The new year...

... always provides an opportunity to look back but, more importantly, to look forward to the coming year.  The general consensus is that, at least in economic terms, the coming year should be significantly better than last year – but will 2010 be much different to 2009 for the accounting profession?

Clearly, a better economic environment will provide a boost to all businesses – including accounting firms – and we will also benefit from the improving performance of our clients and what is expected to be a better market for transactions, fund raising and general corporate activity.  However, it is important that we don’t forget the lessons of the last few years and that we assist our clients in avoiding some of the ‘excesses’ we have seen that have damaged so many businesses.  We must remember that ‘if it looks too good to be true – it probably is’.

For the profession as a whole we will continue to see a continuation of some of the topics that have dominated 2009 – particularly the search for a single set of high quality global accounting standards.  I think everyone has accepted that IFRS are the only credible global accounting standards to fill such a role but there remain issues over their adoption by certain countries – notably the USA – as well as concerns about the governance and accountability of the IASB (the body that issues IFRS).  It is vital that we make progress on this in early 2010 and that the USA is persuaded to confirm that it will adopt IFRS by a specified date.  There can be conditions for this acceptance (such as there being an acceptable governance structure for the IASB – but we urgently need the USA to confirm that they will, in principle, adopt IFRS.  Japan has committed to the adoption of IFRS, it is already adopted in Europe and China will, I am confident, fully adopt IFRS as well.  With the USA on board this will cover the world’s leading capital markets and should ensure that IFRS becomes the single, high quality global accounting standard called for by the G20 – and the accounting profession.

Increasing regulation is also likely to be a feature of 2010 – mostly for the financial services sector, but it must be possible that some of this will drift into the accounting profession.  I hope not as, in general terms, I think the profession is well regulated although there are some countries that need to adopt regulatory systems similar to those in the more developed countries.  Indeed, I would argue that in some aspects the accounting profession may be over-regulated but I see no chance of a lessening of regulation so there seems little point in arguing this case.

As we emerge from the global recession we may see a few more mergers between some of the smaller mid tier firms who want to increase their market share.  However, I do not think these will significantly affect the market place as most of these firms act for smaller clients and few have many, if any, significant public interest clients.  However, because size is seen as such an important indicator in the accounting profession I have no doubt that some firms will be regarded as moving into a market position that is not wholly appropriate.  This may be an issue for BDO, and possibly one or two other networks who can credibly be regarded as an alternative choice to the Big 4 in much of the marketplace.  We will have to work harder to explain how BDO is able provide a real challenge to the Big 4 for those companies that would prefer not to use the services of the Big 4 and how BDO is different from networks that may be growing their revenues through merger but who don’t have the necessary global infrastructure and support to be a credible choice for businesses that might otherwise use a Big 4 firm.  In this context, I suspect that unless there is a major corporate collapse that prompts concerns over the role of the auditor, the Competition and Choice debate will rumble on but is unlikely to make any real progress – and in this regard 2010 will be much the same as previous years.

For me personally, 2010 will have many challenges – helping our member firms respond to changed economic circumstances, ensuring we maintain our investment in the network and, later this year, the launch of our new audit methodology and new audit process tool – ensuring that a ‘BDO audit is a BDO audit’ in whatever country it is delivered and whatever the nature of the client – a guarantee of a consistently delivered, high quality, robust audit.

 BDO International  Ethics  Global Accounting  Mark to Market  Standards & Regulators  2 Comments February 2nd, 2010