SERVICES: Benefits to the Accounting Shake Up?
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Much is currently being said about pending amendments in legislation and proposed regulations for the accounting profession both in South Africa and internationally, with the talk centred around the negative effects and threats to smaller firms. Industry experts agree that realignment of the accounting environment is inevitable as result of the changes, but what of the benefits?
At the recent Moore Stephens International conference held at the Cape Town International Convention Centre, international chairman Richard Moore addressed professionals from across the globe on the issue:
“The emergence of financial reporting standards, the uncertainty in network regulations and the growing complexity of regulations, are challenges that lie ahead. There is already a reduction of firms offering audit services and the consolidation of smaller firms.”
Moore said that a clear positive to emerge from increased transparency and regulation is that it would help to, “shatter the myth that there is a gulf in the levels of quality between the mid-tier and big four firms.”
“We don’t dispute the technical competence of the larger firms but we are as good as the big 4, especially in our chosen markets, but in many instances the mid-tier firms offer better value for money.”
Charles Oosthuizen, director of Moore Stephens Cape Town agrees that there are clear positives to be expected from the proposed regulatory changes: “The draft Companies Bill, which proposes exemption to small businesses from painstaking financial reporting and audits, will have a large impact on smaller audit firms, forcing them to rethink their structures and whether they will move away from auditing.”
“The JSE’s new regulations that will require firms to have at least three audit partners as well as a International Financial Reporting Standards (IFRS) advisor in house or under contract has put additional strain on these smaller firms.”
“These regulations also require auditors of listed companies to be listed on the JSE register of auditors as well as with the Independent Regulatory Board for Auditors (IRBA),” advises Oosthuizen. “Compliance with these onerous requirements is expensive.”
“We are anticipating seeing a number of smaller firms or sole practitioners no longer wanting to be involved in auditing due to the regulatory environment we currently find ourselves in. This will improve the overall standard of the industry and the quality of its service to clients.”
Oosthuizen advises that this in turn will create potential growth opportunities within the mid-tier firms as more work will become available through less competition.
“Quality and value are the key differentiators in the current market – firms that invest in their resources and training to ensure that they consistently deliver good service will see growth.”
Another huge pressure on the industry is the skills shortage being felt by everyone. “Finding and retaining quality staff has always been a major challenge. Another benefit of seeing smaller firms move away from auditing is the freeing up of valuable skills as well as skills acquisitions through mergers.”
“In the next few years I feel we will see a powerful shift in the accounting industry as smaller firms and sole practitioners merge with those that are compliant,. The industry will see a move towards a younger, more dynamic set of experts,” concludes Oosthuizen.
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