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July 15, 2008

AGN International reveals strategies to distinguish group as an association following Forum decision

A mid-tier association has revealed it went to great lengths to appear more like an association of independent firms following a decision not join the Forum of Firms.

AGN International, the 18th-largest accountancy group in last year’s International Accounting Bulletin world survey, introduced a series of strategies in order to be regarded as an association, including asking member firms to re-brand without the AGN initials and a new quality control system.

The association’s chief executive Nick Blake said AGN had been pondering whether to become a network or remain an association for a number of years, but as the Forum of Firms deadline loomed, a “hard decision” was made to remain an association.

“There’s been a lot of effort involved in re-designing our organisation and making sure we and our member firms were happy with what we were doing,” Blake said.

AGN’s decision to continue down the association path was motivated by several factors that were cost, liability and business related.

Blake explained: “[The first reason] was this whole question of vicarious liability and the perception that if one is a network then vicarious liability is more prevalent than if one isn’t a network.”

Setting up of a conflict identification system within the organisation was another motivating factor.

“Not only from a cost viewpoint, but also from an operational viewpoint,” Blake said. “Would all member firms give the necessary information in order to make it a worthwhile database and a realistic database? We felt that wasn’t going to be the case and the cost of putting that in place and maintaining it was going to be exorbitant.”

A consequence of remaining an association has been the introduction of a new strategy on quality control procedures.

“Once firms become members we can’t undertake, within AGN, peer reviews, and monitoring quality and quality standards,” Blake said, while stressing that the association does implement quality standards. To overcome this problem, AGN draws on quality reviews by regulators where possible. In the markets where regulators do not perform audit reviews, AGN commissions independent firm reviews in accordance with the International Federation of Accountant’s ISQC1 – Quality Control for Audit, Assurance and Related Services Practices.

Blake said only two member firms decided to leave AGN International due to the decision to remain an association.

“They were in the Middle East, which is an area where international branding is very important to member firms but we are literally on the point of replacing them with even stronger member firms,” he remarked.

One of the firms that left to join Horwath International is Horwath MAK, a large mid-tier firm that is particularly strong in the United Arab Emirates and has eight offices and 350 staff across the Middle East. Blake said AGN will admit a replacement firm in the next few months.

Despite the significant restructure, Blake said AGN International continues to prosper and now has member firms in 89 countries. In the 2007 financial year, the association’s combined revenues grew by 14 percent to $1.3 billion.

Arvind Hickman

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