| Industry chiefs are split on issue of joint audits and say staffing is still the biggest problem |
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| The managing partners of Ireland’s leading accountancy firms are split as to whether the introduction of a joint audit regime in Ireland would be beneficial for the industry, with all the heads of the Big 4 against the concept. As in last year’s survey, staff shortages remain the ‘achilles heel’ of the industry, with firms increasingly looking outside Ireland to address the issue. On the positive side, Ireland’s continuing prominence as a global financial services centre is increasing opportunities for the sector, as is growth in wealth management services and general economic buoyancy. |
Earlier this year, the Hundred Group of Finance Directors recommended the introduction of a joint audit regime. This has been met with a mixed response from within the profession. Of those who answered the question in this year’s survey, some 53 per cent were against the implementation of a joint audit regime. All members of the Big 4 were not in favour of such a regime, while mid-tier firms were generally more positive about it.
Donal O’Connor, managing partner of PricewaterhouseCoopers said, ‘The 8th Directive gives group auditors, including joint group auditors, undivided responsibility resulting in inevitable duplication in audit work by both firms in such circumstances. This extra work can also be coupled with a potential dilution of consistency in groupwide audit quality and approach to the audit. Ultimately the marketplace should decide whether joint audits make commercial sense for business and give any greater level of assurance and transparency and joint audits should not be forced on companies.’
A joint audit regime would reduce the choice available to clients, according to KPMG’s managing partner, Denis O’Connor. ‘The principal argument for a joint audit regime appears to be to change competition in the sector. In Ireland this proposal would have the completely opposite effect. The industry is already very price competitive but there is a compelling case in the public interest to see less reliance on the Big Four. The solution to this is to see a fifth firm emerge internationally as this is essentially a global issue and will only succeed with global reach. Joint audits in a small economy like Ireland will only reduce, not increase, the choice available to companies as they will, by definition, conflict more firms from acting and reduce choice available to businesses,’ he explained.
According to managing partner at Ernst & Young, Paul Smith, such a move is fraught with difficulty. ‘Asking auditors to accept responsibility for the work of others is likely to require artificial intervention by regulators and standard setters, will probably drive up costs and may damage audit quality,’ he said.
Similarly, Pat Kenny, managing partner at Deloitte, argued that there was ‘no culture’ for such a regime in Ireland, and that it is ‘inefficient and expensive where operated’.
Mazars’ managing partner, Joe Carr said, ‘[This presents] an opportunity for quality firms outside of the big 4 to demonstrate capability and thereby provide much needed audit choice in the large corporate market’.
The introduction of a joint audit regime could serve to negate the effect on the profession of, ‘another Big 4 firm suffering a similar fate to Andersens’, said Grant Thornton’s managing partner, Paul Raleigh. ‘There is too much concentration of large audits in the Big 4. This is a major risk for the profession and business if another Andersens happens. Joint audits would reduce this risk and allow mid tier-firms the time to make the necessary investment to scale up to do this work,’ he outlined.
Staffing
In 2006, staffing is still a key concern for a large number of the respondents. Sharon Gallen, auditing and accounting partner at Horwath Bastow Charleton said that one year on, finding and retaining high quality staff was still the biggest threat facing the accountancy sector. Her thoughts were echoed by Liam Twohig, managing partner of Baker Tilly O’Hare, who said that the shortage of suitable qualified staff was a significant issue in the sector.
The issue of staff retention was not only something that impacted upon the medium sized practices, with the Big 4 also indicating that staffing was again proving to be challenging.
PwC’s O’Connor , said, ‘The biggest issue which needs to be addressed is to ensure that the profession continues to remain an attractive option for quality people to join and to stay over the long-term. The work is demanding, the landscape is becoming more regulated but the development of market leading skills and the quality of the work experience and the clients still means the profession attracts the best and the brightest. However, the profession will only succeed through quality people and this has to be a priority.’
In order to tackle the staff shortage Irish firms need to look at new options, as Kenny, explained, ‘Over the past year Deloitte has increased its global recruitment to source candidates from EU/EEA countries e.g. Poland. However as the skills shortage for staff is being experienced globally, we have had to extend our recruitment search to non-EU countries.’
Patrick Gillen, a partner with Russell Brennan Keane, says that to cope with the problem, his firm is focusing on ‘more long term development opportunities and more emphasis on training & development’, as well as ‘building up the firm’s profile via marketing’.
Patrick Lawlor, managing partner of Brenson Lawlor, says his firm is focusing on the ‘variety of work’, as well as offering ‘loyality payments’ to keep staff.
‘Continual recruitment at graduate level’ combined with ‘higher salaries to retain senior staff’ is how Sean Fitzpatrick, managing partner of OSK Accountants & Business Consultants is addressing the staffing problem.
At Ryan Glennon, Liam Ryan, managing partner, said that the firm had appointed a full time human resources manager, along with a HR generalist, to assist the firm.
Shortages were identifed across all sectors within the firms. Niall Garvey, a partner with Oliver Freaney identified a lack of audit seniors as being problematic; Gillen pointed to the lack of qualified audit & corporate services staff; and Niamh Meenan, a partner with RSM Robson Rhodes, said her firm’s biggest problem area was audit, ‘due to increasing demand for professional staff from practice and industry’.
Threats and opportunities
Aside from staffing, one of the other key threats to the accountancy sector is any downward movements in the worldwide economy and the global business environment. O’Connor of KPMG said, ‘The biggest threat to the industry is that of ‘knee-jerk’ reaction to some of the global business failures and their causes.
Global opportunities are a new area that Irish accountancies firms can begin to consider, according to Smith. ‘The enormous wave of outgoing investment from the Far East economies, particularly China and India’ presents large growth potential for Irish accountancy firms’, he says.
A number of other issues also arose in the survey. Julian Caplin, managing partner with Moore Stephens Caplin Meehan, said that the biggest threat to the industry was the consolidation of the big four.
Meenan saw increasing regulation within the sector as both a threat and an opportunity. She said that while it could threaten business, it could also lead to increased accountability in the sector.
For Paul Keenan, managing partner at BDO Simpson Xavier, ‘the recognition of the quality and the abilities of the practices outside the big four’ is the biggest opportunity for his business. Willie Fahy, managing partner of IFAC, identified ‘specialism’ as the biggest opportunity, a philosophy he shares with Lawlor.
Vivan Nathan, managing partner of HLB Nathan, sees Ireland’s growing prominence as ‘a financial player in the world market’ as offering the most opportunity.
Many of the firms agreed that the current buoyant Irish economy had created new opportunities in new sectors, with a number of the firms highlighting wealth management and tax planning as key growth areas. As the number of high net worth individuals in Ireland continues to rise, these sectors look likely to expand further and provide a growing revenue stream for the accountancy sector. |
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| Article appeared in the October 2006 issue.
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