nexia international audit forum sharing our strengths to build quality
TRANSCRIPT
Nexia International Audit ForumNexia International Audit Forum
Sharing our strengths to build qualitySharing our strengths to build quality
Nexia International Audit ForumNexia International Audit Forum
WelcomeWelcome
Chairman of the day – Jeremy BoadleChairman of the day – Jeremy Boadle
Quality control reviewsQuality control reviewsWhat we have learnt from you and the way forwardWhat we have learnt from you and the way forward
François MahéFrançois Mahé
A Strong pressure on auditors internationally
• New regulations on auditing standards (ISA,..)
• New rules for the control of auditors (PCAOB,…)
• New accounting bases (IFRS,…)
Nexia: Who are we ?
• A network of Independent firms• In expansion, with a great number of new members• A lot of contacts• A federal organisation in many countries• Several main activities : audit, tax, consulting, • We are an audit network (audit fees = 50 %)• Different audit regulations (Nexia, national, continental)
Facing the fat four• Very big market share, every where• Large portfolio of activities• Very integrated model
– Strategy– Marketing– Quality– Methodology and tools
• …But, the market needs a credible alternative
Our issue• To be recognised as a alternative to fat four
(not an imitation)– At the Nexia brand level– Wider world
• 2 “success key” factors– Size– Quality
Answers to quality expectation • Services
− Skills− Organisation
• Homogeneity − Respect the international and local rules and
standards − The same professional standards and practices
What we do
• A control review programme• An annual Representation letter by members with
respect to audit quality control procedures • Audit methodology• Communication on the website• Audit forum
Annual representation letter
• Quality is the responsibility of every member• Confirmation of compliance is required from each
member• It covers main area of compliance in quality and
audit processes• Information about client profile – helps Audit
Committee assess members for further review• We don’t get 100 % responses
Nexia situationWhat we learnt from the quality review programme
Strengths• Knowledge of the clients• Audit practices• Experienced partners and staff• External controls from local
Institute in many countries• Efficient quality management
in the federal organisation countries
Weaknesses• Different audit rules and tools
(Nexia - National)• Documentation of audit work and
conclusions often could be improved
• A lack of formalised quality controls
• A lack of written procedures
The challenges we face
• Different audit environment– National environment– Nexia environment
• Independent firms
What we have to improve• 100 % response to the representation letter• Implement firm wide quality control procedures
everywhere• Increase the training programmes in audit• Improve the quality review programme
– Follow up of recommendations– Clarify the scopes (limited or full)
What we are thinking about• To impose the annual representation letter as a condition to
be in Nexia• To implement regional audit committees or delegations
– To organise more training sessions– To reinforce and improve the quality reviews
• Implement, as an obligation, a unique quality management system with:– Clearly identified responsibility– Written procedures– Annual quality report
Conclusion• The market is looking for new credible audit firms• Nexia has a very good position
– Size– Organisation (not only a directory)– Members involvement
• Independence and network are really consistent• Quality in audit is one of the conditions to succeed
Thank you for your attention
François Mahé
Auditeurs & Conseils Associés
Nexia France
Group sessionsGroup sessions
Group sessions
Option A: Efficient Audit Documentation
GO TO GRAHAM BELL SUITE
Option B: Winning new clients across Nexia
REMAIN IN TARA SUITE
Winning new clients across Nexia Winning new clients across Nexia (or how to pitch internationally)(or how to pitch internationally)
Barbara HamiltonBarbara Hamilton
About me• With firm for four years• Responsible for business and client development
at Smith & Williamson• Chartered Marketer, Postgraduate Diploma in
Marketing, BA (Hons) in Retail Marketing• Chair of Professional Marketing Forum in London• Over 300 pitches, over 30 so far this year
Today we will cover• Why people buy audit services• What clients are looking for• Decision making in large organisations• Best practice bid management• Coffee break at 10.30am• How to sell Nexia International• What will win and lose a tender• Coordinating pitches internationally• Frameworks we can use to win
Why buy Nexia International? • It’s as good as anything else out there• Independent network of autonomous organisations• Local knowledge• No large infrastructure to support• Client has more choice because we do• We know the people we refer work to• Technical committees = assurance of quality
Why people buy audit services
• To save money, make money,improve profitability
• To save time, improve effectiveness
• To solve a problem
• Because they have to
It is sometimes useful to remember
In the period when people buy audit services, they are interested in it, otherwise they won’t give it much thought.
In the same way that when your car breaks down, you are looking for a mechanic.
It is not likely therefore that a client cares as much about audits, as you do, or knows as much.
What clients are looking for1. Technical expertise2. Resources3. Industry
understanding4. Understanding of
their issues5. Price
6. Team fit7. Service8. Enthusiasm9. Approach10. Availability
Decision making in large organisations
• Groups/committees with 1 or 2 people with power of veto
• Politics and vested interests still play a part• More public and governance led decision making• Role of procurement, especially internationally• Who is buying and what do they need to know?• Do they want to buy?
Remember: Decisions are made by people not organisations
In a pitch, it is your objective to …
• Make is as easy as possible for the client to choose you
Which you can do by …• Following their brief• Being simple and clear in your responses• Showing consideration and empathy• Stating explicitly why you believe you are the
right choice for them• Behaving in a way that demonstrates that you
want the work
International pitches: What can go wrong
• People get confused about what they have to do • The client’s brief is unclear and they are
unavailable • Language, cultural barriers, time differences• Information is provided late or not to brief • Questions are not asked at the right time so
assumptions are made• Time is wasted getting basic things done
International pitch coordination• Plan your time especially document production• Identify what you need to know • Ask questions to avoid unnecessary assumptions• Set and define clear roles• Set realistic deadlines and keep on top of them• Try and be different
Roles and responsibilities• Bid leader: makes decisions and defines strategy • Bid manager: coordinates information• Bid author: puts the document together• Bid champion: challenges strategy (voice of experience)• Bid team: contributors of information, people who will be
doing the work
Every role (except that of the bid champion) can be undertaken by the same person.
Best practice atSix stages:• Stage 1: Initial contact• Stage 2: Planning the pitch• Stage 3: Research and decision making• Stage 4: Documentation formation• Stage 5: Pitch delivery• Stage 6: Follow up and evaluation
1: Initial contact
• Alert the business development (BD) team
• Alert Head of Department (HoD)
• Agree whether to go ahead with appropriate directors
• Contact the client to say thanks
2: Planning the pitch• Identify a bid team• Obtain approval from HoD to bid team• Hold a planning meeting with your bid team• Diarise key dates• Identify initial selling points & how you can
demonstrate them
3: Research and decision making• Establish who the decision makers are • Make the most of existing relationships• Identify our competitors• Identify the key issues and objectives for the client• Consider our areas of strength and weakness• Decide why the client should choose us and how
to demonstrate it
4: Documentation formation• Identify and plan your key points around the brief• Be as short as possible, less is more• Use examples and case studies• Use appendices for standard text• Double check that we’ve answered their questions• Read it again
The document
• It’s time consuming
• You cannot ignore it
• But it is the behaviour around the document that will determine whether you win or lose
5: Pitch delivery
• Plan with the team what to say
• Hold rehearsals (at least two)
• Invite a senior colleague to be the client and ask awkward questions
• Make sure everyone has something to say
6: Follow up and evaluation
• Have a follow up meeting internally
• Contact the client to say thanks and follow up on any points raised in your meeting
• Win or lose, obtain feedback from the client
• If you win, share the good news
Coffee break
How to sell Nexia International
• Creating some selling messages that you can use when you pitch
Features and benefits
• A feature is an aspect of a product or service
• A benefit is the end result to the client or consumer
• Combining them you can create a benefit (or selling) statement
A Nexia benefit statementNexia has a presence in 92 countries around the world[which enables us to]Help clients in every major business geography[which means that]They don’t have to worry about changing advisers if their international needs change
Ideally start with a client need
• You are more likely to win if you base your pitch around the client
Ask yourself (and them)
• What problems do they need to solve?
• What problems do they want to solve?
The needs
• We need highly technical advice
• We want a team we can work with
• We want someone who understands our sector
• We want a firm that understands us
The need creates the feature• We need highly technical advice = we have a technical
committee, and can offer training support if you need it• We want a team we can work with = we’ll give you
choice and you can meet everyone on the team if you want to first
• We want someone who understands our sector = we have sector specialists
• We want a firm that understands us = we have a familiarisation process which you won’t pay for
Create a selling message
We have a technical committee, and can offer training support if you need it which means that we can give you the highly technical advice that you need.
We can give you choice of team and you can meet everyone if you want to first. This should give you a team you feel you can work with.
Think about what it is you can offer
• Your resources
• Your experience
• Your approach
Consider the end result
• What is the benefit of your approach?
• How will you make a difference?
So, why you? Features & Benefits
Working in groups
• Choose a client need from the list
• Describe how your features resolve that need
• Create a benefit statement
Try using this sentence structure
Our [x] means that [y]
Or
Our [x] enables us to [y ] which means that [z]
The needs, again
• We need highly technical advice
• We want a team we can work with
• We want someone who understands our sector
• We want a firm that understands us
What wins pitches• Demonstrating in your behaviour your
selling points from the beginning
• A rapid response at a high level to the first approach from a potential client
• Asking questions, find out the real issues
• Structuring the proposal clearly and simply
What wins pitches
• Preparation for meetings
• Show confidence, enthusiasm, commitment
• Explaining your strategy and structure for servicing the client’s needs
What loses pitches
• Disorganised response to invitation to bid
• A dull or standard document
• Lack of interest in additional information and understanding of client
• Not quite answering their questions
What loses pitches• Not allowing junior people to speak• Talking about you rather than the client• Fielding people who are clearly too busy to attend
to a new client• Jumping in too quick in meetings and not listening• Focusing on the individual you already know
Frameworks you can use• The relationship analysis model
– To see where you stand and test any assumptions you may have about who is involved in the decisions, so that you can make the most of existing relationships and make sure you’re realistic about the value of the people you know.
• I-Beams competitive positioning model– To look at your position in relation to your competitors so
that you can identify your relative perceived strengths and weaknesses, so that you can make sure you deal with them appropriately.
+
-
Vie
w o
f Sm
ith &
Will
iam
son
- +Level of influence in the organisation
Friends Allies
Protestor Enemies
No man’s land (indifferent)
Players of unknown influence and allegiance
Low High
Positive
Negative
?
?
The relationship analysis model
I-Beams competitive positioning
Crucial
Incidental
Strong
Weak
Strong
Weak
Client Nexia International Competition
Industry understanding
Expertise
Team fit
Understanding their issues
Resources
I-Beams competitive positioning
Crucial
Incidental
Strong
Weak
Strong
Weak
Client Nexia International Competition
Industry understanding
Expertise
Team fit
Understanding their issues
Resources
Industry understanding
Expertise
Team fit
Understanding their issues
Resources
I-Beams competitive positioning
Crucial
Incidental
Strong
Weak
Strong
Weak
Client Nexia International Competition
Team fit
Expertise
Expertise
Expertise
Team fit
Team fit Industry understanding Industry understanding
Industry understanding
Understanding their issues
Understanding their issuesUnderstanding their issues
Resources
ResourcesResources
Competitive tactics• Choose one point on the model• Come up with a tactic that you could use to
create competitive advantageOne rule• You cannot be negative about the
competition
In groups come up with some tactics
Crucial
Incidental
Strong
Weak
Strong
Weak
Client Nexia International Competition
Team fit
Expertise
Expertise
Expertise
Team fit
Team fit Industry understanding Industry understanding
Industry understanding
Understanding their issues
Understanding their issuesUnderstanding their issues
Resources
ResourcesResources
One message to take away
• Ask yourself why you?
• If you can’t answer that question the client certainly can’t for you.
Winning new clients across Nexia Winning new clients across Nexia (or how to pitch internationally)(or how to pitch internationally)
Barbara HamiltonBarbara Hamilton
International developmentsInternational developmentsYvonne LangYvonne Lang
International developments
• IFRS
• ISA
• Ethics
IFRS as global standardsChallenge 1 – acceptance in the USA• 2006 memorandum of understanding
• EU and US summit in April 2007
EU and US summit
‘Promote conditions for US GAAP and IFRS to be recognised in both jurisdictions without the need for reconciliation by 2009 or possibly earlier’
IFRS as global standardsChallenge 1 – acceptance in the USA• 2006 memorandum of understanding
• EU and US summit in April 2007
• SEC proposed rule
SEC proposed rule
• Eliminate the reconciliation requirement for non-US companies using IFRS and registered in the US
• Consider whether US companies could use IFRS
IFRS as global standardsChallenge 1 – acceptance in the USA• 2006 memorandum of understanding
• EU and US summit in April 2007
• SEC proposed rule
• IASB may have to isolate US guidance that results in the introduction of ‘rules’
IFRS as global standardsChallenge 2 – wider adoption/convergence• China – new standards issued in February
2007
• Canada – over next five years, publicly accountable companies will move to IFRS
• Japan – ongoing convergence programme
IFRS as global standardsChallenge 3 – a lot of work still to be doneShort-term convergence• Segment reporting – IFRS 8 issued• Borrowing costs – amendment to IAS 23
issued• Joint ventures – exposure draft imminent• Income tax – exposure draft due late 2007• Impairment – in early stages
IFRS as global standardsChallenge 3 – a lot of work still to be doneMedium-term convergence• Business combinations – revised standard due• Consolidation – discussion paper due• Fair value measurement guidance – exposure draft due early 2008• Financial statement presentation – discussion paper due• Revenue recognition – discussion paper due late 2007• Post-employment benefits – working group formed• Leases – working group formed• Liabilities and equity – research stage• Derecognition – research stage• Financial instruments – improvement and simplification – research stage• Intangible assets – research stage
IFRS as global standardsChallenge 3 – a lot of work still to be doneOther projects• Insurance contracts
• Liabilities
• Management commentary
• Extractive activities
IFRS as global standardsChallenge 4 – application to small and medium-sized entities
• Standards are not suitable for all companies
• No exemptions
• Lengthy disclosure requirements
IFRS as global standardsChallenge 4 – application to small and medium-sized entities• Exposure draft ‘IFRS for small and medium-sized entities’
(SMEs)• Issued February 2007• Commentary period closed on 1 October • ‘Stand alone’ set of principles for SMEs• Simplified from full IFRS• Illustrative financial statements• Disclosure checklist
International Standards on Auditing
• Some 100 countries are using or plan to use ISA
• IAASB’s clarity project is key to world-wide adoption
• Project will be complete by end of 2008
The clarity project• Set objectives for each ISA• Clarify obligations of auditors – ‘shall’ instead of
‘should’• Eliminate ambiguity of language• Improve readability and understandability• Also being used as opportunity to redraft a
number of standards
Current position• Clarified standards
issued• Exposure drafts –
clarified and revised• Exposure drafts –
clarified• Still to do
4 (‘Risk’ standards) 11 (some exposed
more than once) 11 7
Where are the big changes?
• Audit of groups
• Written representations
• Audit reports
Ethics – revisions to IFAC Code• Extension of independence to members of
network• Introduction of sixth threat to independence
– management• Additional clarification in a number of areas• Effective 2009
International developmentsInternational developmentsYvonne LangYvonne Lang
Group sessionsGroup sessions
Group sessionsOption C: Developing quality control procedures
within your practiceTARA SUITE
Option D: Understanding and managing the risks in international assignments
GRAHAM BELL SUITE
Developing quality control proceduresDeveloping quality control proceduresFrançois MahéFrançois Mahé
Context
• Strong pressures on auditors internationally
• New regulations on auditing standards
• New rules for the control of auditors (PCAOB in the US, H3C in France,…)
• Evolution of the audit quality concept
• IFRS
Why managing quality ?
• The same professional standards and practices
• Respect the international and local rules and standards
• Improve client confidence
What is managing quality• 1 principle: “Say what you do and do what you
say”… no more !
• 3 objectives: Conformity, transparency, confidence
• A specific organisationResponsibilitiesProceduresOrganise the evidence
Managing quality system
Quality system
ProcessesResources
Responsibilities and Skills
Documentation
Documentation
Quality manual
Procedures
Technical manualsand tools
Quality manual• Management engagement
• Activities under quality control
• Quality system description
• Subject to be audited: Nexia, National Institutes
Procedure• What has to be done
• How to do it
• Who has to do it
• With which tools
Which procedures ?• Acceptance• Maintenance• Conflicts• Audit plan • Supervision• Independent review
• Recruitment• Training • Evaluation• Audit procedures • Technical documentation• Managing Quality
Example 1 : Acceptance of a new assignment
• Before accepting a new audit assignment:– The partner checks that all the required conditions are satisfied – To achieve this he completes the required questionnaire and signs it– The questionnaire is signed by a member of the board for final
approval (2 copies, one in the audit file, the other in a central file)
• The points to check are:– Independence from the firm, the partners, the staff– Incompatibility (legal requirements)– Conflict of interests– Skills to do the job
• Each year, the partner responsible checks the correct application of this procedure
Achieving Quality Culture in Small Achieving Quality Culture in Small PracticesPracticesPercy ItaliaPercy Italia
Objectives of a professional services firm…. Irrespective of size....
• Delivering outstanding client services
• Hiring the best talent and providing fulfilling careers and professional satisfaction
• Achieving financial success
Focus of the Presentation:
• Quality in Client Services
• Service Quality – Client experience with the firm
• Human Capital – Our main asset
• Challenges faced by smaller firms in maintaining a quality culture
Quality in Client Services
• Technical Quality – How good is the work?
• Service Quality – What kind of experience does the client have with the firm?
How good is our work – Technical Quality
• Relatively generalized areas of practice
• Specialisation in niche areas
• Involves significantly lesser risk like accounting & book keeping services, etc.
• Easier to locate appropriate human resources
What is required to achieve this culture….
• Measure client satisfaction –get their feedback directly. Through partner visits, regular interactions & questionnaires.
• Deal effectively with the feedback – discuss feedback within the firm and provide the client a response to the feedback.
• Discuss specific concrete ideas & share amongst professionals within the firm, for enhancing value to the clients during their engagement
• Training program in client management skills – on job training & Nexia leadership programs for young partners and managers – use effectively
• Reward professionals who excel in such client quality services.
Our Main Asset: The Human Capital…
• Staffing & Recruiting• Training & Development• Performance Evaluation• Compensation & Promotions• Interlinked with all of the above is ‘Work Assignment’
Staffing & Recruitment
• Have an objective plan of resource requirement – Plan well in advance for known requirements / achieving annual performance targets
• Identify the right skill sets considering the nature of engagement
• Have the right mix of experience• Leverage high cost senior staff with low cost junior
staff• Heavy attrition a global phenomenon - Never stop
interviewing
Training & Development
• Most training for junior staff is on the job in smaller firms• Make effective use of in-house training by developing a
strong training process• Senior staff should be encouraged to conduct technical
training sessions• Junior staff should be encouraged to share their knowledge
and experience with other staff members on completion of an engagement
• Use local expertise and encourage staff to attend professional continuing education program - Senior staff should mandatory attend specific hours of CPE
• Most technical reviews by senior partners are good training experience for training staff
Performance Evaluations
• Specifying performance criteria
• Designing the counseling process
• Implementing the process
Performance Evaluations…..
• Good system of performance evaluation need not be very formal. Small firms cannot afford the effort to document extensive appraisals.
• Evaluations tend to be more personal, with extensive involvement of partners and direct discussions with the concerned staff.
• Define clear annual goals for employees to achieve. Evaluate based on goals set keeping their career objectives paramount
• Technical evaluations should happen periodically on completion of respective assignments preferably by immediate senior / partner , to be followed by counseling
• Have a transparent & formal evaluation policy
Compensation & Promotions
• A good compensation & promotion policy helps ensure that all professionals are making most of their talents and capitalizing fully on their potential
• Should be performance based rather than seniority based
• Avoid being subjective, use measurable criteria
Work Assignment & Staffing
• Structured approach to assignment & staffing. Consider the skills & experience required to complete the assignment
• Avoid assigning based on urgency - start planning well in advance to ensure right skilled and experienced staff are assigned as needed
• Avoid assigning based on short term criteria and use the long term professional approach to staffing
• Major goals of proper staffing should be professional development of staff, client demands for quality, cost effectiveness & efficiency
• Have regular scheduling meetings and co-ordinate planning exercise well between senior staff
Importance of Scheduling
• Single most important managerial activity in the firm• Frequency of scheduling decisions makes having the
right system a matter of paramount importance• Scheduling influences the cost of work, its quality and
the delivery timelines• Long term implications – effects professional
development, motivation & productivity of professional staff
• Plays an important role in dissemination of expertise through out the firm
How to Schedule?
• Profitability considerations• Client service & quality requirements• Skill building• Motivation & morale
Challenges facing smaller firms…
• Resource crunch – finding the right resources• Structured training & development• Senior management time spent managing• Consistency in maintaining quality• Resistance to change & adapting to changing
environment• Lack of expertise in dealing with new situations
THANK YOU!
Percy H. ItaliaPartner
Agarwal & Italia, Chartered AccountantsSuite ‘H’, Fifth Floor
Surya Towers, Sardar Patel RoadSecunderabad. India. 500 003.
Discussion sessionDiscussion session
Discussion session
• Group A – MARCONI SUITE
• Group B – BAIRD SUITE
• Group C – EDISSON SUITE
Discussion
• Is it necessary to implement a specific structure to achieve quality ?
• Which are the key points of a quality system ?• Is there a risk of bureaucracy with procedures ? • A quality manual for Nexia ?
– An obligation ?
– A minimum standard ?
Developing quality control procedures Developing quality control procedures within your practicewithin your practice
Nexia International Audit ForumNexia International Audit Forum
Closing remarksClosing remarks
Chairman of the day – Jeremy BoadleChairman of the day – Jeremy Boadle