iab544 uk

www.InternationalAccountingBulletin.comDecember 2014 Issue 544

Political uncertainty a concern for British businesses

● Global Accounting 2014 Power 50 ● BDO on M&A spree as it seeks to rival Big Four

● World Congress of Accountants debate SME audits ● EY secures ABS licence

In or out?

IAB 544.indd 1 17/12/2014 11:34:02

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December 2014 y 1www.InternationalAccountingBulletin.com

Editorial Advisory BoardKevin McGrath, Crowe Horwath International CEOKevin Arnold, Nexia International CEOGeoff Barnes, Baker Tilly International president and CEOGraeme Gordon, Praxity executive directorStephen Jacobs, INPACT International presidentJon Lisby, Kreston International executive directorJames Mendelssohn, MSI Global Alliance, chairmanChristian Mouillon, EY global vice-chair, assuranceEd Nusbaum, Grant Thornton International CEOMichael Reiss von Filski, Geneva Group International CEOLiza Robbins, Morison International CEOMartin van Roekel, BDO International CEOJean Stephens, RSM International CEORobert Tautges, HLB International CEO

Despite a year of solid performance by international accounting networks and associations in the UK throughout 2014, the pending political uncertainty is cause for concern for larger firms. To think that the political rhetoric of the UK Prime Min-ister David Cameron, promising a yes/no referendum on UK membership of the EU if he wins the May 2015 general election is going to go unnoticed by the profession is highly unlikely. With numerous interna-tional clients investing in the country and as one of the country’s largest employers the Big Four leaders speaking to the Interna-tional Accounting Bulletin called for reason and for the UK to remain in the single EU market. Political point scoring has also led firm leaders to single out political risk as their biggest reason for concern for the future as the UK finally starts showing signs of recovery. EY UK chairman and manag-ing partner UK and Ireland Steve Varley emphasised the need and obligation to help Europe to .be more competitive especially against global competitors such as India and China.

With the old continent already facing many challenges linked to demographics, economics and productivity there’s little room for emotive political rhetoric simplify-ing important political and economic issues. However, it seems most EU countries find themselves dealing with increased euroscep-ticism and while politicians try to tune in to that sentiment perhaps it’s time for busi-nesses to be more vocal about the impact on business and global competitiveness of Europe in the light of shifting global forces.

Nevertheless, 2015 is likely to be an impor-tant year for UK accounting firms as they attempt to replicate and build on the success of 2014 against the backdrop of political uncertainty.

Top influencers of the professionIt’s become traditional for our December issue of the International Accounting Bul-letin to include the annual Power 50 list.

The eagerly anticipated Power 50 has a slight twist this year as once again with sister title The Accountant we tried to find a fair way of compiling the list. We settled on leaving it to our subscribers who were all able to vote online. However due to the vot-ing link being shared with non-subscribers and repeat voting we were obliged to dis-qualify many votes received. In the end we took into consideration legitimate subscrib-ers’ votes, but we also recognised a few joint entries and some organisations/initiatives that we felt overcame challenges in 2014 or have the power to make a real difference in their environment in the future. We don’t wish for the list just to include people with the biggest job within a large organisation, but also to include people making a real dif-ference to the profession in their region.

Congratulations to all who made it onto the list. There were many we would have wished to have mentioned, but we’re sure that they will make the cut in future as they continue to influence the global profession.

Ana [email protected]

Testing time ahead for the UK

EDITOR’S LETTERInternational Accounting Bulletin

NEWS 02-04

CONTENTS

■ EY UK joins PwC and KPMG by securing ABS licence.

■ EU audit implementation: Key consultation expected in the UK.

■ BDO on M&A spree as it seeks to rival Big Four.

FEATURES 04-14

COUNTRY SURVEY 14-20

O4-05: WCOA

With audit thresholds rising all over the world, audit and assurance services for SMEs seem to be less and less in demand. Vincent Huck reports on the challenges for accounting firms and the alternative services that are developed.

O6-13: GLOBAL ACCOUNING POWER 50

International Accounting Bulletin and its sister title The Accountant bring you the list of the 50 most powerful people in the profession as chosen by subscribers and the team at the IAB and TA. See who’s made it on the list in 2014.

14-20: UK

With the possibility of a vote on EU membership seeming more likely, and the first signs of economic recovery taking hold, this year has seen the UK buffeted by political and economic change. As the country prepares to enter another, highly uncertain year, its accounting industry is braced for change. Ana Gyorkos and Isabella Grotto report.

Give your students a business perspective of the world of accounting. Give your students access to content they can trust. Give your students the edge. Subscribe to The Accountant

www.vrl-financial-news.com

A subscription to The Accountant is the ideal accompaniment to an accountancy course of study. Including exclusive features and interviews with major figures in the accountancy sector, The Accountant will help your students to understand the real-world implications of the theory they are learning, and help improve their employability in a competitive jobs market. A weekly newswire gives you regular updates of all the big stories, while IP access means students can view our content anywhere with access to the student portal.

Subscribe to The Accountant for: • IPaccesstoourcontent.Soyourstudentscanaccessour

content campus-wide with one login

• Contentyoucantrust.Wehave125yearsofexperiencedelivering accountancy news.

• Trulyglobalanalysis.Wecoverarangeofstoriesfromaroundthe world, so your students get a wide perspective of the sector.

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IAB 544.indd 1 17/12/2014 11:34:05

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NEWS International Accounting BulletinROUND-UP

GLOBAL

KPMG global revenues up 6% KPMG global has reported revenues of $24.82bn in the year to 30 September 2014, up 6.3% in local currency terms and up by just under 5.9% in US dollar terms.

The latest annual performance breaks KPMG’s sluggish global growth experienced in the previous two years where the firm grew 2% in 2013 and 1% in 2012.

Audit revenues were up 3.8% with the firm earning $10.46bn in fee income, up from 1.2% growth in the previous year.

Tax revenues grew 6.1% to $5.27bn, up from 4.2% growth in fiscal year 2013, driven by an increased demand for tax compliance and tax advisory services according to the firm.

Advisory brought in $9.09bn in fee income, up 10.4% on the previous year. The advisory growth was driven by demand and strengthened capabilities in management consulting, risk consulting services and transactions and restructuring.

Regionally, Americas revenue was up by 10% to $8.51bn, Asia-Pacific 3.8% to $3.86bn and EMA (including India) was up 4.7% to $12.45bn earned in fees.

This year marked a change in leadership for KPMG as in February global chairman Michael Andrew retired after being diagnosed with

“a serious medical condition”. He was succeeded by John Veihmeyer, the chairman and chief executive of KPMG US.

INDIA

Satyam ex-chairman jailed in final chapter of accounting scandalIndian software group Satyam Computer Services’s former chairman and founder Ramalinga Raju has been sentenced to six months in prison for his role in the $1.5bn international accounting fraud case that engulfed the company in 2009.

The decision marked the final chapter in the close to six-year fraud case which, in terms of scale and damage caused, echoed the 2001 Enron scandal in the US.

Raju was sentenced alongside four other former Satyam senior executives, including his brother B. Rama Raju, who held the post of managing director at the time of the scandal.

UK

EY UK joins PwC and KPMG by securing ABS licenceEY UK is the latest Big Four firm to be granted an alternative business structure (ABS) licence by the Solicitors Regulation Authority, enabling it to provide legal services in England and Wales.

EY UK’s move echoes the global strategy of the network to make the multidisciplinary approach a global selling point

According to the network, EY’s global law practice already has more than 1,100 people in 60 locations. In the past 12 months, EY has also created legal teams in Mexico, Costa Rica, Singapore,

China, Vietnam, Australia and New Zealand, and will have a presence in more than 80 jurisdictions by 2017.

EY UK now joins PwC and KPMG which have already secured the licence earlier in the year.

EUROPE

EU audit implementation: Key consultation expected in the UKThe UK government’s Department for Business, Innovation and Skills (BIS) has plans to launch a consultation on the implementation of EU audit reform before the end of the year, IAB has learned.

A spokesperson for BIS told IAB that this consultation will include consideration of whether and how the UK might implement the various options that member states have under the EU rules.

Both the Directive 2014/56/EU on Statutory Audits and the Regulation 537/2014/EU on Statutory Audit of Public Interest Entities left 51 and 32 options, respectively, available for member states to decide on, according to the Federation of European Accountants.

For example, the EU regulation established that the maximum period a firm can audit a company is 10 years.

However, it introduced two options whereby member states could extend the audit engagement for another 10 years by tendering the contract, or another 14 years if a joint audit firm is appointed.

NEWS ROUND-UP

MOVERS & SHAKERS

Crowe Horwath International has

appointed Crowe Horwath US chief

executive officer Charles Allen

and Ruihua principal partner Yang

Jiantao as co-chairmen of the

network, effective 1 January 2015.

BDO International has extended Martin van Roekel’s tenure as chief executive officer of the mid-tier international network for another three years.

Van Roekel first took the role in

September 2011 and since then

has led BDO’s growth mainly

through a dynamic external

growth strategy, with the network

acquiring a significant number

of firms worldwide, most notably

PKF International’s member

firms in Australia and the UK.

In Van Roekel’s first three years’

tenure as CEO, BDO International

revenues grew from $5,672.3m

in fiscal year 2011 to more than

$7bn in fiscal year 2014.

Alliott Group has appointed long-

standing association member

Selim Ozutez to its EMEA advisory

board. Ozutez is currently audit and

accounting partner of Alliott Group

member firm ICS Bagimsiz Denetim

in Turkey.

LinkedIn Group World Accounting Intelligence

Twitter WAI_News

Facebook page World Accounting Intelligence

Scan our QR code for quick smartphone access to IAB

Join our online community

IAB ONLINE – DECEMBERTop 5 articlesMerger spree boosts BDO revenue

EY UK joins PwC and KPMG by securing ABS licence

Satyam ex-chairman jailed in final chapter of accounting scandal

KPMG global revenues up 6% after two years of sluggish growth

RMS adds correspondent firm in Myanmar

WCOA Rome: The Olympics of accountancy

Most retweeted articleKPMG global revenues up 6% after two years of sluggish growth

Read in 137 countriesUK 25%

US 12%

India 5%

Malaysia 5%

Canada 4%

Rest of the world 46%

Germany 4%

IAB 544.indd 2 17/12/2014 11:34:09


NEWSInternational Accounting Bulletin ANALYSIS

M&A

BDO on M&A spree as it seeks to rival Big FourBDO registered an annual total fee income increase of 8.81% to $7.02bn in the year ending 30 September 2014, growth it attrib-uted in part to the 28 mergers it completed over the past 12 months.

Audit and accounting made up 57.5% of total fees at $4,036.5m, up from $3,824.9m in the past financial year. Meanwhile, advi-sory contributed 21.9% at $1,537.38m and the tax service line totalled $1,446.12m at 20.6% of total revenue, up from $1,328.7m and $1,294.45m respectively in 2013.

BDO chief executive officer Martin van Roekel told International Accounting Bul-letin: “We’re very proud to see that for the first time in our history we have exceeded the $7bn mark, an increase of 8.8%.

Reflecting on the network’s growth, Van Roekel explained: “It comes partly from M&A and partly from organic growth.“It’s interesting to see that firms that have

been able to do M&A have also realised an organic growth,” he added.

With acquisitions across Fiji, Réunion Island, Bangladesh, Papua New Guinea and Sierra Leone, and existing offices’ expan-sions in Laos, Afghanistan and the Maldives, the network brought the total of countries in which it is present to 151.

In terms of staff, the series of mergers increased BDO’s global headcount by 5.4% to just under 60,000 total partners and staff, working across the 1,328 offices of the net-work’s 110 member firms.

Van Roekel told IAB: “We’re very pleased with the 28 mergers realised in the past 12

months as it confirms what we’ve been say-ing in the past two years that we foresee a consolidation in the mid-tier networks. Say-ing something is one thing; when it’s realised of course it confirms that our expectation was the right one.”

Two areas leading organic growth for the network are the US and China.

In the US, the network reported revenues of $833m in the financial year ended 30 June 2014 and completed four acquisitions throughout the past 12 months, including Pittsburgh-based accounting firm Alpern Rosenthal and Hartman Leito & Bolt in Forth Worth.“If I look at the M&A that have been

realised until end of September it’s pleasing to see that recently we have seen two very interesting M&A in the US,” commented van Roekel. “Taking into account the dis-cussions going on in a number of countries by our member firms we expect that trend to continue in the current year.”

Indeed, on 1 December BDO US acquired UHY Texas. The network also added firm SS&G and subsidiary SS&G Parkland to its network, expanding its operation in the Midwest.

It is also in light of these developments that van Roekel told IAB: “We expect that in some years from now there will only be two or three truly global mid-tier networks in the market.”

In China, meanwhile, BDO revenues wit-nessed 16% growth and took advantage of favourable economic conditions in the Peo-

ple’s Republic to complete four mergers.At the same time, BDO International and

BDO China recently invested in a share-holding in BDO Hong Kong, the first step towards integrating the network’s Hong Kong and China firms, effective 1 January 2015.

According to Van Roekel, the network’s performance in China is indicative of a wider, successful trend across emerging economies.“China is a prime example,” he explained.

“The switch to a service-led economy pro-vides real opportunity and we are already bigger here than EY and KPMG. This is part of the reason for the network’s sustained growth and in turn gives us the momen-tum and power to lead the consolidation of the mid-tier and continue our cycle of expansion.”

Looking to the coming years, BDO is gearing up both to fight its corner in a con-solidating mid-market and grow its clout to rival that of the Big Four.“At BDO, we’re actively increasing our

presence in the US, a ‘re-emerging’ economy, and also in the emerging markets that we know are central to our clients’ growth strat-egies,” he explained.“This is part of the reason for the net-

work’s sustained growth and in turn gives us the momentum and power to lead the consolidation of the mid-tier and continue our cycle of expansion.“By 2018 we predict only two or three

substantial mid-tier networks with a global presence will be left standing."<

RSM International has added correspondent firm MAT Audit and Professional Services in Myanmar to its network. Based in the country’s commercial centre Yangon, MAT Audit and Professional Services marks RSM International’s latest addition in the region.

DFK International has added Johannesburg firm Levitt Kirson to its association, marking a return to South Africa after losing its only member in the country in 2010.

Previously a member of Nexia

International, Levitt Kirson had offices in Johannesburg, Durban and Cape Town. In August of this year the Johannesburg office split and rescinded its membership with the network, unlike the other two offices which chose to stay with Nexia.

PKF Littlejohn, a UK member firm of

PKF International, has added its first

business recovery, turnaround and

insolvency specialist firm Geoffrey

Martin & Co.

Led by three partners and with 15

members of staff, Geoffrey Martin

& Co serves clients across multiple

industries through its offices in

London and Leeds.

As a result of the deal, the employees

of the London office will relocate

to share PKF Littlejohn’s quarters in

Canary Wharf, while the Leeds office

is to remain at its current location.

Kreston International has added

Kazakh firm Eurasian Financial

Services to its network.

BKR International has added G. Kibria & Co from Bangladesh to its association. Headquartered in Dhaka, G. Kibria & Co has three partners and 61 staff.

Geneva Group International has added sister businesses BFP Steuerberatungs and BFP Wirtschaftsprüfungs to its association in Austria.Headquartered in Graz and with offices in Burgenland, Carinthia and Vienna, BFP firms offer a range of services in tax, audit and consulting.

FirmMovements

IAB 544.indd 3 17/12/2014 11:34:09


FEATURE International Accounting BulletinWORLD CONGRESS OF ACCOUNTANTS

www.InternationalAccountingBulletin.com

Small and medium enterprises rep-resent more than 95% of the busi-nesses in the OECD countries and they generate over half of the jobs in

those countries.In the EU alone, more than 99% of the

businesses are, in fact, SMEs, according to the European Commission. They provide two out of three private sector jobs and con-tribute to more than half of the total value-added created by businesses in the EU.

Furthermore, nine out of 10 European SMEs are actually micro enterprises with fewer than 10 employees, making micro businesses with an average of two employees the backbone of Europe’s economy.

While SMEs have suffered from the finan-cial crisis, they have shown more resilience than larger businesses and in many coun-tries, like Germany and the UK, are leading the national economic recovery.

Nevertheless one of the major challenges faced by SMEs remains access to finance, which is linked to the necessity to provide assurance on businesses’ financial health.

Against this backdrop, regulators around the world are increasingly raising audit thresholds and exempting many SMEs from audit requirements.

Grant Thornton International global leader of assurance services Ken Sharp says this has not really impacted accounting firms in general and his firm in particular. “At this point I don’t think there has been an impact and the reason I say that is because some companies might opt out of the audit because they are no longer legally required

to have one, but they find themselves having audit being required by other stakeholders whether it’s lenders, investors or other par-ties.”

Asked if SME clients still value the audit product, and are willing to pay for one, Sharp says there are different scenarios. In the case of a small business owner who is very much involved in his business, working on the financials every months, and signing the cheques, Sharp says the owner would be reluctant to pay for an audit: “Because it doesn’t do anything for him, he already knows everything that’s going on. In fact he probably controls most of what’s going on so he would see no need when in other situa-tions small business owners might.”

Other situation includes business owners who are not directly involved in the business and leave it to other to manage and run the operations. “They might want an audit or at least a review to have an independent set of eyes to provide them some degree of comfort that their investments and company is being well managed and the financial reports they are getting are fairly presented,” Sharp says.

An audit does not add value but it gives a level of assurance or comfort for the stake-holder who has money on the line, he con-tinues. “But generally speaking it’s fair to say most SMEs without outside influences would not have an audit and therefore it makes it challenging to sell or convince peo-ple that they need an audit service.”

As audit products have usually been devel-oped for larger listed companies, one of the challenges of selling an audit to a SME has

to do with the product’s relevance. Ameri-can Institute of Certified Public Accountants vice-president, firm services and global alli-ances, Mark Koziel says that in the discus-sion around audit relevance and financial reporting relevance for SMEs, both are chal-lenged if one applies the same standards as the large entities.

“In the US we have an estimated 14,000 listed entities in the US exchange and an estimated 29 million small businesses. And for the longest time we’ve mandated the US GAAP to be the same for both of those types of businesses, and that just doesn’t make a lot of sense,” he says.

In the US, SMEs are not required to appoint an auditor, but when looking for funding, a bank or a lender can ask for the financial statement to be audited, reviewed or compiled by an independent professional accountant.

“In the SME market in the US, there are a variety of things that you can do,” Koziel says. “Depending on why the SME would need the financial statement, other than just good financial management for themselves, the question is: what do the banks require?”

A bank can require an audit but can also be satisfied with a review or a compilation, according to Koziel. It all depends on the relations the bank enjoys with the client and the level of the loan.

Asked whether US firms would like to see audit thresholds being implemented, Koziel says it’s not even on the discussion table. “Maybe they would like to see that as it would increase the number of audit

To audit or not to auditWith audit thresholds rising all over the world, audit and assurance services for SMEs seem to be less and less in demand. Vincent Huck reports on the challenges for accounting firms and the alternative services that are developed.

IAB 544.indd 4 17/12/2014 11:34:13


FEATUREInternational Accounting Bulletin WORLD CONGRESS OF ACCOUNTANTS


engagements out there, but do they see it as necessary? I’m not sure,” he says. “I don’t think it would be a possibility.”

At the other end of the spectrum, in Nor-way for almost 100 years, all limited liabili-ties companies have had statutory audit requirement, until 2011 when the regulator introduced audit thresholds.

Speaking at the World Congress of Accountants (WCOA), the Norwegian Institute of Public Accountants (Den Norske Revisorforening) chief executive officer Per Hanstad says that as the result of the change in regulation 192,000 out of the 265,000 Norwegian limited liability companies could decide not to have an audit. He says around 100,000, or 56% of those opted out.

“I’m very disappointed that so many cli-ents chose to get rid of the auditors imme-diately,” Hanstad says. “That tells me the audit product we are developing is seen as not having the value and SMEs are not will-ing to pay for it.”

Hanstad spoke as part of an international panel chaired by ACCA external affairs director Sue Almond which looked at differ-ences between countries in how regulators, professionals and businesses approached assurance services.

Also part of the panel was IFAC Small and Medium Practices (SMPs) committee mem-ber Stuart Black, an Australian. He remem-bers that the Australian profession also felt uneasy when the government introduced thresholds. “We were a very cosy profes-sion; we didn’t have to think about the com-ing years; we were lazy,” he says. “But the thresholds came in and we though ‘oh what we going to do?’”

The Australian government started to deregulate SME reporting in 1995 with the Corporation Act which abolished the need to produce financial statement for SMEs.

“But life went on and it didn’t cause us [the profession] any impact at all,” he says. “Then in 2007, thresholds were lifted, but when the changes went through I don’t think anyone noticed it happened; it was a bit of a non-event.”

He believes there is life after audit for accounting firms, and he says Australian practices are now heavily involved in other assurance services such as reviews and agreed-upon-procedures.

Today he says the legislation is quite com-plicated in Australia as there are different thresholds under the four different federal

Acts of Parliament and the eight different State Acts. “So the question about which thresholds you fall under depends on what sort of entity you are and which state or which Act you are operating under,” he says.

Canada went through a similar evolution to Australia. Up until 1986 all private com-panies had to undergo an audit. IFAC SMP committee member Phil Cowperthwaite, also a panel member in Rome, explains that the legislative changes in 1986 introduced the possibility for companies to choose not to have an audit if all the shareholders agreed against it. “For example, General Motors in Canada decided it didn’t need an audit,” he says.

Cowperthwaite also believes there is life after audit and he says many Canadian pro-fessionals moved to reviews and compilation services. Since then the Canadian profession has tripled, he says. “I haven’t met too many accountants at the traffic lights washing windscreens for money in Canada.”

The fourth and final panel member was Conseil Superieur de l’Ordre des Experts-Comptables (CSOEC) vice-president Philippe Arraou who explains that assur-ance services for SMEs are still heavily regu-lated in France.

“So we have a vast number of SMEs which are audited, but we have two kind of profes-sions providing services to SMEs in France: the chartered accountant who advices and the auditor who audits,” Arraou says.

Indeed, the French regulation is made in a way that even for SMEs both aspects – advis-ing and comparing financial statements, and auditing and delivering an opinion – need to be regulated, he continues. “But we consider them as two different assignments: the finan-cial statement is prepared by a professional according to accounting standards, and then the role of the auditor is limited to deliver-ing an opinion on this financial statement. There are different roles, but complemen-tary of course.”

For Black, the French system makes sense for providing independence, but only if there is a regulation requiring an audit. “But to be frank, in my view, it ignores the question of why do you need an audit for an SME,” he asks. “To my mind there’s no evidence that I’ve seen anywhere in the world that shows that countries which don’t have audit for SMEs have greater failure than countries that do have audit.”

However small the clients, Cowperth-

waite counters, an audit does make a difference to a business. “They actually know where they are and not where they wish they were,” he says. “That is also use-ful, although most of my clients would rath-er have where they wish they were!”

Referring to the French system, which by law requires two sets of accountants for SMEs, Cowperthwaite says that regardless of the number of accountants SMEs have to help them grow, the main issue is those accountants’ level of experience.

He says firms tend to send their junior auditor, or the least qualified person, to micro entities clients which themselves have no experience in accounting. “If there was ever a formula for disaster it is sending a jun-ior auditor to a non-accountant and expect to get something of value,” he says. “I don’t really know if you need one, two, three or four accountants, but for the really small clients you have to send out senior people to the job, on site, talking to your clients and having direct communication.”

In addition, Hanstad at the Norwegian Institute of Public Accountants adds, firms need to rethink the product they sell to SMEs. “One of the problems today is that we try to sell products to small companies which are absolutely not fit for purpose at all,” he says. “As long as we try to sell an audit to SMEs the same way as we sell to the biggest companies or multinationals, we will lose.”

Conversely for Arraou at CSOEC, while creating added-value from services rendered to businesses is important, this can’t impact the independence and public interest role of the auditor.

“When you’re performing an audit you are not responding to the demand of the client – that would be like asking a turkey what he thinks about Christmas dinner,” he says. “You’re working for the public inter-est; you’re developing an opinion useful for the company, but not directly provided to the company.”

The trend of rising audit thresholds is expected to continue in the coming years and as more SMEs escape the net of statuto-ry audit requirements, audit firms will have to adapt their offerings and find new argu-ments to convince businesses of the necessity of providing assurance. However Sharp of Grant Thornton International is not worried by the state of play. “Those are challenges, but certainly not threats,” he says. <

IAB 544.indd 5 17/12/2014 11:34:16


Global Accounting Power 50 2014International Accounting Bulletin and its sister title The Accountant bring you the list of the 50 most powerful people in the profession as chosen by subscribers and the team at the IAB and TA. See who’s made it on the list in 2014

This year we thought long and hard about how to produce the best unbiased snapshot of this year’s top influencers in the profession. We

agreed to give the power to our loyal sup-porters, our subscribers, but also incorporate our editorial views on the profession and

include some of the key initiatives and events that have taken place throughout the year.

At the IAB and TA we have spoken to many inspiring individuals from across the globe, who might not head up one of the big firms or large professional bodies, but still in their own environment excel and influence

the profession. Congratulations to all the individuals,

joint entries and initiatives which made it to the list this year and thanks to all the sub-scribers who voted.

The list is in alphabetical order and is not a ranking.

African Women Chartered Accountants Forum (AWCA)

Created in 2002 by four South African women AWCA aimed to encourage, support and accelerate the advancement of black women CAs, qualified and aspiring. In 2002, there were only 407 black female CAs in South Africa. In 2014, there were 3,445 registered out of South Africa’s 35,657 SAICA-registered CAs. In 2014 alone, more than 1,000 black CAs qualified. Of these, 665 were black women CAs. That means more black women CAs qualified in one year than the total number of black women CAs in South Africa in 2002.

Albert Ng

Organisation: EY ChinaPosition: Greater China managing partner

Albert Ng is EY’s Greater China regional managing partner and also represents the emerging markets on the global executive. Ng has 30 years’ experience of accounting in China.

He has been active in helping numerous Chinese organisa-tions list both domestically and overseas and is considered a pioneer in the investment advisory consulting space in China.

Ng has been a member of EY’s global executive team since 2010 and an advisor to the advisory council of the Mayor of Shanghai since 1995. He was presented with a Magnolia Gold Award for his contribution to the development of the city of Shanghai.

Alex Malley

Organisation: CPA AustraliaPosition: Chief executive

Fresh from launching his book The Naked CEO, Alex Malley continues to be a strong advo-cate of sustainability and inte-grated reporting. A member of the International Integrated Reporting Council, he is also a business commentator in broadcast media and hosts the television show The Bottom Line screened nationally on Austral-ia’s Channel 7 Digital.

IAB 544.indd 6 17/12/2014 11:34:23


FEATUREInternational Accounting Bulletin POWER 50

Andreas Bergmann

Organisation: IPSASBPosition: Chair

At the helm of the International Public Sector Accounting Standards Board (IPSASB) since 2010, Bergmann and the board he chairs have a herculean task to undertake: to twist the arms of governments to adopt accrual-based IPSAS. Public finance have historically been neglected by the accountancy world, which has focused more on the private sector, but the global financial crisis strengthened support for holding gov-ernments to account and encouraging them to manage public finances with the same diligence required for private sector corporations.

Anton Colella and Don Peebles

Organisation: ICAS and CIPFAPosition: Chief executive and head of CIPFA Scotland

The Scottish independence referendum has unleashed passion-ate feelings in the UK over the past year and its repercussions were felt beyond the UK’s borders as the rest of the world took a strong interest in the Scots’ vote. CIPFA and ICAS played an important role in informing the debate in a non-partisan way. Peebles led C IPFA’s work on the issue w ith the public a-tion of the informative report Scotland’s future in the balance. At ICAS, Colella led the institute through numerous debates and the publication of various papers tackling the question of tax and pen-sions. As the UK continues to work out the details of devolution in the coming months both Colella and Peebles’s work on the matter is far from over.

Antoni Gomez

Organisation: Antea and AurenPosition: Chairman and President

Antoni Gomez is the leader of the Spanish association Antea and the president of the network Auren, which is an entity of Antea. Under Gomez’s leadership both organisations have gained traction in the market with Antea recently announcing it is entering the Colombian market.

Arnold Schilder

Organisation: IAASB

Position: Chairman

Arnold Schilder trained and started

his career at PwC and during this time

finished his PhD, while serving as the

president of the Dutch professional body

NIVRA.

Since his appointment as chairman of

the International Auditing and Assur-

ance Standards Board (IAASB), Schil-

der has played a key role in guiding the

IAASB as it strives to enhance the qual-

ity and consistency of practice through-

out the world. In September 2014, Schil-

der’s long-standing contribution to the

professional was recognised through the

awarding of IAB’s 2014 Lifetime Achieve-

ment Award.

Barry Melancon

Organisation: AICPAPosition: President and chief executive

Melancon has led AICPA since 1995, mak-ing him the longest-running chief executive officer in the institute’s 125-year history. Under his leadership, AICPA has voted to offer credits internationally, potentially allowing non-US-based accountants to gain access to AICPA credentials.

During 2014 Melancon has petitioned the US’s Equal Employment Opportunity Commission to halt investigations into accounting part-nerships regarding the mandatory age provisions of partners.

Barry Salzberg

Organisation: Deloitte globalPosition: Chief executive

Salzberg has overseen the fifth consecutive year of growth for Deloitte Global as chief executive.

This year the firm cemented its position as the leading professional services firm and has for the second consecutive year earned the high-est fee income globally, yet again overtaking PwC. Under his govern-ance, Deloitte saw its revenues increase 5.7% during the year ending 31 May 2014, with consultancy a determining driver of the network’s performance. Salzberg is also a trustee of the IFRS Foundation.

Anders Heede

Organisation: BDOPosition: EMEA chief executive officer and global head of network development and advisory

After a successful career in advisory Anders Heede joined BDO in 2008 as the chief executive of BDO Denmark. In a short space of time Heede has achieved a leadership role within the global network. His views on mid-tier market consolidation and future accounting market trends made him one of the most influential speakers at this year’s Interna-tional Accounting Bulletin Industry Forum.

IAB 544.indd 7 17/12/2014 11:34:27


FEATURE International Accounting BulletinPOWER 50

Charles Tilley

Organisation: CIMA

Position: Chief executive

Tilley’s tenure this year was

characterised by the develop-

ment of CIMA’s joint venture

with its US partners, the AICPA.

The management accounting

profession is at the forefront

with the global designation

CGMA created by the pair. Tilley

was also appointed to serve as chairman of IFAC’s Public Accountants

in Business Committee. Tilley is an advocate of the disclosure of better

financial information as a member of the IIRC. However, CIMA is the

only global professional body that hasn’t participated in The Account-

ant World Survey disclosing members and student figures country-by-

country. This magazine, as a legitimate stakeholder of the profession,

encourages Tilley to lead by example and facilitate an integrated par-

ticipation in our survey next year.

David Sproul

Organisation: Deloitte UKPosition: Chief executive and member of the Deloitte global executive

David Sproul has been chief executive of the UK firm for the past three years and has led the businesses through the firm’s role in the London 2012 Olympic Games, as well as through a testing time for the audit business, hit by regulatory changess,and navigating the business towards advisory and technology busi-ness opportunities.

David Tweedie

Organisation: IVSCPosition: Chairman

Sir David Tweedie served as chairman of the International Accounting Standards Board for a decade, spreading the use of IFRS as a single set of global standards in more than 100 countries. In late 2012 the IVSC recruit-ed Tweedie to replicate the success story of

IFRS. Tweedie and the IVSC have embarked on a difficult mission: cre-ating global valuation standards and a global profession from scratch. Particularly worrying is the lack of standards to value financial instru-ments, which according to Tweedie is a ticking time bomb for financial stability.

Dennis Nally

Organisation: PwCPosition: Global chairman

PwC global chairman since 2009, Dennis Nally is at the helm of many of PwC’s corporate responsibility projects, working with organisations ranging from the World Business Council on Sustainable Devel-opment, to the World Economic Forum’s Global Citizenship Initiative and the United Nations Refugee Agency. Earlier this year he led the firm’s global acquisition of Booz & Co. and steered the firm to its 6% growth in fee income to $34bn.

Edward Nusbaum

Organisation: Grant Thornton InternationalPosition: Chief executive

Edward Nusbaum has been Grant Thornton International chief execu-tive since 2010 with his term extended until the end of 2017 this year. The past year saw Grant Thornton International continue its global expansion under Nusbaum’s leadership, with the network carrying out 22 mergers and acquisitions across Canada, Taiwan, Switzerland and Vietnam in the 10 months leading to 1 August 2014. In the US, the firm’s revenue hit an all-time high of $1.354bn in the year to 31 July.

In 2014, Nusbaum was one of the few executives to complete the ALS ice bucket challenge, pledging a donation to the charity and challeng-ing Grant Thornton’s leadership to join the challenge.

Fayezul Choudhury

Organisation: IFACPosition: Chief executive officer

Appointed chief executive officer of the IFAC in February 2013, Fayezul Choud-hury’s first year of leadership has been character ised by continued global expansion.

Prior to his appointment at IFAC, Choudhury held the position of vice-president of corporate finance and risk management at the World Bank, where he was spokesperson on global account-ing and auditing issues.

Choudhury cut his teeth working in public accounting and management consulting for PwC, during which time he spent three years helping to develop

the firm’s consulting practice in Nigeria. In the past year, Choudhury has campaigned for governments to mirror the private sector transition from cash to accrual-based accounting.

IAB 544.indd 8 17/12/2014 11:34:31



Gerardo Longobardi

Organisation: Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili (CNDCEC)Position: President

Longobardi was elected president of the Italian profession in July. His list of candidates stood in the election under the motto “Living the pro-fession together” and gained the majority of votes. His election came just months before Italy, the birthplace of modern accounting, hosted the World Congress of Accountants . The challenge of the CNDCEC will be now to keep alive the powerful legacy of the WCOA, and not just in Italy.

Hans Hoogervorst

Organisation: IASBPosition: Chairman

The IASB with Hoogervorst at the helm has managed to keep up momen-tum in IFRS expansion as the only global single set of standards availa-ble. The significant addition of Japan to the IFRS family, so far on a volun-tary basis, doesn’t make up for the perennial absence of the US. Further challenges for Hoogervorst will be to reactivate vigorously the convergence effort with IASB’s US counterpart the FASB. With the notable exception of the standard on revenue recogni-tion, convergence projects on leases and insurance contracts remain on standby.

Ian Ball

Organisation: CIPFAPosition: Chairman

Following 10 years as CEO, Ball stepped down from IFAC in March 2013, only to reappear as the chairman of CIPFA in September that year. Ball took the role as an opportunity to promote reform in public sector accounting following the sovereign debt crisis and applying New Zea-land’s best practice public accounting practices. At this year’s WCOA he was awarded the IFAC Gold Service Award.

James Doty

Organisation: PCAOBPosition: Chairman

Doty who has been at the helm of the US regulator since 2011 has been instrumental in bringing changes to enhance the audit report for listed companies in the US. Doty himself described these changes as a “water-shed moment for auditing in the US”. Doty’s challenges for the New Year include firmly advocating for disclosing the lead audit partner in US audit reports and continued efforts to make the first inspection of a PCAOB-registered mainland Chinese audit firm happen.

Jean Stephens

Organisation: RSM InternationalPosition: Chief executive

Stephens has been at the helm of RSM since 2006 and this year saw a pick-up in the network’s fortune as, following the loss of RSM Tenon in the UK in 2013, Baker Tilly UK decided to join the network because of its strong presence in the US and emerging markets. RSM was also presented with this year’s International Accounting Bulletin Network of the Year award.

Helen Brand

Organisation: ACCAPosition: Chief executive

ACCA chief executive since 2008, Helen Brand is among the UK’s most prominent female leaders in finance. Awarded an OBE in 2011 for services to accountancy, Brand has led the institute in its mission to offer busi-ness-relevant qualifications for those seeking a career in finance, account-ancy and finance around the world.

This year ACCA entered into part-nership with professional bodies in Myanmar, Colombia and Greece as well as providing thought leadership on key challenges for the profession.

Geoff Barnes

Organisation: Baker Tilly InternationalPosition: Chief executive

Responsible for the day-to-day leadership and management of the eighth-largest network, Barnes was faced with the challenge of finding a replacement firm for Baker Tilly UK, which left the Baker Tilly International network in April to join RSM. The network successfully recruited MHA MacIntyre Hudson as its UK representative in October.

IAB 544.indd 9 17/12/2014 11:34:34



Jennifer Thomson

Organisation: World BankPosition: Chief financial management officer

Thomson, a CPA Australia member, co-chairs the steering committee of the Memorandum of Understanding to Strengthen Accountancy and Improve Collaboration (MOSAIC). Her work at the World Bank and MOSAIC focuses on building accounting and auditing capacity, crucial for developing countries to build trustworthy markets and invigorate their economies through robust public financial management.

John Veihmeyer

Organisation: KPMG Global and USPosition: CEO

Following the early retirement of KPMG global chairman Michal Andrew for medical reasons in February, Veihmeyer was named as his successor. Veihmeyer has been KPMG US chief executive officer since June 2010. In 2014 KPMG US revamped its strategy offering through the establish-ment of KPMG Strategy, a move consistent with this year’s trend towards strengthening consulting and advisory capabilities among the Big Four. However, the past year has also seen KPMG come under heavy regu-latory fire. An ongoing gender discrimination suit picked up pace in October, a PCAOB review of 50 audits led to some audit quality concerns and questioned the solidity of evidence used by the firm to approve financial statements in almost half (23) of the cases.

Jos van Huut

Organisation: EGIANPosition: Chairman

After a long-standing career at Mazars and Praxity, Van Huut now holds many roles including the chairmanship of the European Group of International Accounting Networks and Associations (EGIAN), which provides a forum for members to develop common positions on specific technical and legislative issues and to debate these issues with key professional stakeholders and regulators. In addition to his EGIAN role Van Huut is also a board member of the Netherlands Institute of Chartered Accountants (NBA) and the Fédération des Experts Comptables Européens (FEE). He is also a Praxity board member.

Kevin Dancey

Organisation: CPA CanadaPosition: Chief executive officer

Previously the president of the Canadian Institute of Char-tered Accountants, Dancey was appointed CEO of CPA Canada in January 2013 after having played a vital role in bringing the Cana-dian profession together in one institute. Dancey is the former CEO and senior partner of PwC Canada and has also served for two years in the Canadian Depart-ment of Finance.

Kevin McGrath

Organisation: Crowe Horwath InternationalPosition: Chief executive

McGrath has been running the global network of 150 firms in 10 countries since 2012. This year the network added firms in France, Germany, Switzerland, Serbia and India. Crowe Horwath International is the ninth-largest network globally, according to the IAB World Survey 2014.

Jeff Thomson

Organisation: IMAPosition: President and CEO

Thomson’s leadership has been instrumental during Institute of Management Accountants’s ongoing process of globalisation, leaving behind the US profession’s traditional navel-gazing. Under his tenure IMA has turned into an organisation with international aspirations; it partnered with ACCA and returned to IFAC membership, where he is advocating greater recognition of the management accounting profession.

IAB 544.indd 10 17/12/2014 11:34:35



Mark Koziel

Organisation: AICPAPosition: Vice-president – firm services and global alliances

In the past year, Koziel has helped launch the AICPA’s Center for Plain English Accounting, created the institute’s first-ever European Sum-mit and been responsible for the AICPA’s firm strategy. He frequently speaks on accountancy issues throughout the US and globally.

Mark Weinberger

Organisation: EYPosition: Chairman and CEO

EY global chairman and chief execut ive of f icer since July 2013, Weinberger has overseen a dynamic year for the busi-ness. The network completed the acquisition of consultancy The Parthenon Group, a move consistent w ith a Big Four- wide trend of increased consul-tancy and strategy capability development.

This year also saw the largest-ever partner promotion in the network’s history, with 675 pro-fessional staff promoted to the role.

Martin van Roekel

Organisation: BDO InternationalPosition: Chief executive

Under Van Roekel leadership BDO International global revenue exceeded $7bn in the year to

30 September, following 28 mergers that the network completed dur-ing the financial year. As the leader of the biggest mid-tier network employing 60,000 people Van Roekel predicts more consolidation in the mid-tier market in the years to come.

Mary Jo White

Organisation: SECPosition: Chair

Mary Jo White was sworn in as chair of the US SEC in April 2013. White’s first year as SEC chair has seen the tug of war between the US and Chi-nese intensify over Big Four audits and the accounting firms still facing legal action by the SEC.

On the adoption of IFRS White continued to perform a balancing act. She hinted at further discussions over the possibility of adoption, but re-emphasised the authority of US standard-setting bodies and the importance of the US’s role in international standard-setting.

Mervyn King

Organisation: IIRCPosition: Chairman

King, who is not an accountant himself, has become a leading figure in the profession. After spearheading <IR>, he has now taken this pro-ject to new heights by introducing the concept of integrated thinking as the basis of good gov-

ernance, part of which is integrated reporting. King has also embarked on the revision of his code (the new King IV), which will see some new innovations.

Michael Izza

Organisation: ICAEWPosition: Chief executive

ICAEW chief executive since 2006, Michael Izza has led the institute through several years of change. Despite being a non-legal body, this year the ICAEW gained the power to regulate non-contentious probate services and became a licensing authority for Alternative Business Structures. In 2014, the institute also continued its commitment to the international development agenda through capacity building projects in developing countries. Izza remains a firm and vocal critic of tax avoidance schemes.

Kirsten Patterson and Lee White

Organisation: CAANZPosition: Senior leaders

The merger between the New Zealand Institute of Chartered Accountants (NZICA) and the Institute of Chartered Accountants in Australia (ICCA) is an unprecedented milestone in the almost inevitable consolidation trend between professional bodies around the world. What makes this union unique is its cross-border nature. Pending the last legislative changes to finalise the merger, Patterson and White (both CEOs of the merging institutes) will be under the spotlight. Not least because the CAANZ’s 100,000 membership could challenge CPA Australia’s top spot in the ‘down under’ profession.

IAB 544.indd 11 17/12/2014 11:34:38



Olivia Kirtley

Organisation: IFACPosition: President

Olivia Kirtley became president of the IFAC board in November 2014 after serving as deputy president for two years. She is the first presi-dent to come from the management accounting profession as well as the first female to head the organi-sation.

Outspoken Kirtley’s challenge will be to keep the promises of the WCOA 2014, for the profession to pursue government transparency and help businesses to grow.

Olivier Boutellis-Taft

Organisation: Fédération des Experts Comptables Européens (FEE)Position: Chief executive

Boutellis-Taft, a former equestrian professional, has served as FEE chief executive officer since 2006. In the past year Boutellis-Taft led FEE in playing a key role in informing the profession on the newly adopted EU audit reform. As EU member states take the first implementation steps, the profession will be looking out for Boutellis-Taft and the FEE to continue their work.

Paul Druckman

Organisation: IIRCPosition: CEO

A year ago the IIRC issued its long-awaited integrated reporting <IR> framework, fol-lowing an intense consultation period in which more than 350 stakeholders’ respons-es were received globally. A year later, imple-mentation by companies is the key milestone for IIRC and how to provide assurance on the information provided by companies using the IR framework. There’s also a further question

about whether to leave IR as a market-led initiative, or if there’s a need for regulatory oversight. Druckman was also awarded the 2014 IAB Per-sonality of the Year Award.

Shahied Daniels

Organisation: SAIPA

Position: Chief executive

Daniels’s expertise and extensive experience in accounting is orientat-

ed towards SMEs and micro enterprises and is increasingly recognised

nationally and internationally. He serves on the IFAC board and on the

Professional Accountancy Organisation Development Committee. He is

also a member of PAFA’s board and council.

Sue Almond

Organisation: ACCAPosition: External affairs director

At ACCA Almond influences and dr ives debate and thinking on technical issues affecting business and accountancy around the world. She is also a technical advisor at the IAASB and her knowledge and experience has established her as a well-known expert in the audit sec-tor, especially for her work on the implementation of ISAs.

Stephen Haddrill

Organisation: UK FRCPosition: Chief executive

The update of the corporate governance code and the proposals to align SMEs accounting with the requirements of the EU Accounting Directive are just two tasks which have kept Haddrill busy in 2014. In the pipeline awaits the implementation of the EU’s audit reform. But the FRC, in tandem with the government, has very discreetly done its homework con-

vening a group including accounting firms and professional bodies, companies and investors to inform a consultation.

Michael Prada

Organisation: IFRS FoundationPosition: Chairman

IFRS Foundation chairman since the beginning of 2012, Michael Prada is preparing to enter the final leg of his three-year term. This year, the Founda-tion succeeded in securing the financial backing of the European Parliament, a move criticised by some as undermining the independence of the body. The Foundation also reaffirmed its cooperation with the European Securities and Markets Authority. Looking to 2015, the IFRS Foundation is opening its International Accounting Standards Board to a constitutional review, in order to face an evolving standard-setting scenario.

IAB 544.indd 12 17/12/2014 11:34:43



Uantchern Loh

Organisation: SAC Position: Chief executive

Uantchern Loh leads the Singapore Accountancy Commission to trans-form Singapore into a leading global accountancy hub for the Asia-Pacific region. In the past year the SAC launched the Singapore quali-fication programme providing access to the accountancy profession to individuals of all background and disciplines.

Uschi Schreiber

Organisation: EYPosition: Global vice-chair and markets leader

U s c h i S c h re i b e r, n o t a n accountant, makes our list for advocacy of the role the pro-fession and firms play to help diversify businesses and busi-ness thinking. Also for her work in the Woman in Parliament initiative and the role of busi-ness in society. She joined EY Oceania in 2008 after a success-ful career as chief executive of large government agencies.

Vickson Ncube

Organisation: PAFAPosition: chief executive

Ncube has been involved with the Pan-African Federation of Account-ants since its inception in 2011, and is a leading voice in the growing pan-African profession. As Africa’s economies continue to grow and regional economic integration becomes a reality, PAFA will play a lead-ing role in the continent’s development. Ncube is a fellow and former chief executive of the Zambia Institute of Chartered Accountants, a fel-low of ACCA and an associate of the Chartered Institute of Arbitrators.

Warren Allen

Organisation: IFACPosition: Former president

In his two years of presidency, Allen led IFAC to increase the profile of the pro-fession globally by focusing on three main themes: capacity building, pub-lic financial management and the role of accountants in fostering growth in business. Allen retired after the World Congress of Accountants and told The Accountant earlier in the year he was looking forward to his retirement to focus on fishing in his home country New Zealand.

Wilmar Franco

Organisation: Consejo Técnico de la Contaduría PúblicaPosition: President

Franco leads the standard-setting body that is advising the Colombian government in its strategy to align the national profession with inter-national standards. As such, Latin America’s fastest-growing economy is to adopt IFRS fully, including for SMEs and micro entities. The chal-lenges ahead for Franco and the government are to adopt international auditing standards and unite Colombia’s divided profession.

Yang Jiantao

Organisation: Ruihua Certified Public AccountantsPosition: Managing partner

Managing Partner of Ruihua Certified Public Accountants which has been ranked number three among all, and number one among local Chi-nese accountancy firms. He is also a chief accountant, a senior member of CICPA and was recognised in the International Accounting Bulletin’s Global Accountancy “Next 50” list in 2013.

The Cuban Profession

Organisation: Asociación Nacional de Economistas y ContadoresPosition: Professional accountants

Cuba has been described as “the last Pepsi can left in the stadium” by a global account-ancy leader and reader of our magazines. So far only a network, HLB International, has a member firm on the island. But the last communist country in Latin America has put in place ambitious plans to attract foreign investment. Cuba’s 33,450 accountants have a power they might utilise to reform the economy and perhaps bring about democracy.

IAB 544.indd 13 17/12/2014 11:34:48

COUNTRY SURVEY International Accounting BulletinUK


The slight economic recovery has had a positive impact in accounting firms as clients become more confident and changes in audit tenders are becom-

ing daily routine for the larger firms. How-ever all could be thrown off balance as politi-cal risk linked to the potential UK exit from the EU lingers

While globally Deloitte was able to retain its position for the second year in a row as the largest global accounting firm, in the UK PwC is at the helm and £225m ahead of its global rival.

PwC UK reported revenues of £2.5bn ($3.91bn) in the year to 30 June 2014, which excludes £275m earned by the Middle East practice bringing the total revenue of the firm to £2.8bn.

The 5% increase in fee income overall “reflects an improving economy, the grow-ing confidence of our clients and the ongoing investment we have made in the firm over the past six years to create a responsible, profitable and well diversified business,” according to PwC UK chairman and senior partner Ian Powell.

Deloitte UK, which reported revenues of £2.3bn in the year to 31 May 2014 saw its growth slow to the lowest level in four years (1.4%), a sharp fall compared to the 8% rev-enue increase witnessed in 2013 and 11% growth in 2012, which was mainly on the back of strategic investments.

Deloitte UK also earned £236m in fees by its Swiss practice, which brings the total to £2.55bn.

Among the firm’s service lines, audit fell 1.8%, from £719m in 2013 to £706m. The decrease comes after last year’s 12% increase in fee income in audit. Tax rev-enues remained flat at £562m, compared to £563m last year. Consulting increased slightly (0.5%) from £619m last year to £622m, while corporate finance bucked the trend with a 4.7% increase to £424m from £405m in 2013. Deloitte UK chief executive and senior partner David Sproul tells the International Accounting Bulletin that the

performance reflects the slowdown in activ-ity across the advisory businesses.

“This has been the slowest in the past four years, when we have grown 30%. Partly it has also been affected by the audit tender business. However we did continue to invest and we’ve promoted 72 partners and this year we’re seeing our performance pick up again,” he says.

“Looking at our Q1, the growth is back to over 6%.”

Third ranked KPMG reported revenues of £1.9bn in the year to 30 September 2014, up 5%.

EY UK was in close pursuit as the firm reports revenues of just under £1.9bn, £1,868.0m, in the year to 27 June 2014, up by 8.6%, which exceeds the global firm’s 6% growth. The firm’s assurance service line grew by 8.5% to £550m, tax by 3% and advisory grew by 15% to £559m, slowing slightly from the 17% increase witnessed in 2013.EY UK chairman and regional manag-ing partner in the UK & Ireland Steve Varley says “we are really pleased with our growth and we seem to be leading our market in top line growth once again”.

“We have had a very brave investment strategy over the past six years, through the worst part of the recession, and that cour-age is starting to pay off now as those invest-ments are giving us good growth,” he adds.

The mid-tierA similarly mixed picture is evident from the mid-tier’s figures. While some have seen their performance hit record highs, others remain slowed by varying levels of performance across their service lines.

Grant Thornton UK chief executive offic-er Scott Barnes says: “If you look at overall growth in the business, our advisory busi-ness continued to grow by 15%,” but while audit grew by 4%, tax stagnated. As such, explains Barnes: “If you put all that together [growth] is slightly less than previous years.”

Indeed the network saw a slowdown from the 13% increase registered in 2012/2013 to

9% in its latest fiscal year.Such a slowdown could prove dangerous

in the UK’s enduringly competitive mid-tier, however, and those competitors who have been able to take advantage of the first signs of recovery in the UK market are hot on Grant Thornton UK’s tail.

Among them, BDO has distinguished itself through a bullish 2013/2014 performance which earned the firm a 26% increase. Man-aging partner Simon Michaels acknowledg-es: “The market has changed in a number of ways, such that we are seeing an awful lot of opportunity.”

Among these changes, he says, a signifi-cant degree of consolidation within the mar-ket over the past few years has allowed BDO to complete its “strategic merger” with PKF UK 18 months ago.

The firm is now reaping the profits, explains Michaels: “The results that we’ve got now reflects the first full-year of that merger and show a very successful picture as regards, first, the growth and increase in profitability, but also the fact we’ve seen our market share grow.”

Competitor Nexia International also has reason to celebrate as it looks back on a record year for its network in the UK. Net-work member firm Smith & Williamson’s group finance director Jeremy Boadle says last year “showed a record set of results” for the firm.

Customers have begun to rediscover their belief in the UK market throughout 2014, according to Boadle, who says: “Private cli-ents are more resilient and corporate clients are feeling more confident about investing for growth. That pick-up in activity has helped revenue growth and has enabled us to increase our staff utilisation.”

Baker Tilly UK, now part of RSM’s net-work, reported revenues of £246m in the year to 31 March 2014, which according to managing director Laurence Longe only includes seven months’ worth of RSM Tenon numbers, which the firm bought in a pre-pack deal in August 2013.

EU membership issue creeps closer to centre stage With the possibility of a vote on EU membership seeming more likely, and the first signs of economic recovery taking hold, this year has seen the UK buffeted by political and economic change. As the country prepares to enter another, highly uncertain year, its accounting industry is braced for change. Ana Gyorkos and Isabella Grotto report

IAB 544.indd 14 18/12/2014 09:45:49

COUNTRY SURVEYInternational Accounting Bulletin UK


“The full impact of that deal will come through in our numbers by March 2014,” Longe adds.

Looking back Longe describes the year for Baker Tilly UK as “transformational”. While he’s confident about the UK economy and says the firm has enjoyed a positive impact from economic growth, he also says the inte-gration of the two firms has been smooth.

“We’ve rationalised the business and we have brought people physically together over a faster time scale than we were previously been able to do with our past M&A,” he says.

Asked about the “rationalisation” Longe says it’s been “easier for us as it’s been done against a backdrop of a growing economy.

“I think across the entire firm we have had about 100 redundancies and we now have 2,500 people,” he adds.

It was back in April that the firm announced it was leaving the Baker Tilly International network to join RSM. It still retains its name, Baker Tilly UK, and little is known about a potential change.

Longe says: “We’ve had many multilat-

eral and bilateral meetings with member firms within the network as we sit down to see how we can join forces in certain mar-kets. The large firms within the network are very closely connected and work together to improve our entire service offering.”

The departure of Baker Tilly UK left Baker Tilly International without a UK member for several months until, in October, Morison International’s MHA MacIntyre Hudson joined the network, leaving Morison Inter-national without a UK member for the time being. The IAB rankings reflect these latest changes in membership.

AuditIn the past two years the Big Four firms have seen an unprecedented change in audit, and most importantly audit retendering as, in light of the CMA rules and European audit reform, many companies have started reten-dering their audits.

While the EU audit reform was passed in the EU parliament earlier in the year the UK government’s Department for Business, Innovation and Skills has plans to launch a

consultation on the implementation of the audit reform before the end of the year. At the time of publication the consultation about whether or how the UK might imple-ment the various options that member states have under the EU’s rules was yet to be released.

EY UK had an 8% increase in assurance fee income and Varley says this was mainly on the back of “winning audits such as the audit of the BBC, London Stock Exchange, Co-op Bank, and Sage Technology, and we’ve just won the Royal Bank of Scotland.

“Even though assurance grew 8.5% we managed to increase the headcount by 9%. We’re investing in our assurance business ahead of the curve, expecting to win more audits.”

According to PwC UK data published in August, by the end of the year as many as 56 FTSE 350 companies could have put their audit out to tender in 2014, compared to 30 tenders in 2013 and 18 in 2012.

The number of tenders is unprecedented and firms have to adjust from dealing with just two or three tenders a year, to poten-

■ UK

NETWORKS – FEE DATA

Rank NameFee income

(£m)Growth

rate

Fee split (%)

Year-endAudit &

AccountingTax

servicesManagement

consultingCorporate

finance

Corporate recovery/

InsolvencyLitigation

support Other

1 PwC* (1) 2,539.0 4% 36 25 18 21 - - - Jun-14

2 Deloitte* (2) 2,314.0 0% 28 22 24 17 - - 9 May-14

3 KPMG* 1,909.0 5% - - - - - - - Sep-14

4 EY* 1,868.0 9% 29 25 30 16 - - - Jun-14

5 Grant Thornton UK* 512.3 9% 26 18 - 7 23 3 23 Jun-14

6 BDO* (3) 392.0 26% 33 27 - - - - 40 Jun-14

7 Nexia International* 289.5 8% 30 19 3 1 5 - 42 Jun-14

8 RSM International* 246.0 - 44 26 6 7 13 - 4 Mar-14

10 Mazars* 130.0 8% 38 18 5 - 11 4 24 Aug-14

9 Moore Stephens International* 129.7 4% 51 14 7 2 6 1 19 Dec-14

11 Baker Tilly International* 119.0 -28% 58 23 2 2 7 - 8 n/a

12 Kreston International* 115.1 12% 46 23 6 5 4 - 16 Oct-14

13 HLB International* 95.9 16% 46 24 3 4 6 - 17 Sep-14

14 PKF UK* 76.0 7% 48 24 7 5 5 - 11 May-14

15 Crowe Horwath International* 61.1 1% 59 24 1 4 2 3 7 Mar-14

16 UHY International* 50.0 4% 53 21 5 3 11 — 7 Apr-14

17 ECOVIS International* (4) 4.6 10% 69 31 - - - - - Jun-14

Total revenue/growth 10,851.3 5%

Notes: (e) International Accounting Bulletin estimate. (1) PwC fee income figures include the UK firm only. The fee income figures including PwC’s Middle East practice are £2,814m for FY2013/2014 and £2,689m for FY2012/2013. (2) Deloitte fee income figures include the UK firm only. The fee income figures including Deloitte’s Swiss practice are £2,550m for FY2013/2014 and £2,515m for FY2012/2013. (3) BDO provided unaudited figures as audited figures were not available at the time of publication. (4) ECOVIS International does not include revenue of its full member law firm in the UK. If it were to, the total revenue would be £29.2. *Disclaimer = Only data from the named member firm or the exclusive member firms within a network/association is included. Data relating to correspondent and non-exclusive member firms is not included. Source: International Accounting Bulletin

IAB 544.indd 15 18/12/2014 09:45:50



tially bidding for more than 10 FTSE 350 audits a year.

Sproul says Deloitte UK has spent a lot more on the planning process and has devel-oped, and globally rolled, out a new audit tool called Deloitte Audit.

He says: “We have also worked hard on pulling the right teams together, because the pace of tender and the need to respond to them is clear. You have to be far more disci-plined than in the old days when we maybe had one or two tenders a year. And you have to be far more focused on the needs of the clients. It’s been very intense and fiercely competitive. There’s not been a lack of com-petition in any of these tenders.”

Affect on feesSproul says that the increase in tenders has not decreased fees and he says there’s been instances of fees going up.

“Fee pressure is not as stark as it was about two years ago and the fierce competi-tion is more around innovation,” he adds.

He also says there has been competition emerging from Grant Thornton UK and BDO as companies are keen to hear from them.

This increase in competitiveness has also been fostered by changes in the market itself,

explains BDO UK’s Michaels. “What has also supported our growth figures is that the regulatory debate shone a light on the audit marketplace and in particular three areas: the market structure, independence and audit quality.

As a result of these factors, he says: “What we’re finding is we’re seeing more opportu-nities to grow our business through, first, diversifying our service offering and, sec-ondly, stretching up to act for more listed businesses at the top end of the market, for instance the FTSE 350.”

BDO UK has been able to capitalise on this opportunity, but Michaels believes there is still some way to go before upcoming mid-tier firms will be able to pose a serious threat to the Big Four in the audit space.

“We act for more than a third of the FTSE 350 in an advisory capacity,” he says, add-ing: “What we’re seeing on the audit side is more opportunities with more audit com-mittees looking to tender their audits, but we’re not yet seeing a shift from those firms using organisations outside the Big Four, like BDO, to undertake their audits.

“That behavioural change is something that’s going to take more time and you’re probably looking at a five-year-plus strategy there before you see any meaningful shift,”

he admits, but adds the regulation “will continue to create more opportunity for firms outside the Big Four, particularly BDO, to build their position.”

Grant Thornton UK’s Barnes agrees an “inevitable consequence of the regulation” will be a rise in the willingness among busi-nesses to use firms other than the Big Four, but specifies: “I think larger corporates started to put more work out to tender, even before the regulation came out, once market sentiment started to move in that direction. I think the regulation almost lagged behind what was happening in the market.”

ScepticsHowever, regulatory changes have not been universally welcomed within the UK indus-try.

Longe at Baker Tilly UK is sceptical about the changes coming in from EU audit reform as he believes the continued commoditisa-tion of the audit market remains the key issue.

“This is not making audit an attractive place for people to come and work in this market,” he says. “And it’s not clear what the reforms will do to that effect. I think one important trend across the profession is that audit has been hard to grow and it is easy to

■ UK

ASSOCIATIONS – FEE DATA

Rank Fee income

(£m)Growth

rate

Fee split (%)

Year-endAudit &

AccountingTax

servicesManagement

consultingCorporate

finance

Corporate recovery/

Insolvency Litigation

support Other

1 IAPA* 372.6 19% - - - - - - - n/a

2 Praxity* 172.4 -1% 40 18 2 4 9 3 24 n/a

3 PrimeGlobal* 72.2 -35% 44 28 8 3 - - 17 May-14

4 DFK International* 66.9 1% 48 21 4 2 11 - 14 n/a

5 KS International* 40.1 -1% 58 15 10 2 7 2 6 Apr-13

6 MSI Global Alliance* 39.6 5% 32 18 2 2 36 - 10 Dec-13

7 MGI* 38.8 11% - - - - - - - Jun-14

8 BKR International* 33.4 12% 53 28 2 4 5 2 6 n/a

9 AGN International* 32.7 -2% 52 21 - - - - 27 Oct-13

10 INPACT* 8.6 -2% 88 4 5 1 - 2 - Dec-13

11 GMN International* 7.4 3% 42 17 11 - - - 30 Sep-13

12 EuraAudit International* 7.4 -7% 55 16 5 - - - 24 Jun-13

13 Abacus Worldwide* 5.7 - 25 10 20 5 - - 40 Dec-13

14 Integra International* 5.7 -9% 55 30 5 10 - - - Jun-14

Total revenue/growth 903.5 4%

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

IAB 544.indd 16 18/12/2014 09:45:50



see that audit as a proportion of total rev-enues is decreasing and declining.”

The controversy and shift in public opinion towards companies avoiding UK corporation tax by employing complex tax schemes hasn’t subsided in 2014 and govern-ments, companies and tax services providers have all faced intense public scrutiny.

The latest revelation unveiled by European journalists has uncovered documents linking more than 1,000 multinational corporations to large-scale tax planning in Luxemburg.

Despite being legal, competitive tax plan-ning practices are being increasingly criti-cised by the international community. The multilateral competent authority agreement is among the latest example of the mount-ing focus on harmful tax practices exem-plified by initiatives such as the Base Ero-sion and Profit Shifting programme by the Organisation for Economic Co-operation and Development (OECD). In October, 51 jurisdictions signed a multilateral competent authority agreement enabling automatic tax exchange, including Luxemburg.

Following the signing industry insiders raised concerns over the implementation of

the agreement, which allows early adopters to begin sharing data by September 2017.

At EY, Varley welcomes the OECD pro-gress saying: “We’re now looking for the government to continue to co-ordinate its efforts. I think there’s also a real need to restore public confidence in tax law and in the system in the UK and globally. We should continue to be concerned about how the public views business tax, and not just the letter of the law, but also the spirit of the law.”

Changing expectationsLooking forward, like any service line, tax needs to respond to client needs and, today, public opinion and expectations around tax planning are different. It will cause busi-nesses to arrange their tax affairs not only in accordance with the law, but also consistent with broader expectations.

Reflecting of how things were when Sproul took on the leadership role at Deloitte UK three years ago, he says there’s been “a shift in public perception of what we do as a business and as a profession.

“Some would say that once the econo-

my starts growing some of these concerns are going to go away, but I don’t think so. There’s been a change in public expectations. And it’s not just about having a CSR report. It’s about what you stand for and your licence to operate in the society,” he adds.

He has confidence in the OECD’s work and calls for national governments to align around it.

“We’re very clear that business needs to do more to build public trust and these sort of stories about tax arrangements don’t help,” Sproul says.

Indeed, adverse public opinion has acceler-ated regulatory action, both within the UK and further afield, on tax planning.

Shortly after respondents spoke to IAB, the UK government announced the introduc-tion of the “diverted profits tax”, a 25% levy on profits generated in the UK but artificial-ly shifted abroad, in an attempt to address aggressive fiscal planning in Europe.

Soon known as the Google tax, the excise is part of the government’s plan to raise over £1bn over the next five years through tackling tax avoidance and is likely to affect large multinationals ranging from tech giants

■ UK

NETWORKS – STAFF DATA

Rank Name

Total staff Growth rate

Partners Professional staff Administrative staff Offices

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

1 PwC* 18,950 17,420 9% 854 874 14,651 14,087 3,445 3,333 31 34

2 EY* 14,924 13,624 10% 692 565 10,409 9,350 3,823 3,709 22 22

3 Deloitte* 14,458 14,631 -1% 967 983 11,899 12,018 1,592 1,403 28 28

4 KPMG* 11,929 11,335 3% - 583 - - - - 24 23

5 Grant Thornton UK* 4,238 4,234 0% 191 206 3,113 3,012 934 1,016 26 27

6 RSM International* 3,820 - - 389 - 2,773 - 658 - 33 -

7 BDO* 3,604 3,893 -7% 255 259 2,655 2,778 694 856 23 25

8 Nexia International* 2,239 2,297 -3% 364 359 1,183 1,246 692 692 29 27

9 Kreston International* 1,904 1,737 10% 189 171 1,382 1,267 333 299 50 46

10 Baker Tilly International* 1,761 1,722 2% 177 224 1,229 1,183 355 315 45 25

12 Mazars* 1,593 1,417 12% 124 108 1238 1084 231 225 20 18

11 Moore Stephens International* 1,450 1,349 7% 142 149 1,051 886 257 314 33 34

13 HLB International* 1,107 965 15% 144 123 726 627 237 215 31 24

14 PKF UK* 1,029 924 11% 117 107 695 599 217 218 20 18

15 UHY International* 736 734 0% 82 80 507 509 147 145 23 23

16 Crowe Horwath International* 658 645 2% 69 72 459 454 130 119 9 9

17 ECOVIS International* (1) 63 63 0% 6 8 52 50 5 5 1 1

Totals 84,463 76,990 5% 4,762 4,871 54,022 49,150 13,750 12,864 448 384

Notes: (e) International Accounting Bulletin estimate. (1) ECOVIS International does not include staff of its full member law firm in the UK. If it were to, the total staff number would be 215. *Disclaimer = Only data from the named member firm or the exclusive member firms within a network/association is included. Data relating to correspondent and non-exclusive member firms is not included. Source: International Accounting Bulletin

IAB 544.indd 17 18/12/2014 09:45:51



Google, Amazon and Apple, to high street brands such as Starbucks.

The 25% rate to be charged under the new law is higher than the UK’s prevailing corporation tax at 21% and, as such, the regulation removed the tax avoidance advantage sought by the businesses divert-ing profits.

Commenting on the new measure, KPMG UK head of tax policy Chris Morgan described the policy as “a very clever move”.

“This is a completely radical approach we’ve never seen before,” he explained. “The Chancellor has repeatedly offered businesses operating in the UK a pledge to provide the most competitive tax system in the G20 provided they play by the rules,” he added, “This ‘carrot’ is now balanced with an enormous stick.”

This threat of higher tax rates for diverted profits is likely to change dramatically the way affected multinational companies do business, according to Morgan. “The reality is that this tax is unlikely to be paid since we expect that companies affected will restructure to ensure profits are not artifi-cially diverted. They will then be taxed at the standard rate of corporation tax in the normal way,” he explained.

“The on-the-ground effect is therefore

likely to be that the kind of aggressive tax planning through artificial structuring that this measure targets will come to sudden and abrupt halt.”

A determining fighting ground for the UK mid-tier remains advisory.

“Advisory has always been an important part of our business and it’s probably about half of our business nowadays,” Grant Thornton UK’s Barnes explains. “It is a trend that will continue, not just within Grant

Thornton UK but across the industry. Most businesses’ audit and tax practices are only going to grow if there is an improvement in the economy and more companies are being formed. It’s a mature market whereas advi-sory is still very fragmented; if you look at the statistics worldwide even the smaller firms have a small market share,” he says.

Despite its centrality however, areas of real difficulty remain within the advisory space.

Describing PKF UK’s performance in the

■ UK

ASSOCIATIONS – STAFF DATA

Rank Name

Total staff Growth rate

Partners Professional staff Administrative staff Offices

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

1 IAPA* 4,978 5,043 -1% 558 573 4,075 4,119 345 351 154 163

2 Praxity* 2,351 2,120 11% 188 189 1,768 1,425 395 506 51 59

3 DFK International* 1,047 1,049 0% 119 128 718 718 210 203 38 38

4 PrimeGlobal* 939 1,503 -38% 129 187 627 1,005 183 311 29 42

5 MSI Global Alliance* 622 650 -4% 61 63 393 451 168 136 5 5

6 KS International* 488 490 0% 59 63 314 304 115 123 7 7

7 MGI* 469 428 10% 80 79 389 349 - - 23 24

8 BKR International* 390 375 4% 51 52 257 252 82 71 5 5

9 AGN International* 323 301 7% 36 30 217 199 70 72 5 5

10 INPACT* 130 119 9% 11 11 92 82 27 26 5 4

11 EuraAudit International* 95 108 -12% 10 15 58 68 27 25 6 6

12 Integra International* 82 90 -9% 15 14 50 57 17 19 4 4

13 GMN International* 78 69 13% 16 15 53 44 9 10 1 1

14 Abacus Worldwide* 54 - n/a 5 - 45 - 4 - 1 -

Totals 12,046 12,345 -2% 1,338 1,419 9,096 9,073 1,692 1,853 334 363

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

■ UK

FIRM MOVEMENTS

NETWORK/ASSOCIATION FIRM ADDITIONS, MERGERS & ACQUISITIONS

Abacus Worldwide Added: Shelley Stock Hutter (London,)

Baker Tilly International Lost: Baker Tilly UK; Added: MHA MacIntyre Hudson (London)

BDO Acquired: Morgan Franklin Limited (London)

Grant Thornton International Acquired: Navigant Consulting (London), The Local Futures Group (London)

HLB International Added: French Duncan (Glasgow)

IAPA Added: Harwood Hutton (Beaconsfield)

Kreston International Added: Consilium (Glasgow); Lost: Simpson Forsyth (Aberdeen)

Mazars Acquired: Deloitte’s public sector internal audit business (London)

Morison International Lost: MHA MacIntyre Hudson (London)

PKF Added: PKF-FPM (Northern Ireland), KLSA (London)

PwC Acquired: Mokum Solutions (London), GeoTraceability (London)

RSM International Added: Baker Tilly UK (London)

IAB 544.indd 18 18/12/2014 09:45:51



service line Jeremy Bowler, PKF Cooper Parry and PKF UK and Ireland chairman says: “To start with the negative, I think the one area which has not been terribly exciting for any of us, surprisingly, has been the restructure market. I think that’s pretty consistent with all firms in that the restruc-turing market has been the quietest for many years.”

Conversely, he says, other areas have per-formed better, as “a lot of businesses are

well-resourced and prepared to invest in looking at ways of improving the businesses that they’re trying to drive forward.”

His analysis is echoed by Boadle at Nexia’s Smith & Williamson. He describes the insol-vency market as “still being very difficult and challenging, both in terms of numbers of administrations and liquidations, but also in respect of pricing”.

Elsewhere in the market, industry players are continuing to strengthen their advisory

arsenal.As a blast from the not-so-distant past the

Big Four have yet again started investing in their legal offering across the world. This year saw PwC, KPMG and, most recently, EY apply for an Alternative Business Struc-ture (ABS) licence in the UK, granted by the Solicitors Regulation Authority.

The licence enables firms to operate on a multidisciplinary practice basis, but does not constitute the creation of a separate legal

EU audit reform implementation and the controversial transitional provisions

The EU audit reform debate has exhausted many in the profession and firm leaders say they just want clarity at this stage, as imple-mentation of the rules is still unclear across most EU countries.

Both the EU Directive 2014/56/EU on Statu-tory Audits (the Directive) and the Regulation 537/2014/EU on Statutory Audit of Public Interest Entities (the Regulation) left 51 and 32 options, respectively, available for member states to decide on.

IFAC’s warnings about getting a patchy audit regulatory framework across countries might emerge as a real threat, depending on how dif-ferently member states interpret the Directive and the Regulation during the ongoing imple-mentation process.

For example, the EU Regulation established that the maximum period a firm can audit a company is 10 years. However, it introduced two options whereby member states could extend the audit engagement for another 10 years by tendering the contract, or another 14 years if a joint audit firm is appointed.

Equally, the Regulation sets a list of pro-hibited non-audit services which firms cannot render to audit clients in order to enhance the independence of the auditor. However, there's an option available for member states to allow certain tax and valuation services, as long as they don't disrupt the audited financial state-ments, the audit committee is informed, and independence is not jeopardised.

A spokesperson for the government’s Depart-ment for Business, Innovation and Skills (BIS) tells IAB that it plans to launch a consultation on the implementation before the end of the year, saying: “This [consultation] will include consideration of whether and how the UK might implement the various options in the Directive and Regulation. We have also worked with the Competition and Markets Authority (CMA) on the issues around mandatory retendering and rotation of audit firm appointments, which has now made an order on mandatory retendering of appointments for the FTSE 350."

The IAB further asked the spokesperson if BIS is currently getting feedback from various

stakeholders (other than the CMA), and if so, which stakeholders it is listening to in order to inform the forthcoming consultation.

BIS wasn’t available for comment on that at the time this magazine went to press.

Nonetheless, IAB has learned that BIS and the Financial Reporting Council have convened a number of stakeholders, forming an ad hoc group for the implementation of the EU law. ICAS, ICAEW and ACCA acknowledge being rep-resented in such a non-binding stakeholder group.

The CMA, a non-ministerial department of the UK government, published an order in Octo-ber that, among other measures, will require FTSE 350 companies to put their audit contracts out to tender every 10 years. The order comes into force for financial years commencing on or after 1 January 2015.

One of the most controversial parts of the order are the transitional provisions for audit engagements signed before June 2014, when the regulation came into force, although the new rules will apply as of 17 June 2016.

A key question is to know when the first rota-tion of audit firms should take place, because article 41 provides three types of transitional arrangements depending on how long an audit firm has been in place.

And an additional question would be to know from what date the duration of the audit engagement is calculated. According to a Sep-tember interpretation by the European Com-mission (EC), that date is the first financial year covered in the audit engagement letter when the auditor was appointed for the first time. As such, following the latest EC interpretation:

• Audit firms that have been appointed on or before 16 June 1994 have to rotate by 16 June 2020. That's because the Regu-lation granted six years to change audit firms that have been in place for 20 or more years (as of June 2014, when the Regulation came into force).

• Audit firms that have been appointed between 17 June 1994 and 16 June 2003 have to rotate by 16 June 2023. That’s because the Regulation granted nine

years to change audit firms that have been in place between 11 and 19 years.

• Audit firms that have been appointed between 16 June 2003 and 16 June 2006 have to rotate by 16 June 2016.

According to this interpretation, auditors appointed on or after 17 June 2006 would rotate when their current engagement ends, which can’t be more than 10 years. In the first and second cases [articles 41(1) and 41(2)], the Regulation specified that public interest entities “shall not enter into” or “renew” those long-term audit engagements.

In the third case, however, article 41(3) of the Regulation features a different structure. It reads that audit contracts signed before 16 June 2014 (before the regulation came into force) which are still in place as of 17 June 2016 (deadline for implementation) “may remain applicable until the end of the maximum dura-tion referred to in article 17(1)(2) [i.e. 10 years] or in article 17(2)(b) [i.e. the option for member states to rotate earlier than in 10 years]”

To make things more complicated it also stated that “article 17(4) shall apply”, which contains the options for member states to prolong the maximum duration of audits by 10 or 14 years through tendering or joint audit, respectively.

Is it possible to interpret a transitional arrangement of up to June 2024? That would reflect two years until 2016, when the rules have to apply anyway, plus 10 years if article 17(4) [i.e. extension by tender] really “shall apply”; or plus however many years are left of the ongoing audit engagement.

The CMA sought to align its mandatory ten-dering provisions rules with those transitional provisions of the Regulation as interpreted by the EC. Therefore the CMA sticks to those arrangements when it comes to the mandatory tendering of FTSE 350 auditors.

In light of such ambiguous rules, the CMA stated it would review its order if substantial guidance on the interpretation of article 41(3) is provided, which differs from the current interpretation.

IAB 544.indd 19 18/12/2014 09:45:52



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practice.Varley at EY says the move is in response to

client needs, as well as the global strategy of the business. He says: “We’re not doing this to compete with traditional law firms. This is a part of a package for our existing clients that are asking us for these services.”

Deloitte UK is currently the only UK Big Four firm with no ABS licence and Sproul says the firm is not looking to secure an ABS licence for the time being. However he said: “We do continue to review if this is something that could be complimentary to what we do and at this stage the answer is no”.The UK is gearing up for a general election in May 2015 and political rhetoric is getting stronger and stronger about the potential yes/no referendum about UK membership of the EU. However, many UK accounting firm lead-ers show little support for such a referendum as they call for sensible business decision-making and say political risk is the biggest threat for their clients and future investment decisions.

Varley says that: “While we remain posi-tive about the UK economy over the next five years, the run-up to the election in May increases the political uncertainty, which is not good. “I think it’s a common view that the access to the EU single market is key. I think we have an obligation to help Europe be more competitive, because we’re competing globally against companies in India and China and so forth. We have to be competitive and at the moment we’re a bit off the pace and a bit insu-lar as we try to sort through our own problems trying to complete the single market.”

Sproul echoes Varley’s views and says any business prefers certainty to uncertainty when making decisions to invest and grow.

“And if we echo what our clients are telling us then our view is that the UK would be much worse off if we came out of the EU,” asserts Sproul.

“We support views on reform, but I think we find ourselves in a difficult position if we find ourselves outside.” <

■ UK

Top 20 firms: fee data

Rank Fee income (£m) Last year’s fee income (£m) Growth rate

1 PwC 2,539.0 2,436.0 4%

2 Deloitte 2,314.0 2,307.0 0%

3 KPMG 1,909.0 1,841.0 5%

4 EY 1,868.0 1,721.0 9%

5 Grant Thornton UK 512.3 471.2 9%

6 BDO 384.2 304.0 26%

7 RSM International 246.0 - -

8 Smith & Williamson (1) 199.0 185.7 7%

9 Moore Stephens International 129.7 124.7 4%

10 Mazars 130.0 120.0 8%

11 Saffery Champness (2) 66.2 61.0 9%

12 Crowe Clark Whitehill (3) 61.1 60.7 1%

13 MHA MacIntyre Hudson (4) 41.8 38.2 9%

14 Kingston Smith (5) 40.1 40.5 –1%

15 Johnston Carmichael (6) 36.3 33.4 9%

16 Menzies (7) 32.0 30.6 4%

17 Buzzacott (8) 28.1 25.2 11%

18 Reeves (9) 21.2 20.0 6%

19 Armstrong Watson (11) 18.8 18.1 4%

20 haysmacintyre (12) 18.3 17.4 5%

Notes: *BDO provided unaudited figures as audited figures were not available at the time of publication. (1) Smith & Williamson is a member of Nexia International. (2) Saffery Champness is a member of Nexia International. (3) Crowe Clark Whitehill is a member of Crowe Horwath International. (4) MHA MacIntyre Hudson is a member of Baker Tilly International. (5) Kingston Smith is a member of KS International Source. (6) Johnston Carmichael is a member of PKF International. (7) Menzies is a member of HLB International. (8) Buzzacott is a member of PrimeGlobal. (9) Reeves is a member of Kreston International. (10) UHY Hacker Young is a member of UHY International. (11) Armstrong Watson is a member of MSI Global Alliance. (12) haysmacintyre is a member of MSI Global Alliance. Source: International Accounting Bulletin

IAB 544.indd 20 18/12/2014 09:46:01

WealthInsight provides detailed data and insightful analysis on the world’s High Net Worth Individuals (HNWIs) and wealth sector. With decades of experience providing business information, WealthInsight helps organisations make informed decisions and win new business.

AAt WealthInsight’s core is our proprietary HNWI Database of the world’s wealthiest individuals. Around this database we have built a number of valuable research based products and services that make WealthInsight much more than just a rich contact list.

We work with and provide solutions for: Wealth Managers Private Banks Family Offices Technology Providers Professional Services – Consultants, Accountants, Lawyers, Real Estate Professionals Fund Managers, Asset Managers, Venture Capitalists Non-profits and Educational Institutions

For more information contact us at [email protected]: +44 (0)207 406 6553

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IAB 544.indd 21 17/12/2014 11:34:59

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Tel: +44(0)20 3096 2636 ; Email: [email protected]

IAB 541v2.indd 26 19/09/2014 10:19:50

Tel: +44 (0)20 3096 2636; Email: [email protected]

Tel: +44 (0)20 7406 6553 Email: [email protected]

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