line leadership team. Last year, PrimeGlobal launched a multiyear global partnership with Thomson Reuters to address inclusivity and diversity in the tax and accounting industry. A highlight of the partnership was the virtual Women’s Leadership Conference, attended by 300 participants from four continents.

Steve Heathcote, PrimeGlobal

Sue Hutchinson, Beever and Struthers

Peter Manser, Kreston Reeves

Stuart Hinds, Ecovis Wingrave Yeats

Nigel Bostock, Crowe UK

Robert McCann, Ecovis Wingrave Yeats

“This has increased awareness while influencing the profession with education on unconscious bias and gender discrepancies,” says Heathcote. “By sharing good practices and stimulating discussions, we can make significant steps across our firms. In 2021 we will be extending the focus to diversity, equity and inclusion.”

RISING STARS Increasing diversity at partner level is a very challenging area, and unfortunately in many cases it just comes down to competing with legacy issues and the fact that it is women who have children says Jenkins. “We identify our rising stars at an early stage in their careers so that we can mentor and nurture them,” he continues. “They also need to have role models who they can aspire to and learn from – and with four fixed-share female partners and one equity female partner out of a total of 22 partners, our aspiring women already have a number of role models.” Clients are not moved permanently from women who take maternity leave, so they do not have to rebuild their client portfolio when they return. In addition, training material and changes in policies and procedures are centrally stored and readily available. As for how the changes forced by the coronavirus crisis will affect the accounting profession in the UK in 2021 and beyond, Robert McCann, senior partner at Ecovis Wingrave Yeats and chair of the supervisory board at Ecovis International says they have accelerated the harnessing of technology significantly.

“Covid-19 has required us to think about how we support our clients in times of need,” he says. “Improvements in client relationships in recent months can only be good for the profession. The pandemic has also highlighted the importance of a healthy work-life balance.” Challenges created by these changes include uncertainty around developing strategic objectives, the effect on the economy and SME client group, well-being and wider support for employees and their families, increased cybersecurity and data protection risks, and difficulty in obtaining the right information and evidence when remote working, says Hutchinson. Jenkins suggests working and collaborating remotely needs to be combined with an element of physical interaction since effective training cannot be done completely remotely. “We also need to physically meet clients to fully develop our business relationships and give them the care and guidance required,” he continues. “Over time clients will expect to interact in person more readily. Going forward, the working week will be split between home and office working, spread across core and non-core working hours depending on individual circumstances.” The pandemic has seen the accounting profession demonstrate its ability to adapt and evolve to meet the changing needs of its clients and people, concludes Bostock. “The last 12 months have also seen continuing regulatory pressure on the audit profession, a drive for improvement in audit quality and strengthening of auditor independence. “Post-coronavirus, as the confidence needed in financial reporting continues to grow, we see our role as increasingly important.” <

www.internationalaccountingbulletin.com | 21

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I n t e r n ati ona l A c c o u n t i n g B u l l etin i nter v i ews S tev e Heath cote on chang es d u e t o t h i s e x t r a o rd i n a r y y e ar, an d outl ook s on ev en ts an d trends

Feature | 2020 review

2020:

the profession reflects Following a most unexpected and extraordinary year, key global figures from the accountancy C-suite spoke to Zoya Malik about their organisations’ operational shifts, and their outlooks on events and trends such as working from home Zoya Malik: How much investment has been made by your organisation for meetings and events in 2020? Which platforms have served well?

Dr Christian Gorny: There has been strong investment in hardware for videoconferencing systems in partners’ offices. On the software side, various systems have been used, such as Teamviewer, GoToMeeting, GoToWebinar, Microsoft Teams, Zoom, Facetime, Skype. It depends on the individual circumstances of each meeting and the level of confidentiality to be observed. Liza Robbins: The impact of Covid-19 increased the emphasis on virtual meetings, but the importance and time investment did not diminish. Going forward, pandemic permitting, Kreston will have a programme of both virtual and physical meetings and events. Kevin Arnold: Nexia has delivered over 30 webinars, viewed by over 3900 individuals across the globe to help promote best practice and knowledge sharing across the network. Each webinar has had external speakers as well as specialist speakers from member firms. Adobe Connect was initially used to deliver the webinars, but increased demand and functionality requirements led the network to adopt Zoom, which has worked well. Nexia’s highly successful virtual event, Nexia Week 2020, was delivered to 1,600 participants from more than 180 member firms. Jean Stephens: Our ongoing investment into digital capabilities meant that we were able to swiftly transition into a virtual environment for all meetings and events. While regularly using MS Teams, Zoom, ON24 and Miro, we also built a bespoke platform that hosted our World Conference which was available to all 48,000 RSM colleagues.

Stephen Hamlet: We found some excellent speakers, most of whom were willing to present to our members at either no cost or a low cost, in order to gain access to our firms, looking to build a relationship with our network and our members. We did not charge our members to attend these online events, and we added even more events to our normal annual programme. Our biggest investment was that of time spent reinventing our meeting programme into an online offering, creating interesting virtual activities, and learning how to facilitate all of this. We principally used the various functionalities within Zoom. Steven Heathcote: When all in-person 2020 events had to be cancelled, the executive management team recognised the need to pivot event strategies. We utilised digital platforms already in place such as Zoom, Microsoft Teams and the custom-made PrimeGlobal mobile app, which provided additional opportunities for connecting members in real time. During 2020, the financial investment in events was minimal, as we already built several very strong platforms which enabled us to switch to digital in a matter of days – for example our website, and our mobile app. As a result, the association transitioned from in-person events to digital offerings seamlessly, producing 90 events in 90 days with minimal investment. As we navigate the events landscape in 2021, there will be challenges but also opportunities for more global connections and access to thought leadership through the implementation of hybrid conference models blending in-person and digital experiences. Tim Wilson: We allocated £23,000 across

various platforms that served us well such as on Zoom, Cvent and Swapcard.

Zoya Malik: How have virtual conferences served to consolidate regional members’ interests towards collaboration and lead generation? Tim Morris: It was quite challenging to collaborate in the new normal as well as to generate leads, but we made it up via regular email communications and social media promotions. We held a series of virtual meetings focusing on specific topics aiming to consolidate members’ interests. This has been done easily on a regional basis but has been challenging on a worldwide basis due to time zones. Tendai White: All virtual events have been geared to help our members forge closer links, share experience, explore best practice, and win new business. Our INPACT Marketplace maximised referrals and business development, our member-led virtual annual conference enhanced collaboration, and our Global Leaders Forum allowed non-board committee members to explore areas for development. Liza Robbins: A key benefit of virtual meetings, is that they are low cost to host and attend, so they attract higher participation than regional or international physical meetings. Virtual conferences do not incur the same out of pocket expenses (delegate rate, travel, hotel and subsistence) and also save time out of the office. Member firms would typically send two or three people to a physical international conference, whereas they may send between six and nine people to a virtual conference.

28 | January 2021 | International Accounting Bulletin

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I n t e r n ati ona l A c c o u n t i n g B u l l etin i nter v i ews S tev e Heath cote on chang es d u e t o t h i s e x t r a o rd i n a r y y e ar, an d outl ook s on ev en ts an d trends

Feature | 2020 review

Examples of this were the attendances at the two Kreston Latin American conferences which attracted three times as many participants as a physical conference. Malcolm Bolton: We encouraged our regional presidents to maintain close contact with members in their respective regions. This led to a significant increase in regular virtual meetings and virtual social events between members that were all well received. Martin Sharp: We have been able to get wider engagement from firms and individuals that would not normally have attended in-person events, due to cost and time considerations. We have also had success with new special interest groups – valuation services and legal services – that might not have had the level of interest in former times. Memoria Lewis: We have increased the number of formal events we held by four times. While they can never replace an in-person conference, they work especially well to maintain connectivity between members and keep the momentum going. We have delivered a combination of technical, personal development, practice management, networking and social events. We have also delivered four ‘regional’ conferences, though they became global as everyone was encouraged to attend.

Zoya Malik: What events do you have planned for 2021? Christian Gorny: The ETL Global Conference 2021, and the National Partners’ Congresses in Germany, Spain, the UK and the Netherlands. Martin Sharp: Events planned for 2021 include a virtual EMEA Regional Conference in February. In-person conferences include the ANZ Regional Conference in May, the UK & Ireland conference, the North America Conference in October, and the Asia-Pacific Regional Conference in Thailand in November. We will probably hold a virtual annual conference and AGM in July. Stephen Hamlet: We have planned in-person events in Bucharest with the EMEA and International Tax meeting in May, and in Montreal with the Global meeting in October. We are also hopeful for the Asia-Pacific meeting in Singapore in June. Steve Heathcote: We are hosting our first Tax and Assurance Digital Experience on an interactive 3D platform in early January 2021. We will continue to focus on the PG Insights panel discussions with two events scheduled to take place during the first half of 2021.

In addition, we will continue collaborating with our alliance partners including Thomson Reuters, ACCA and the AICPA on producing relevant thought leadership programmes and events focused on member initiatives around diversity and inclusion, and environmental social responsibility. Tim Wilson: There will be a mix of events such as virtual specialist interest groups, virtual regional meetings, 12 webinars including a Future Leaders webinar, Brexit, ACCA, Firm Academy, Technology and International Trade, three Doing Business meetings, as well as a physical EMEA conference, a physical international conference and physical regional meetings Liza Robbins: We have a programme of physical and virtual events planned for 2021: the World Conference, the EMEA Conference, the Asia-Pacific Conference, the Latin America Conference, technical meetings for audit, corporate finance, VAT and international tax, the Future Leaders meeting, the Managing Partners meeting and numerous meetings in association with partners and clients.

Zoya Malik: What investment has been made to support colleagues and member firms’ staff in 2020? Tendai White: The key investment for us was in training and development. For our Executive team, we worked with a tech consultancy to enhance Office 365 skills, used a business development and social media expert for enhanced Zoom and LinkedIn training, and an executive coach for presentation skills and techniques, specifically in a virtual world. Jean Stephens: Early on we accelerated our plans for a dedicated global learning management platform, to help us make a rapid transition to online learning and development. However, the greatest investment we have made this year is in being intentional about maintaining our connections with each other. Making up for those informal moments around the office has taken a concerted effort from everybody, and I am proud of the way in which our teams have consistently supported each other.

Zoya Malik: What initiatives have your organisation taken to investigate the impact of WFH on the health and well-being of members during the pandemic? What support has been given?

Christian Gorny: Regular team calls and virtual meet-ups, partly even nationwide helped to keep up the spirit. No official investigation took place, but rather informal surveys through bilateral conversations or in the context of Master Partner team calls. Individual difficulties such as quarantine, infections or even fatalities of family members were responded to with the greatest respect and understanding, but without pressure. Likewise additional family-related stress of colleagues with children at home were dealt with through maximum flexibility. Tim Morris: Our Americas/Worldwide office in New York administered a survey to the team when the pandemic began with the assistance of a strategic alliance partner, which advised on how to address any emotional or mental, physical concerns related to Covid, the impact of deaths in the news and coping mechanisms throughout. In addition to this, every team member was encouraged to take their vacation days to avoid burnout. Tendai White: From the start we set about providing a safe and supportive environment aimed to normalise the struggles and challenges where members could open up to share their personal difficulties. Our members are individual firms with individual needs. Through a platform we call The Cave, we conducted regular personal check-ins to ensure strong engagement and identify issues and personalised our response by need. This could be as simple as an extra phone call or note to let them know we are here to help and support, or a referral for professional support. We are working with an organisation specialising in workplace well-being programmes, to support members in 2021 and beyond. Liza Robbins: Kreston’s staff are UK based and support has varied from regular team meetings and communication, a hamper of appreciation from our board, a working from home financial allowance, and increased staff employment benefits including health and well-being support options. We have also employed an intern during 2020, who we are proud to pay a London Living Wage rather than an underpaid intern salary. Kreston has kept up regular communication with our colleagues and member firms’ staff across the globe. We also share ongoing best practice case studies, so one firm may learn from another member firm. Kreston’s connectivity and culture of closeness has been much appreciated, especially in 2020. 

www.internationalaccountingbulletin.com | 29

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I n t e r n ati ona l A c c o u n t i n g B u l l etin i nter v i ews S tev e Heath cote on chang es d u e t o t h i s e x t r a o rd i n a r y y e ar, an d outl ook s on ev en ts an d trends

Feature | 2020 review

Tim Morris, BKR International

Jean Stephens, RSM International

Christian Gorny, ETL Global

Tendai White, INPACT

Malcolm Bolton, GMNI

Steve Heathcote, PrimeGlobal

Liza Robbins, Kreston International

Tim Wilson MSI Global Alliance

Kevin Arnold, Nexia International

Memoria Lewis, Morison KSi

Martin Sharp, DFK International

Stephen Hamlet, Russell Bedford International

Martin Sharp: We have held webinars and workshops on well-being, comparing best practice. We have also shared articles from leading institutes and professional bodies Kevin Arnold: Nexia’s global office puts out regular communications that provide access to professional health and well-being support for individuals as well as tips on how to look after health and well-being during the pandemic. Additionally, virtual social events were organised every two weeks to help individuals socialise, relax and have fun during challenging times. Webinars and tools around mental health and well-being have been delivered by specialists to member firms as well as members sharing their knowledge around mental health and well-being to support other member firms. Nexia also ran a global photo competition to discover how individuals across the world, were working from home and to help bring remote working to life. Stephen Hamlet: We created a partnership with a specialist health and well-being provider, offering an online programme and

content that members can log into at their convenience. We also held some special discussion-based sessions on health and wellbeing techniques. Our more informal events, such as happy hours, have also helped keep people motivated and morale boosted. Tim Wilson: We have started a partnership with Positive Group to ensure the psychological well-being of our members, and together we put out a survey to establish how well people were dealing with the current circumstances. A speaker from Positive Group at the conference made everyone aware of the overall problems that our membership was facing, and some possible solutions. Positive Group has in turn started a Positive Leaders Programme – being launched in February 2021 – to tackle the science of psychologically informed leadership, specifically aimed at our member firm leaders. Another smaller initiative surrounds our breaks at our international conference, including yoga, mindfulness and an art historian, to give people a bit of an interesting diversion.

Zoya Malik: What have you learnt about your own strengths and leadership style in creating confidence and leading the network across the globe during these uncertain times? Liza Robbins: I have always worked in global organisations, which has relied on an ability to create confidence and provide support to colleagues in often distant locations. Strong but empathetic communication skills are key, as is a vision to see beyond the immediate and into a brighter future. I have worked through several crises – Covid, the global and Asian financial crises, SARS, the Kobe earthquake – and I am resilient. Martin Sharp: By maintaining an open and consultative approach, I believe that members of our team have felt confident about speaking up and sharing their concerns. We have a very flat structure and a strong sense of collaboration and mutual support. Giving individuals clear goals and the freedom and confidence to accomplish in their own way has been very successful

30 | January 2021 | International Accounting Bulletin

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I n t e r n ati ona l A c c o u n t i n g B u l l etin i nter v i ews S tev e Heath cote on chang es d u e t o t h i s e x t r a o rd i n a r y y e ar, an d outl ook s on ev en ts an d trends

Feature | 2020 review

Memoria Lewis: That being genuine, confident in your own right and using humour to mitigate crisis is always helpful. Jean Stephens: The reminder of the importance of empathy, collaborative leadership and resilience, and those topics quickly became clear and helped guide my frequent communications globally. An interesting learning for me was that it is possible to successfully build relationships across a computer screen – something I was quite sceptical about in the beginning. Stephen Hamlet: I’ve learnt that in order to look after others, it is important to look after yourself and remain focused and positive, even if some days you are not feeling so great. I’ve learnt that people can be so resilient, that our profession has been so adaptable, and this keeps us positive. I’ve also learnt that it is OK to admit that these are uncertain times, but as long as we plan as best we can, are willing to be flexible, yet lead with conviction while showing empathy to others, then we will be best placed to succeed. Steve Heathcote: Our leadership was recognised by winning the Association of the Year award at Digital Accountancy Awards 2020, highlighting the need for listening, agility and rapid decision-making during times of crisis. We have also anticipated what our firms will need in the future as we move to recovery by completing our biggest strategy consultation ever, with over 160 firms. Anticipating what will be required for the future is an essential aspect of leadership, even during a crisis. If you don’t anticipate change and act on it you are only managing, but not leading. We want to make sure we are the leaders of the strong association of tomorrow, consisting of modern, diverse and agile members ready to face and embrace change. Tim Wilson: I have felt there is a need for a clear vision and clear tasking, without micromanaging. An optimistic, upbeat disposition is important. Globally, the need to be more visible, culturally aware and responsive to the demands of members has been important, as has been the need to seek ways to innovate and provide greater value add through areas such as L&D.

Zoya Malik: How optimistic are you in terms of business outlook for your organisation in 2021? And what is your message to the market? Tim Morris: I have been amazed at how resilient our members have been, so in the

longer term I am optimistic. However in 2021, there are several other real-world issues, such as Brexit, which on top of the Covid crisis will make for a challenging environment. As an association, our message to our members is that we will work closely to provide services and tools they require and continue to use the technology and innovation that has been with us in the past months, to add value to our offer. Malcolm Bolton: We always remain optimistic. As a smaller association we have nimble management processes and so can react quickly to change. We are always keen to add suitable members and consider there are going to be accounting firms that will be looking to reduce their overheads. Joining a smaller association that operates on a lower cost base could well be appealing for firms that need to maintain international contacts and want to achieve this more affordably. Martin Sharp: We are concerned about the wider economic impact on businesses and individuals that our members serve, but we believe that the services provided by our members will still be highly sought after. Moreover, we and our members are clear that belonging to an international organisation with reach and capability is more valuable than ever, so we expect continued modest growth in 2021 and we do not think that we will lose many member firms, especially considering our low cost-base. Our message to the market is that DFK continues to stand for dedication serving the needs of members and their clients, fairness in the way that we treat people regardless of creed, and kindness in the we treat our colleagues, our clients and our communities. Memoria Lewis: I am very confident in our own position, though I have an optimistic nature. Our members, overall, have had a surprisingly good year, despite the crisis. Obviously, that is not the same everywhere; certain regions have been hit harder than others and are therefore more vulnerable. I believe that there may be a shift in activity – but have been saying this for some time – to more transactions in 2021. As an association, we are here to support our members as best as we can and therefore may need to be more flexible. Kevin Arnold: The Covid pandemic has not deterred the growth of the Nexia network. The network experienced a 5% rise in global revenue. Having strong members contributing to the success of the network means we are optimistic about 2021.

Our key message to the market is to be agile in what you do, and deliver value to your members in any way you can to help support them through their challenges, as this will be the key to success for any network. Jean Stephens: We enter 2021 in a strong position and ready to face any new challenges, cognisant of the material impact of the virus on our member firms, clients and communities. The future remains hard to predict, but amid the many challenges presented by the pandemic, there has been an opportunity to reimagine how we collaborate, remain resilient, harness technology and focus on our own well-being without compromising on our focus on our strategy and delivering exceptional client service. Stephen Hamlet: Clearly, there are advances in terms of vaccines becoming available; yet at the same time, we – especially in the UK over the Christmas period – have taken a few steps backwards. Yet last year taught us that we can cope, we can adapt, we have continued to provide great support to businesses around the world, and this can only lead to even more success in 2021. Steve Heathcote: Our firms have strengthened their trusted business advisor status with their clients. When they were needed the most, they were by their clients’ side. This puts PrimeGlobal member firms in a very strong position for the future. We anticipated and became leaders in digital transformation and innovation years ago. This provides a strong foundation for the future to create positive impact across our firms’ clients in helping support economic recovery. The value of professional accountants has been demonstrated to governments and stakeholders worldwide – accountants have been business emergency services, navigators and coaches. There is an opportunity to work in partnership with other organisations to help firms and business transform to meet future market needs. The recognition of sustainability as a business imperative is also positive for all of us. Sustainability is a priority PrimeGlobal will continue focusing on throughout 2021, celebrating the recent win of IAB’s Sustainable Organisation of the Year award and building on the extensive experience our members have in this area. My message to business is look ahead, look for positives, retool with data and digital, listen to your trusted advisers who are members of a strong association, and make sustainability a business imperative. <

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I n s id e P ub l i c A c c o u n t i n g re p or ts on h ow P r i meGl obal fi r ms are i nves t ing i n Te c h n o lo g y t o d e v e l o p o p p or tun i ti es to stay competi ti v e and gro w

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I n s id e P ub l i c A c c o u n t i n g re p or ts on h ow P r i meGl obal fi r ms are i nves t ing i n Te c h n o lo g y t o d e v e l o p o p p or tun i ti es to stay competi ti v e and gro w

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I ns i d e P u b l i c A c c o u n t i n g an d A ccou n tin g Today repor t on ho w Si x Pr i m e Glo b a l fi r m s S i g n a N ati onal P l edge for D i v er si ty an d Inclus io n

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I ns i d e P u b l i c A c c o u n t i n g repor ts on h ow P r i meGl obal fi r ms are a n t ic i p a t i n g a p e r m a n e n t sh i ft from compl i an ce to adv i sor y

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I ns i d e P u b l i c A c c o u n t i n g repor ts on h ow P r i meGl obal fi r ms are a n t ic i p a t i n g a p e r m a n e n t sh i ft from compl i an ce to adv i sor y

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n t ry Repor t - Russi a

IAB Rankings feature | russia

russia:

significant aml legislation is afoot It takes a lot to push coronavirus-related developments oﬀ the top of the agenda in this most turbulent of years, but the evolving regulatory environment has come close to doing this in the world’s largest country. Paul Golden reports

I 75

n June, Draft Law no. 975888-7 was submitted to the Russian parliament. The law provides for an increase in the revenue threshold for a mandatory tax audit from RUB400m ($5.4m) to RUB800m. The initiative to exempt most of the SME sector from mandatory audit was expected to come into force by the end of 2020. According to Sergey Kharitonov, managing partner of Kreston International member firm Marillion Audit Company, this would have a variety of impacts on the profession. “The negative impact is that many small Russian firms involved in this kind of mandatory audit will have to close their audit business,” he says. “On the other hand, the quality of such audits has always been a subject of criticism from the bigger firms as they were often conducted for a very low fee with minimum procedures. Therefore, the reputation of the audit profession suffered.” The proposed changes will segregate audit firms into two tiers, with tier one firms able to provide audit services to PIE and non-PIE entities and tier two firms able to provide audit services only to non-PIE entities. There will also be the introduction of a new regulator with the Central Bank of Russia becoming either the sole regulator or coregulator with the Ministry of Finance, which currently oversees the profession. These changes will significantly change the landscape of the Russian audit market. However, the final quantitative and qualitative requirements for audit firms are not yet clear, notes Alexander Malkov, partner at Baker Tilly Russia. “Over the last year requirements around anti-money laundering (AML) have also

become more stringent,” he says. “Auditors and audit firms are now subject to Russian AML legislation and are required to notify the state body [Rosfinmonitoring] of any suspicious transactions when rendering services to all their audit or non-audit clients.”

REFORM DELAYS One factor behind the delay in reforming the audit sector is that transferring the functions of state audit regulation from the Ministry of Finance to the Central Bank of Russia triggered a lot of debate, says Crowe Expertiza managing partner Alexander Yerofeev. “In June, the Ministry of Finance revised a number of regulations governing the principles of external quality control of audit organisations,” he says. “Measures are envisaged to improve the planning of control procedure and improve reporting and transparency of the results of control work.” There is also a completely new, longer and difficult exam for auditor certification – a process that could seriously limit the amount of newly certified auditors according to Konstantin Shcherbakov, deputy director general at Morison KSi member firm Avantage Audit. In September, two new standards were introduced for fixed assets and capital investments which will be applied from 2022. However, these effectively replace the previous standard and do not contain any crucial amendments according to Alexey Tsibin, managing partner at PrimeGlobal member firm Quattor Advisory. “The standard for capital investments will more regulate the issue of capital recognition since there was no clear regulation of that area

of accounting before,” he explains. “However, it will not create any significant new rules.” Changes to the standard for accounting for profits tax began to apply this year. These changes amended the method for determining and recording deductible and taxable differences, since previously such differences were accounted for under the income statement method, whereas now the balance sheet method must be used. The profession has also been impacted by the limitation of benefits under double taxation treaties with Cyprus, Malta, Luxembourg and the Netherlands observes Daniil Berlizov, chief business development and marketing officer at Mazars Russia. “Moreover, a number of laws in November 2020 significantly changed taxation of CFC companies, dividends, and inter-company transactions.” Yet another significant event in the regulation of accounting in Russia this year was the entry into force of the Russian financial reporting standard (Russian FRS) inventory 5/2019, which in 2021 will replace inventory accounting 5/01. The transition to Russian FRS, which is close to IFRS, has been on the agenda for several years and the introduction of 5/2019 is seen as the first step towards significant reform of accounting in Russia. “The development of lease 25/2018 as well as the introduction of new standards (property, plant and equipment 6/2020 and capital expenditure 26/2020) can be considered as the next stage of accounting reform and its harmonisation with IFRS,” explains Daria Perkovskaya, audit and consulting partner at MGI Worldwide member firm Delovoy Profil Group.

20 | December 2020 | International Accounting Bulletin

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n t ry Repor t - Russi a

iab rankings feature | russia

Sergey Kharitonov, Marillion Audit Company

“It should also be noted that since the beginning of this year a new version of the Russian FRS income taxes 18/02 has come into force, which totally changed the reporting of information on income tax calculations rules.” Outside the regulatory agenda, firms have implemented a variety of measures to support clients through the pandemic. For example, Berlizov says clients whose businesses have suffered particularly badly have been given discounts and revised fees. “At the same time, for hourly charged tax consultations, we offered a fixed ruble rate as the Russian currency has lost about 20% of its value in comparison to the dollar this year,” he adds. The pandemic has increased demand for accounting outsourcing from SMEs, according to Perkovskaya. “In particular, significant interest has been noted in services connected with payroll preparation due to the ongoing increase in complexity of payroll preparation rules and frequent changes in reporting,” she says. Olga Gorina, executive director at BKR International member firm Interkom-Audit explains that in relation to coronavirus specifically, the government has taken measures to support SMEs as well as the most affected industries. Deferral and instalment plans for taxes and fees, and an instalment plan for debt repayment have been enacted into law, and general measures are provided for businesses of any level in affected industries, such as bankruptcy protection. “There will be almost no planned and extraordinary inspections under the law on the protection of the rights of legal entities and individual entrepreneurs until the end of 2020,” adds Gorina. “Federal Law No. 115-FZ dated 7 April 2020 amended the timing of the annual general meetings of shareholders and participants of companies so the timing of approval and submission

of annual financial statements for 2019 has significantly shifted and made it possible to extend the timing of the audit for 2019.” She describes the priorities for the Ministry of Finance over the next five years as promoting international cooperation in the audit industry, increasing the level of involvement of the Russian audit profession in international activities, interacting with bodies setting international standards in the audit industry and international organisations in the development of such standards, and ensuring recognition of the Russian regulatory system of audit activities and its supervision.

Alexander Malkov, Baker Tilly Russia

active stage of consideration of the results and making decisions begins,” she adds. Malkov notes that price competition has intensified in those markets with regulated Victoria Smirnova, advisor to the managing compulsory services. “This has further driven partner at IEF PKF, agrees that the down historically low margins for such accounting industry in Russia is characterised products and services, making them – in our by constant legislative changes to comply opinion – non-sustainable in the long run on with best accounting practice and the a quality/value basis,” he continues. transition to online reporting. Alexander Sirous, managing partner at “The latter factor will have a significant Crowe CRS Russaudit, refers to increased impact on the provision of services to a demand for outsourcing services from clients segment of customers from the smallest reluctant to grow their accounting function companies to medium sized start-ups, but in internally and more interest from clients that the future will undoubtedly lead them to a are becoming more transparent as a result of number of clients from the growing business growing compliance pressure. segment using statutory audits,” she says. “Demand for tax and legal services was very Smirnova says a new business line has low during first wave of the pandemic when emerged in the study and comparison of the moratorium on tax audits was introduced federal and regional legislation. “Despite the and the courts were closed,” he explains. reduction in on-site inspections, the interest of the tax authorities in the ordinary activities “Litigation services are in higher demand now and tax is back to normal with expectations of companies has not diminished, so it is of growth in 2021. Demand for transaction important to respond in a timely fashion to support and lead advisory services has been a large number of requests for documents or low with a few exceptions. We see some information received by taxpayers,” she says. demand from companies’ shareholders on “We expect increased demand for services in the performance assessment of management support of tax disputes which will arise when during first wave of the crisis, which may the moratorium on tax audits ends and the continue through the second wave and possibly beyond.” Companies used to submit accounting statements to supervisory bodies physically or by post. Now almost all enterprises should submit their accounting statements for 2019 in electronic form and sign them with a digital signature, explains Tamara Kasyanova, founder and CEO of Morison KSi member firm Joint Stock 2K Audit. “The companies that will be first to come out of recession are those able to quickly move their businesses online and those that provide digitisation-related services,” she concludes. “Conventional offline businesses -ub- ;uho vh- -ķ ;Ѵo o uoCѴ uo r face significant issues.”

CONSTANT CHANGES

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A c co u n t i n g To d a y re por ts on P r i meGl obal ann oun ci ng a s t r a t e g i c par tn er sh i p wi th A ICPA

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n t r y Repor t - Ger man y

IAB Rankings feature | germany

germany: pressing for

audit independence and improved governance The audit profession in Germany has seen the debate around stricter regulatory measures for procedures in auditing intensify in the wake of the highly damaging Wirecard scandal. Paul Golden reports

uditing in Germany was already in turmoil before the coronavirus pandemic began to have an impact following the revelations about ﬁntech Wirecard, whose insolvency left creditors owed in excess of €3bn. Hendrik Auge, auditor and tax consultant at MSI Global Alliance member firm Wortmann & Partner, observes that the responsible auditor and the auditing profession were heavily criticised, intensifying the long-standing discussion about stricter regulatory measures for procedures in auditing. “This scandal has severely damaged the reputation and standing of the auditing profession in Germany,” he says. “The Institute of Auditors and the Chamber of Auditors are currently trying to limit the damage and there is an open debate about measures to be taken. It remains to be seen what actions will be taken by legislature.” Angelika Seuster, head of the German audit working group of HLB Germany, is confident that the audit profession will face significant regulatory developments in the near future due to the collapse of Wirecard, referencing the Government publication of a first draft of a financial market reinforcement of integrity act. “This will have significant impacts on the auditors of public listed entities, such as a mandatory rotation after 10 years with no possibility to extend this period or the prohibition of non-audit services,” she says. “The objective of this act is to restore confidence in the German capital market. These restrictions might extend in the medium term to auditors of non-PIEs and mid-sized audit firms.” Michael Grüne, tax consultant, and auditor and partner at MGI Worldwide member

firm Menold Bezler, highlights three levers to increase the auditor’s independence: • Auditors should have to change more often; • The specifications for the separation of audit and advisory services for clients that are companies of public interest (listed companies, banks and insurance companies) should be tightened to avoid conflicts of interest • Auditors will be required to be liable in cases of gross negligence without limitation. “The maximum liability limit in cases of simple negligent conduct shall be raised from €4m to €20m in case of audits of PIEs,” he adds.

SUPERVISORY ISSUES Ines Thorwart, tax advisor at PKF Germany, notes that due to the Wirecard scandal, the Federal Ministry of Justice has terminated the recognition agreement with the Deutsche Prüfstelle für Rechnungslegung e.V. (DPR) with effect from 31 December. “It remains questionable, therefore, whether a reorganisation of supervision will be undertaken in this case,” says Thorwart. “The German government’s action plan to combat balance sheet fraud and strengthen control over capital and financial markets includes improving supervision – in particular reviewing the two-tier system – and strengthening corporate governance.” The German enforcement procedure for capital market-oriented companies as well as banks and insurance companies has had a two-tier structure with the DPR as the first

stage and the Federal Financial Supervisory Authority (BaFin) as the second. The DPR is an association organised under private law that was recognised by the Federal Ministry of Justice for the purpose of examining violations of accounting regulations. Companies are selected for an audit at random, based on an event or at the request of BaFin, and are free to participate; however, if participation is refused, BaFin can open its own second-level audit and, as the supervisory authority, demand participation. Even if the company does not acknowledge the findings of the DPR, or if BaFin has substantial doubts about the performance or result of the DPR examination, BaFin will conduct its own examination. There has also been a new version of the German corporate governance code, the Act on the Transposition of the Second Shareholder Rights Directive and the Act on the Further Implementation of the Directive Amending the Transparency Directive Regarding a Single Electronic Format for Annual Financial Reports (ESEF). “The corporate governance code has been revised with a view to ensuring that the formal terms are focused on principles so as to reduce redundant duplications of the German Stock Corporation Act and establishing a new category of principles,” explains Andrea Bruckner, member of the executive board at BDO Germany. The new edition of the German corporate governance code clarifies the impartiality requirements for shareholder representatives, while the amended Shareholder Rights Directive included a change to the formal terms in line with the requirements for remuneration of the management board.

16 | November 2020 | International Accounting Bulletin

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n t r y Repor t - Ger man y

iab rankings feature | germany

current situation and there is consensus that without them, a high number of insolvencies would have been likely.

REACTING AND REPORTING

“Covid-19 has made statements for the future dramatically more difficult,” notes Tobias Polka, partner at MSI Global Alliance member firm ADKL. “This task is the main challenge in the crisis. It is about identifying risks at an early stage, and reacting and reporting on them accordingly.” Fiscal authorities demanding more records, Hendrik Auge, Wortmann & Partner documents and tax returns to be sent digitally Ines Thorwart, PKF Germany software tool they use and the ability to has caused many firms to focus on digital ESEF came into force in August, and communicate with their consultant.” processes says Michael Thelen, tax consultant concerns all stock corporations and limited Germany’s pre-coronavirus accounting at Allinial Global member firm KBHT. commercial partnerships that issue securities industry was also characterised by a shortage “Meanwhile, as Brexit-related developments in the capacity of German share issuers of skilled workers – a trend that has affected remain in limbo, many clients in the EU and are not defined as companies. These all participants and will continue to be an and UK are awaiting developments that may organisations must prepare annual and issue after the pandemic has abated. That affect their international dealings,” he says. consolidated financial statements and the is the view of Alexander Leoff, partner at Digitisation was already on the agenda for (group) management report in XHTML, MGI Worldwide member firm Votum, many firms, and coronavirus has accelerated and tag certain information in statements in who refers to strong demand for budgeting that process. “Many firms and individuals accordance with the IFRS taxonomy using inand auditing services. “The changeover in who were previously slow movers suddenly line specifications for financial years starting value added tax from 19% to 16% has also had to adapt and have embraced the new after 31 December 2019. caused considerable consulting and system way of working,” says Thomas Althoff, “As part of the audit, the auditor must implementation costs, although demand partner at MGI Worldwide member firm assess whether the electronic rendering of the for M&A consulting services has come to a RLT Ruhrmann Tieben & Partner. “That annual or consolidated financial statements complete standstill,” he says. will make firms stronger, and hopefully help and the (group) management report complies The lack of talent and looming retirement them survive the economic aftermath of the with the ESEF requirements,” says Bruckner. of many senior professionals is a key concern pandemic, which cannot yet be foreseen.” “The auditor must report on the outcome of agrees Marcus Scheurer, partner RWT Ecovis Germany is another firm that this assessment in a separate section of the Crowe. “Helping clients to get financing has introduced new and more digital work auditor’s opinion.” and government support has been our main processes explains tax consultant Alexander Ulrich Britting, managing partner at task this year,” he adds. “This included the Weigert. “We have focused on providing PrimeGlobal member firm BA-Group, notes short time allowance as well as direct support our clients with the most important and that Germany has implemented a variety of payments and state-guaranteed loans.” up-to-date information to show them what regulatory actions in response to coronavirus The health of the accounting industry in opportunities they have,” he says. including decreasing VAT, implementing Germany prior to coronavirus was pretty “Last year we launched a service platform short-time working grants, introducing good, suggests Carsten Deecke, partner at to facilitate work and communication with regulations to credit and lease deferments Morison KSi member firm Dierkes Partner. our clients which gives them access to every and a serious of grants to heavily impacted “However, the battle to win clients is still industries and businesses. going on, and fees for audit jobs are low and Another significant change was the under pressure,” he adds. temporary suspension of the obligation to Achim Schweizer, partner at MSI Global file for insolvency. “As a rule, companies in Alliance member firm MOOG says his firm significant financial difficulties are obliged by has digitised the exchange of data with clients law to file for insolvency within three weeks and provided them with various cloud-based and managing directors not abiding by these platforms since the start of the pandemic. rules will be prosecuted,” explains Volker “We offer a simple and secure solution Ervens, fellow auditor and tax consultant at for data upload and download, but also Wortmann & Partner. complete collaboration solutions for handling Under the new regulations, this obligation complex projects,” he concludes. “The area of to file for bankruptcy has been suspended videoconferencing has been greatly expanded until 31 December for all companies that and to ensure that our clients receive ongoing find themselves in difficulties as a result of the advice, we have further strengthened our coronavirus pandemic. These measures allow $_ol-v Ѵ|_o@ķ ! $ ! _ul-mm $b;0;m ş -u|m;u home office services for employees.” companies more freedom to cope with the

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n t r y R e por t - The Nether l an ds

iab rankings feature | the netherlands

the netherlands:

supervisor’s role to become a priority Beyond the profession’s response to the coronavirus, accounting in the Netherlands has been impacted by a variety of proposed and actual regulatory changes over the last 12 months. Paul Golden reports

I 80

n January, the Monitoring Committee Audit (MCA) in the Netherlands presented a report entitled A mirror for the audit market, and later that month the Commission on the Future of Audit (CTA) presented its ﬁndings. One recommendation was the appointment of two quartermasters, who were appointed in May 2020 and have a role in ensuring careful execution of the recommendations of the commission. “We believe this is a good move,” says Pascal Belfroid, partner at BDO Netherlands. “As firms, we also need to communicate better about our own change programmes and the results accomplished, even though we are not across the finishing line yet.” Crowe Foederer managing partner Johan Daams notes that at the end of September, the NBA (the professional organisation for over 20,000 accountants in the Netherlands) sent a letter to the Dutch parliament about further deepening of audit quality. “Part of this letter includes an obligation for the auditor to include a standard paragraph in the auditor’s report about fraud risks and continuity,” he explains. “With this initiative, the NBA does not want to wait for legislation, but rather arrange it itself.” Another topic for discussion is the role of the supervisor adds Gijs Veenenbos, managing partner at Crowe Peak. “Many Dutch audit offices are currently under the supervision of the SRA [a network of 375 independent accountancy firms] or the NBA, but it is the intention that all offices will soon be directly supervised by the Netherlands Authority for the Financial Markets [AFM].”

For companies in the large business class – those with more than 250 employees – it is expected from the 2022 financial year that it will be mandatory to file annual accounts digitally via standard business reporting. Belfroid suggests that prior to coronavirus, most audit and accounting firms in the Netherlands faced two major challenges: recruitment and retention of sufficient (diverse) professionals, and managing internal culture-change programmes to improve audit There is still a large focus on preventing quality. “This has not changed, and indeed money laundering and financing of terrorism these challenges only become bigger now we says Juanita Cid, partner at Kreston Lentink all work from home,” he says. Audit. “In July 2018 the fourth EU directive Due to audit developments, demand in this was implemented in the Netherlands leading area is growing, suggests Daams. “Demand to, among others, an obligation of risk for IT security services is also rising because analyses of all clients,” she says. of the risk awareness in this area,” he adds. “The AFM also obligated audit firms to The number of accounting firms with an comply with systematic integrity risk analyses. audit permit is shrinking because of extended We see that audit firms and accounting and regulations over the last few years observes tax firms in general are still working on Achahbar. “The number of audit engagements implementing the procedures to comply with per audit firm is therefore increasing,” he says. the new regulations.” “Fewer players equals more opportunities, which gives a boost to the health of accounting firms with an audit permit.” Service areas experiencing increased demand this year will include services for transfer pricing, as this topic becomes more urgent for the Dutch tax authority adds Achahbar. “There will also be more demand for audits as a result of mergers and acquisitions, as well as restructuring, while based on the current circumstances there will be less ‘regular’ advising.” Koen Gerritsen, managing partner at Ecovis BonsenReuling, agrees that recruitment has been an issue with many -mb|- b7ķ u;v|om ;mঞmh 7b| accounting firms expecting growth in Rachid Achahbar, audit and assurance manager at Allinial Global member firm HLG, refers to mandatory ultimate beneficial owner registration, as well a change in labour law intended to narrow the gap between permanent and flexible contracts, and a decrease in the rate of corporate income tax.

RISK ANALYSES

20 | November 2020 | International Accounting Bulletin

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I n t e r n a t i o n a l A ccou n tin g Bu lletin C o u n t r y R e por t - The Nether l an ds

iab rankings feature | the netherlands

shortage of capacity and not only recruited new employees to start in April, but also another tranche in September. “The Covid-19 prevention measures have a big effect for new employees,” she says. “The way of working has shifted to working more from home and digitally, and with this new way of working it is especially difficult to give young new employees the support and attention they need. It has created a situation in which all of us need to have more patience and a flexible approach towards clients and colleagues alike.” From a professional perspective, she describes these as challenging and interesting Koen Gerritsen, Ecovis BonsenReuling times to be in an accounting and tax firm. “The government issued several measures to turnover and profit, even after taking into help companies and these keep changing. account the effects of the pandemic. “We Clients rely on us to advise them on these see growth in audit requests for financial initiatives, so from day one we started statements and accounting services for foreign informing them on the status of government clients,” he says. measures, what they could do themselves One of the first actions undertaken by and what we could do for them. We have PrimeGlobal member firm Visser&Visser supported and continue to support clients following the coronavirus outbreak was to with government measures and cashflow contact clients to inform them about the advice.” various emergency financial schemes the Dutch government put in place explains international tax partner Erik Klop. “In order to advise our clients about the temporary emergency bridging measure Many firms observe that their involvement for sustained employment we set up a team has increased since October because of with advisors from different departments: required reporting obligations in relation to accounting, tax and HR,” he adds. “This team the government support companies received leads the application process, and with the during the first lockdown period from March final settlement of the grant, assists clients up to May. With taxpayers’ money being spent, to an audit if required.” public interest in the support programmes The firm is in constant contact with clients introduced by government is high and fraud with regard to the estimation of their revenue risks are more of an issue than ever. and liquidity says audit and international As well as demonstrating to the public that business director Wilbert Snoei. “A business accountants have professional scepticism, they and financial stress test is part of the are also under greater pressure to produce service we deliver, for which we make use timely accounts with clients so focused on of dashboards that give us insight in their cashflow. financial position,” he explains. Marco Vermin, member of the executive Visser&Visser has also built a tool that board of directors at DFK member firm gives it 360-degree customer view. “We can Alfa, says almost all his clients undertook an see all relevant aspects of a client from legal impact analysis of the crisis on their business contracts up to the filed tax returns, and for which they sought help from the firm. from data about employees up to their most “Accurate monthly and quarterly reports and recent turnover numbers,” says Klop. “By estimates of the impact on the coming year pulling all that data together, we are able to were highly sought after,” he continues. “The detect and point out potential risks as well as advisory branch, tax and legal had less work advising them in advance about opportunities. initially because almost all businesses had to Data-driven advice is an opportunity that the take stock of their position in the early stages, accounting market can explore much more but demand for advisory services increased extensively.” after just a month or two.” Recruitment has also been an important Since the start of the pandemic, BDO issue at Kreston Lentink Audit. Cid explains Netherlands has created a multi-disciplinary that prior to coronavirus, the firm had a team of specialists consisting of consultants,

GOVERNMENT SUPPORT

Erik Klop, Visser&Visser

legal and fiscal advisers, accountants and auditors to support clients on issues relating to Covid-19. “At the start of the pandemic, additional work primarily related to assistance with the technical details of government coronavirus grants and cash management issues, but it now also includes advice on how employees can work from home safely and effectively,” says Belfroid. “We are involved in assurance work on the settlement of government coronavirus subsidies. The professionals involved have been undergoing a special training programme and are now planning. This has also impacted our client onboarding possibilities as we have less capacity available for regular new audit work.” According to Sjoerd Kuiper, partner at MGI Worldwide member firm Verstegen auditors and consultants, while the firm created a team to help clients apply for the support measures which were put in place, the biggest part of the work of accounting for subsidy funds is still to come. “When the coronavirus outbreak started in the Netherlands, we saw that business acquisitions were put on hold, so demand in our corporate finance and mergers and acquisitions department was somewhat lower,” he says. “Luckily, we recovered pretty fast and went back to business as usual, so in general we do not see any specific changes in demand for our various types of service this year.” Veenenbos says his firm has supported clients by facilitating remote audits with working from home using digital solutions. “We have also been flexible where possible in terms of planning,” he concludes. “Of course, we have assisted all customers with temporary emergency scheme for job retention applications, and will later on support them with the application for determination and with control activities if necessary.”

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I n t e r n a t i o n a l A c cou n tin g Bu lletin repor ts on P r i m e G l o b a l ’s c o n t in u ed growth throughout E M E A

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Ne w P r i m e G l o b a l m e m b e r a n n o unc e m e n t s

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Ne w P r i m e G l o b a l m e m b e r a n n o unc e m e n t s

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Ne w P r i m e G l o b a l m e m b e r a n n o unc e m e n t s

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Ne w P r i m e G l o b a l m e m b e r a n n o unc e m e n t s

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Ne w P r i m e G l o b a l m e m b e r a n n o unc e m e n t s

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In te r na t i o n a l A c c o u n t i n g Bu lletin i nter v i ews S tev e Heath co t e o n h o w c a n w e fu ture- proof A ccoun tants

industry focus | advisory

how can we

future-proof accountants?

PrimeGlobal CEO Steve Heathcote explains the need for accountants to develop an advisory mindset in order to grow and sustain client relationships from the outset, with training delivered through Consultancy Labs, using a blended approach to coaching in cooperation with experienced partners 88

s the trusted advisor status is enhanced, with businesses increasingly looking for services beyond accounting, audit, tax and compliance, so is the demand for advisors to help guide businesses’ ﬁnancial futures and evaluate diﬀerent types of transaction. This trend has created opportunities for many firms, but also presented firms with a challenge to shift the mindset, build staff capability in core professional skills, and innovate. For some it is a real paradigm shift. Core service lines are automated and delivered through the cloud. With automation, higher-level skills are needed from the start of the client relationship to provide value. Clients need accountants with an advisory mindset who are able to see the business through their eyes, look at their business in a different way, demonstrate innovation, show emotional intelligence, communicate effectively and provide relevant business insights. Trusted advisors will be needed more than ever as clients transform their businesses postCovid. However, it is no longer possible to learn these skills as an apprentice on the job by completing routine tasks and moving up to manage an audit. With automation, these skills are needed from the get-go. Accountants may struggle to have the right mindset and be ready to embrace these

professional skills. This reminds me of an old joke: what is an extroverted accountant? The one who looks at your shoes when he is talking to you rather than looking at his own. This still has some resonance, and needs to change for the profession to stay relevant in the new world. This is a challenge, especially now when the apprenticeship model is no longer relevant. At PrimeGlobal, firms realise these skills can be taught, but they need to be taught from the moment someone joins the firm.

However, it takes new interventions and a blended approach to develop confidence and help professionals embrace the value the advisory approach creates. At the moment, PrimeGlobal’s approach to assisting member firms in developing advisory skills is focused around: • Simulating scenarios so professionals can learn from real case studies and problems, guided by experienced advisors; • Creating opportunities to develop an advisory mindset with clients; • Ensuring professionals have the right knowledge – the toolkit to apply when needed.

SIMULATING SCENARIOS

Steve Heathcote, PrimeGlobal

Many PrimeGlobal firms organise Consultancy Labs where teams are able to practice an advisory mindset using real case studies, with the benefit of guidance offered by experienced partners. PrimeGlobal US firm Lutz organises consulting consortiums, where young professionals join together to do a mock lunch meeting, where partners coach the team on the questions to ask and how to think like a consultant. Ron Nebbia, consulting shareholder who leads this programme at Lutz, says consulting consortiums help young professionals better

34 | November 2020 | International Accounting Bulletin

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In te r na t i o n a l A c c o u n t i n g Bu lletin i nter v i ews S tev e Heath co t e o n h o w c a n w e fu ture- proof A ccoun tants

industry focus | advisory

comfortable environment with no strings attached. These sessions are an opportunity for the diverse team of experienced and professional advisors at MCM to listen, learn and evolve ideas around the company’s challenges and goals until they become actionable solutions.”

THE RIGHT TOOLKIT

Ron Nebbia, Lutz

understand clients’ businesses and supply chains. Similarly, US member C&D organises ‘lunch and learn’ meetings with staff to provide additional coaching and learning in this area.

ADVISORY OPPORTUNITIES 89

Some firms are creating the environment and space to look at a client’s businesses differently. Diverse thinking is important, and firms work with staff to try to encourage looking at an issue in a new way, as this helps create new insights and offer better advice. At Lutz, the SWAT team meets every month, where 8-10 people from different divisions work on a client together, to review their business from all sides. The partners are present at these meetings, and they encourage staff to think out of the box. Best ideas are then summarised and presented to the client. MCM CPAs and Advisors is another PrimeGlobal firm that engages in similar work with staff. Diverse firm staff meet with the client in a comfortable environment, to listen, learn and evolve around company’s challenges and goals. This group is made up of diverse staff and put together based on the company’s industry, challenges and goals. They listen and work with the client until solutions are found. Steve Kerrick, MCM partner and advisory services team leader’ says: “A trusted business advisor isn’t someone you buy a widget from, it’s someone you can open up to about the best, the worst and most vulnerable aspects of running a business. “The team at MCM CPAs & Advisors encourages clients and future clients to participate in brainstorming sessions in a

At PrimeGlobal, we have worked with members and consultants to develop competency models and e-learning modules to equip our firms’ staff with the right skills. We run a 24-hour on-demand learning library where staff can chose from a wide range of courses and materials. Competency courses include topics such as building relationships, understanding clients, communication, conversational insights, anticipation, innovation, negotiation, change management and the benefits of diversity. These modules are brought together to create a programme called MBAexpress. In addition, our firms ensure professionals have the right toolkit and mix of skills. US firm Hogan Taylor LLP started a programme called Business Advisory ACT for the whole team. ACT stands for attributes, knowing the attributes of the best advisors and those you already have; conversations, meaning CPAs must learn to have the right conversations with clients to move beyond compliance professionals into the advisor role; and teams, everything we do is in teams of people to serve clients holistically. Similar programmes are run in other firms. For example, at K·Coe Isom, the firm has devised new training courses and apprenticeships called Business Advisory Mentorship and Value Strategist Apprenticeship to teach these skills. Through the Business Advisory Mentorship programme, the firm is creating an intensive and direct opportunity for younger professionals to expand their exposure to both leaders and new experiences, while the Value Strategist Apprenticeship offers an accelerated development opportunity, mentorship and formal training to impact staff ability to support firm growth through powerful client relationships.

FUTURE-PROOFING Helping to future-proof accountants is a bit like driving a car – the insight practice and the use of the toolkit have to combine seamlessly. In order to achieve this, we have

Steve Kerrick, MCM CPAs and Advisors

developed an advisory training program that brings all the parts together. The five-week training will include modules on Intelligence and the Advisory Mindset, Meaningful Relationships, Winning Proposals, Advisory Commitment, and Coaching and Bringing Back to Your Firm. Participants will leave with the tools needed to consistently expand client relationships and develop new ones, supporting the growth engine of the firm. Up to six people from a firm can participate, so they can apply the knowledge and learn from others to create that all-important diversity. The accountants of the future need different skills than in the past. An advisory mindset and the ability to evaluate and deliver different kinds of transactions is going to be critical. At the same time, learning has become more difficult, as we cannot rely on the old apprenticeship model anymore. However, we can excel at this if we apply a blended approach to develop staff from the moment they join the firm. PrimeGlobal firms are embracing this new model with the support of their association. We are working hard with members to share best practices and learning, which help instil diverse thinking and problem solving mentality, ensuring professionals have the right competencies and confidence to use them. The pandemic has presented us with many challenges, but also opportunities – to leave the old model and stereotypes behind and embrace the new elevated status of the trusted business advisor. To do this, we need to be bold to take the right steps, and proactive to introduce structured and blended approaches to shift the mindset and innovate, presenting the profession with a range of new possibilities.

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I n ter n ati o n a l A c c o u n t i n g Bu lletin repor t on P r i meGl obal w in ning b o t h t h e A s s o c i a t i on of th e Year an d Su s tain able O rgan i z a t i o n o f t h e Ye a r at th e I A B D i gi tal A ccoun tancy Awa rds

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Ins i d e P u b l i c A c c o u n tin g repor t on P r i meGl obal w in n in g b o t h t h e A s s o c i a t i on of th e Year an d Su s tain able O rgan i z a t i o n o f t h e Ye a r at th e I A B D i gi tal A ccoun tancy Awa rds

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C PA re p o r t on P r i meGl obal w in n in g b o t h t h e A s s o c i a t i on of th e Year an d Su s tain able O rgan i z a t i o n o f t h e Ye a r at th e I A B D i gi tal A ccoun tancy Awa rds

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P r i m e g l o b a l m e nt ions o n s o c ia l m e d ia

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P r i m e g l o b a l m e nt ions o n s o c ia l m e d ia

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P r i m e g l o b a l m e nt ions o n s o c ia l m e d ia

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P r i m e g l o b a l m e nt ions o n s o c ia l m e d ia

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P r i m e g l o b a l m e nt ions o n s o c ia l m e d ia

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I n te r na ti o n a l A c c o u n t i n g Bu lletin i nter v i ews S tev e Heath cote on h o w t h e a s s o c i a t i o n ’s m e mber s are del i v er i n g v al u e to cl i en t s

feature | audit

why we should

be proud to be auditors Covid-19 has required new approaches to audit and a total reassessment of risk. PrimeGlobal CEO Steve Heathcote offers IAB readers an insight into how the association’s members are delivering value to clients

ecent headlines about audit have not been good reading – dominated by high-profile audit failures and regulatory intervention to break up the big firms. With companies of all sizes under financial pressure, the value of audit is once more being challenged. The audit is sometimes seen as a necessary evil, a compliance activity adding little value to a company or its stakeholders. This is captured by the old joke: Why did the auditor cross the road? Because they did last year! As an ex-auditor it does still make me smile. The reality, however, is very different. The crisis has required new approaches to audit procedures and a total reassessment of risk. My recent discussions with PrimeGlobal member firms highlight that the crisis has increased their focus on understanding business risk, the impact on audit procedures and the audit opinion. Many of our member firms’ audit businesses of differing size and across sectors – often small to medium-sized companies. They are used to complexity, and recognise that every client needs to be understood differently. As Elaine Pantel, partner – assurance and business advisory at Canadian firm Shimmerman Penn, explains: “The partners feel a higher sense of purpose as they

realise how important the audit is during challenging times.”

VISITING CLIENTS Clearly Covid-19 has limited the ability of audit teams to visit clients to complete audit procedures, such as inventory checks. The extent this has impacted audits varies depending on the time of the year end.

Steve Heathcote, PrimeGlobal

Anthony Woodings, business services partner at UK firm Hurst, explains that 30 March year ends were particularly challenging. However, Woodings notes: “We assessed risks, determining exactly when we needed to be at the client’s premises and what could be done remotely. For certain types of inventory, we could obtain strong assurance using collaborative technology. Often when teams go out to client locations, we have down times when they are waiting for information. By obtaining information in advance and really focusing on only visiting when we needed to, we reduced physical time spent at a client from a typical six weeks to six days.” The extent of thought required is helping to focus audit work on key matters. Simply following previous audit procedures is not an option. For both Shimmerman Penn and Hurst, previous investment in technology and moving to fully paperless operations has helped to ensure they were in a strong position to obtain information from their clients to continue audits. Hurst started to adopt an AI auditing solution before the crisis hit. This foresight has proven to be incredibly valuable. Woodings explains: “The software has been great to analyse data to focus on audit risk,

28 | September 2020 | International Accounting Bulletin

gstojanovic@primeglobal.net • www.primeglobal.net

I n te r na ti o n a l A c c o u n t i n g Bu lletin i nter v i ews S tev e Heath cote on h o w t h e a s s o c i a t i o n ’s m e mber s are del i v er i n g v al u e to cl i en t s

feature | audit

Firms like Shimmerman Penn and Hurst have invested in strong quality-control functions with senior staff like Zelman ready to support audit teams. This investment has helped keep a focus on independence during a time when there could be more pressure from clients. It also ensures that teams have access to high-quality advice issued from a range of standard setters and professional bodies.

VALUE OF AUDIT

Elaine Pantel, Shimmerman Penn

and the dashboard really helps explain issues to clients.” The crisis has clearly helped to accelerate the adoption of the technology.

GOING CONCERN 100

There is clearly an increased probability that auditors may need to highlight the existence of an uncertainty regarding a company’s ability to continue as a going concern. For some clients, for example in the casual dining sector, the risks are so clear that clients have accepted the need to do so. However, for others the thought of any form of modified

Pantel and Woodings comment that they have had to invest more time in audits to consider challenging judgemental areas. Pantel notes that this is putting some pressure on the recovery of costs; however, the firms want to support their clients during challenging times and are reluctant to increase audit fees. Both firms are passionate about their clients and want to help provide the insights which help them grow. Woodings comments that Hurst feels fortunate to have entrepreneurial clients that want help to understand their financial position, accept their reality, and are nimble and can refocus on growth. He says for some business owners this is motivating, and reflects the entrepreneurial spirit that is the driver behind many small to medium businesses. Such businesses represent the majority of economic activity, and puts the auditor in the critical role to build the confidence required to generate jobs and growth.

We assessed risks, determining exactly when we needed to be at the client’s premises and what could be done remotely audit report is a shock. As Pantel says: “This is partly psychological – it’s a sense of pride – clients want a ‘clean’ audit report.” The time partners spend discussing risks with their clients is helping them understand their own business position more fully. Bonnie Zelman, director – quality control at Shimmerman Penn, notes: “They help their clients understand that the financial statements belong to them – they need to assess the impact of financial uncertainty on their business.” This helps to bring an advisory element to the audit – but at the same time firmly maintains independence.

Pantel comments that the high-level discussions Shimmerman Penn is having with clients about their current and future business provides – in the longer term – an opportunity to “relook at the value of audit and turn the tide away from its commoditisation”.

THE FUTURE There are clearly challenges ahead for auditors; however, PrimeGlobal firms are highlighting that there have also been positives. They understand their clients’ business better

Anthony Woodings, Hurst

than ever, and their clients have a better understanding of what is required to audit. Audit teams are learning from partners as they see how they address challenging judgemental areas and how to have difficult conversations with clients. This exposure is helping train and equip the next generation of auditors. PrimeGlobal firms are also exploring further collaborative technology which will increase efficiency and effectiveness of audits – for example, by looking at the potential of augmented reality headsets that project computer-generated images and tools onto a visor in front of your eyes. The client would wear the headset to enable remote auditing so, for example, they could walk into a warehouse full of boxes, scan the room and the technology would tell the auditor in an instant how many items are there. It can also be used to review working papers remotely. In a day, an auditor could review working papers in Singapore, review inventory in Germany and remain at home in time for dinner in Manchester! At PrimeGlobal we are committed to bringing our firms together to share practices to improve audit effectiveness, use technology, train staff and enhance audit quality. Post Covid-19, the need for audit will be stronger than ever, with stakeholders requiring assurance about the resilience of businesses. The value of audits may also be better understood by business. The crisis has given us many reasons to be proud of our auditors. That would be a headline about audit that, for once, should make us all smile for the right reasons!

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gstojanovic@primeglobal.net • www.primeglobal.net