In a face-to-face meeting in April 2022, Zoya Malik sat down with Pablo San Martin, President, SMS Latinoamerica to discuss trends in the accounting industry in Argentina, regulatory nuances impacting audit standards and positioning the organisation in LATAM to succeed globally
Zoya Malik: What is the main growth service line?
Pablo San Martin: We are experiencing growth in every consulting professional practice. Those are: i) Digital Transformation, where we provide services related to robotic process automation, business intelligence, big data analytics, digital marketing and process and documents digitalisation ii) SME related strategic planning and productivity improvement involving human resource management, finance, process workflows, costs reduction, marketing, financial reporting, taxation and generational transition iii) Impact Sustainability oriented to social and environmental policies, sustainability committees, sustainable strategy, community positive impact, sustainable programmes for supply chain iv) Sustainable Finance advisory on issuance of green and social bonds, second opinions, implementation of green taxonomies, advisory to financial institutions, Integrated Reporting advisory and assurance and GRI training.
ZM: What are the advisory needs of local SME clients?
PSM: In Latin America, (LATAM), SMEs need to improve productivity in every aspect except for sales, where they concentrate most of their efforts starting with strategic planning (SMEs use emerging strategic planning but it is not very often that they gather teams for deliberate planning sessions) up to ERP selection and implementation. In LATAM, SMEs are threatened in their continuity due to the seniority of owners, so generational transition planning becomes vital. There are also many opportunities for finance efficiencies to be made (collection-payment match, currency edge, access to promoted interest rates, international finance, capital markets and room for leverage, etc) that are also in top demand for advisory.
ZM: What new regulations are in place for raising the profile of Argentine auditing standards for international business confidence to grow?
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PSM: Argentina adopted ISAs and IFRS for public companies. At a slow continuing pace, local standards for auditing and accounting are approaching international standards meaning that slowly it becomes easier to understand local companies’ financial statements than what happened some years ago. There is still room for improvement in the adoption of IFRS for SMEs in general which I think would be beneficial for the economy. International initiatives such as IFR4NPO are important for the world but for regions such as Latin America, and in particular Argentina, are even more important, so we are cooperating with that initiative.
ZM: What is the climate for ‘ease of doing business’ in Argentina?
PSM: Although Argentina is an important economy for the region, there are some regulatory restrictions in place that affect development such as jurisdictional taxing and difficulties in accessing local finance. On the other hand, these restrictions mean that the assets are undervalued in a region of growth and with an enormous growth potential, opening many opportunities for medium or long term investment. In general, I would say Latin America requires good understanding. It is a region of peace where there are great opportunities for doing business, however with the prevention of taking time to get proper professional advice.
ZM: What cross-border assignments are most in play? Is this mainly around M&A, tax advisory, restructuring or other services?
PSM: Financial reporting and taxation are on top. Due to the fact that Latin America is being seen more and more as a unique region there is a trend to consolidate financial information within the region, meaning having the same accounting standards in place, same ERP, same accounting procedures, etc. throughout the whole region. And let’s say that taxation is traditionally in high demand, especially due to FATCA and OECD regulations requiring planning to be in good standing even when getting tax efficiencies. More and more tax knowledge and expertise are required today than some years ago.
ZM: How are your member firms involved in Succession Planning? What is the socio-economic trend currently?
PSM: Succession Planning as a discourse is present in every meeting and part of our QA monitoring process. I would say that our member firms are not facing succession planning for at least the next decade, so we are concerned about beyond 15 years. We are seeing that the rates of retention of young professionals are worsening, so we are working on retention and loyalty plans to make our careers attractive for those who will become partners around 2035 onwards. It sounds quite far off in the timeline, but every professional knows how time-demanding it is, to prepare a partner. We call our programme of partner’s development, “Line 3”. The name for the programme has been coined, since we are working to prepare a whole generation of successors, of the next successors.
ZM: How do regulations and auditing standards differ across Argentina provinces? How does this tally with international business transactions for a corporate operating across national provincial jurisdictions? What are the challenges?
PSM: We have in Argentina a non-traditional organisation for our profession. Firstly, our law regulating the accounting practice involves not just accountants but also management bachelors, economists and actuaries, all of whom are members of the same professional body, IFAC. At the same time, the profession itself is the standard setter for both accounting and auditing standards. On the other hand, there are 24 jurisdictions legally authorised to adopt or change those standards (non-binding agreements have been signed, with jurisdictions agreeing not to introduce changes, however they are legally entitled to). Continued professional development programmes are voluntary rather than mandatory. In that sense, I think that there is room in Argentina for regulatory improvement.
ZM: What is the climate for investment for training accountants in Argentina? What certifications are required to practice? What may be limitations and challenges to winning and growing local and overseas business? What initiatives does SMS Latinoamerica have in place for recruiting and training accounting talent?
PSM: In Argentina there are no CPA exams requirements or mandatory professional practice periods. After completing university studies, accountants can get a CPA license and no additional training is required on a mandatory basis. Ever. That puts pressure on the firms having to implement large training centres and internal exams in accordance with IAESB recommendations. Since we are focused in Latin America and Hispanic U.S., we have implemented that training centred at network level facilitating our member firms access to education. Recruiting and training accountancy talent is a real issue, since fewer young students chose accounting as a career.
So increasingly, we are focused on young students in trying to demonstrate the attractiveness of accounting especially in new roles. In that sense anything related to sustainability becomes essential both for the future of our profession and to attract young accountants. I remain positively convinced that accountants can save the world. Our role is vital in reducing human footprint, to reduce the impact from climate change to help develop our communities and to contribute towards growth.