Thailand’s plans for full adoption of IFRS in 2008 and the
continuing growth of foreign inward investment in the manufacturing
sector are driving the expansion of the kingdom’s accounting
market. David Hayes reports that despite unfavourable trading
conditions, the profession’s future appears bright.
Although a recent economic slowdown reduced the number of
new annual listings on the Stock Exchange of Thailand in the past
financial year, future prospects for the growth of the accounting
market appear bright. Thailand’s return to democratic rule bodes
well for investor confidence and economic growth.
The recent handover of political power to Thailand’s new
democratically-elected government by the military regime that ran
the kingdom since September 2006 is expected to lift the country’s
standing among foreign investors. On the other hand, rising energy
costs are hampering economic development due to Thailand’s energy
import reliance. At the same time, a new generation of
internationally-educated business leaders is emerging who value
information from audits and other internal corporate sources more
than the current ageing business leadership.
The International Monetary Fund estimates Thailand will experience
GDP growth of more than 5 percent in 2008, however despite this
growth, the high value of the Thai baht has affected export volumes
in agriculture, garments, furniture, automobiles and other sectors.
From a previous rate of more than 40 baht per US dollar, the
exchange rate has dropped to 32 baht, causing Thai exporters to
struggle against lower cost producers elsewhere in Asia.
“There have been a lot of [initial public offering – IPO] delays
because of the economic situation,” BDO Thailand audit partner
Anurak Lelapiyamit remarks. “IPO firms look for good timing. There
could be more activity in 2008. The majority of IPOs are
manufacturing-based. Also, some are involved in property
development. There is a property boom in Bangkok, especially on the
underground railway and overhead sky train routes.”
In the middle of this mixed political and economic climate, both
the Big Four and mid-tier accounting practices are reporting growth
while the number of small accounting practices is increasing.
The Big Four and all the leading international mid-tier networks
and associations are present in Thailand. The Big Four firms are
each estimated to earn annual revenues exceeding THB500 million
($16 million) and mid-tier firms’ annual revenues are estimated to
be as high as THB100 million.
BDO Thailand is benefiting from the growing accounting market. “At
BDO Thailand we are doing very well. We have double-digit growth
every year,” Lelapiyamit tells the International Accounting
“We have a lot of inward referral work. Also, clients are
transferring from Big Four companies because of fees and their
service expectation. This has happened for several years, maybe
because Big Four firms are concentrating on corporations.
“Mostly medium-size foreign clients are coming to us from Big Four
firms,” Lelapiyamit continues. “They are from Europe, some of them
are in the service sector and others are in manufacturing. Some
already have been established here in Thailand for a few years, but
with their head office located outside of Thailand. Big companies,
including Thai companies, still prefer to use Big Four firms here.
This is especially so for listed companies, while for foreign
companies this may be a parent company requirement.”
Statutory audit is required for listed companies, limited companies
of all sizes and banks. Audit work represents 60 percent of BDO’s
business, but the percentage is declining gradually while tax
consulting, which at present represents 30 percent of revenue, is
on the rise. Risk assessment and internal audit outsourcing, which
are also growing, as well as corporate and personnel recruitment,
and accounting work make up the remaining 10 percent of
“We are strong in tax work because we have two senior tax partners
who formerly were with Big Four firms. The opportunity [to recruit
them] arose after the Arthur Andersen and KPMG merger,” Lelapiyamit
says. “We promote our tax work through public speaking engagements
and articles in the local Thai press. New business is coming both
from new and existing clients. Big Four clients are coming to us
mostly for audit services. Fees are a very sensitive issue. We have
a yearly fee adjustment – sometimes up and sometimes down. In 2007,
it was double-digit growth.”
BDO is attempting to develop business by penetrating the outsourced
internal audit market. Most potential clients are Thai companies,
some of which are required by the Stock Exchange of Thailand (SET)
to have an internal audit function.
“Some companies prefer to outsource this function while others want
an internal audit review by an independent firm to make sure the
function is working properly,” Lelapiyamit explains. “This is a new
trend. It may be due to the client’s shortage of qualified staff or
certified internal auditors. A lot of public companies require this
Audit services are valued more by the new generation of business
managers than older business leaders who are now retiring.
Lelapiyamit says: “The new generation appreciate the services of
auditors and the advice given. The new generation have a changed
management style – they need more information. They want feedback
on internal controls to know whether there is any weakness.
Management may be decentralised under the new generation of owners
who allocate authority and responsibility to others while the older
generation prefer centralised control. Delegation of responsibility
is more common now.”
Meanwhile, future business expansion by large Thai companies is
expected to create growth in outward referrals by Thai accounting
practices. The move will follow business expansion and the growing
influence of the more internationally-minded new generation of
senior managers. “Outward referrals are not much now, mostly to
nearby Southeast Asian countries like Cambodia and Vietnam,”
Lelapiyamit observes. “We expect more outbound referrals as more
companies expand overseas, led by their new generation of owners
“We should do well for the next year or two as there is a lot of
BDO support internationally. Also, we have to keep up with the BDO
global business expansion plan. We have to position ourselves
somewhere different to other mid-tier firms.”
BDO and other mid-tier firms have to compete with Big Four
practices for outbound Thai companies looking to develop
international business opportunities.
“The Thai accounting market is different for the Big Four firms
compared with mid-tier firms,” Lelapiyamit says. “Growing
medium-size client companies should prefer to work with mid-tier
firms as fees are reasonable, but if they expand overseas then they
may work with Big Four firms. I do not think any more mid-tier
firms are coming into this market. The top 15 international
accounting firms already are here.”
BDO employs 150 staff, of which about 20 are CPAs. There are six
partners. By comparison, Big Four firms in Thailand employ more
than 500 staff. PricewaterhouseCoopers and KPMG employ more than
About 30 percent of BDO’s 150 staff are trainee accountants.
Recruitment drives are organised two or three times a year to
ensure a sufficient inflow of trainees. Lelapiyamit notes that
while it is easy to attract trainees, it is difficult to hire more
able candidates who tend to work for Big Four firms or join big
companies where salaries are higher.
Accountants intending to qualify as CPA members of the kingdom’s
Federation of Accounting Professions (FAP) require an accounting
degree from an approved university in Thailand or overseas.
Trainees then are required to pass six additional exam papers
issued by FAP during a two-year training period with an accounting
firm. Qualification as an auditor requires 2,000 hours audit
practice with an audit firm.
“We hire less than ten new CPAs a year. The number staying with us
changes each year,” Lelapiyamit says. “We try to retain our new
CPAs. They get more responsibility and receive extra holiday leave.
Our staff shortage is at senior level, so we try to improve our
training programme to improve staff quality and meet client
Most accounting practices in Thailand have a staffing shortage and
the Big Four firms also face staffing turnover issues. More
accountants are leaving firms to set up their own practices than
are hired by other companies or accounting firms.
“There needs to be more qualified accounting staff in Thailand.
There is a lot of IFRS work and updating of standards. This is
creating new work for us,” Lelapiyamit remarks. “International
Accounting Standards [IAS] were introduced after the 1997 financial
crisis. The work is still the same but there are some new
disclosure requirements that we have to comply with. In addition,
American client companies here require a [Sabanes-Oxley Act] audit.
Also, our Japanese clients may need a [Sabanes-Oxley Act] audit
from 2008 onwards.”
Leading the way
Thailand is preparing to complete full adoption of IFRS by
mid-2008, when it will become one of the first countries in Asia to
do so, Lelapiyamit notes. The kingdom’s programme to adopt IFRS is
running parallel to the adoption of International Standards on
Auditing, which has also been scheduled for adoption later this
year. There are 37 IFRS and IAS in total and Thailand will adopt 21
of these midway through this year. This follows two standards that
became effective in 2006 and 13 standards in 2007. Another standard
is at the exposure draft stage.
Meanwhile, standards of corporate governance have improved in
Thailand recent years and do not present any difficulties for the
The governance of listed companies, for example, is overseen by the
Stock Exchange Commission (SEC), the SET and the FAP. Both the SEC
and SET have been involved for more than 20 years in issuing rules
informing listed companies how to comply with corporate governance
“Corporate governance is a requirement for publicly-listed
companies but not for non-public companies,” Lelapiyamit says. “The
current standard of corporate governance in Thailand is good…
There still are some scandals such as insider information by
management and by stock brokers, but it is not an issue for the