Seventeen international accounting networks and firms have
passed strict quality control criteria to become the first full
members of the Forum of Firms this week. The International
Federation of Accountants (IFAC) announced an additional four
provisional members have also been chosen.

Membership covers the majority of the 15 highest revenue earning
global accountancy organisations reported in last year’s
IAB World Survey. Among this group, only Praxity Global
Alliance, Nexia International and Kreston International are not
participating, while Moore Stephens International is a provisional
member.

The forum also comprises smaller mid-tier groups, such as
Constantin Associates, INPACT Audit, Mazars, who are a member of
Praxity, Russell Bedford International, Talal Abu-Ghazaleh
International and UHY International.

Harmonising standards

First established in 2002, the forum is an association of networks
that aim to harmonise global financial reporting standards and
improve the quality of transnational audit work at a professional
level. It conducts its business through its executive arm, the
Transnational Auditors Committee, which is also a committee of
IFAC.

To gain membership, networks had to illustrate they have
implemented a globally co-ordinated quality assurance program, were
committed to the use of International Standards on Auditing, and
could meet other quality and code of ethics requirements.
Prospective members still have an opportunity to join the forum if
they can meet the stringent criteria.

Forum of Firms chairman David Maxwell told IAB revealing
the identity of members is an important milestone in the evolution
of the group: “What [membership] is saying is that people who are
here are serious and earnest about driving up quality. The whole
motivation is to raise the standards of quality in financial
reporting and auditing. I wouldn’t call it a badge of quality, I’d
say the ethos of those involved is very much about quality and I
think that is very important.”

Although the forum covers the majority of the transnational
auditing profession, Maxwell stressed that firms, networks and
associations placed outside this group should not be viewed as
lacking in quality. “It certainly doesn’t cast a negative light on
those who are not members and what we are keen to do is make sure
that those who are involved in transnational audits can benefit
from what’s coming out of the Forum of Firms.”

Mid-tier holdout 

One large mid-tier network that hasn’t joined is Nexia
International. Executive director Nigel Hodges told IAB he
is yet to see proof membership is worthwhile for his network. “We
could never see any value in it and from what our information says
it wasn’t going to bring us any value,” he said. Hodges said Nexia
already spends hundreds of thousands of dollars on transnational
audit quality control measures, contributes to standard setting
processes worldwide and believes the money required to adequately
meet the criteria would be better spent on serving clients. He has
also questioned whether many of the mid-tier networks have the
required resources to sustain the level of quality control required
of forum members.

Another member network, Russell Bedford International, said it has
already benefited through being associated with the Forum of Firms.
Last year, the network reported fee income of $327 million and a
growth rate of 15 percent. Chairman Geoff Goodyear said Russell
Bedford has invested a lot of time and money into implementing
quality control systems and raising standards across the group.
“Over a four year period, the amount of investment has got to be
well over $1 million at an international organisational level,” he
said. “The members’ costs are well over that. It’s the uncosted
time, there’s an enormous amount of review work done by member
firms.”

Goodyear admitted he initially feared the extra burden placed on
firms to improve quality control would encourage some members to
leave: “It is the biggest coordinated programme ever undertaken in
our 25 years of history – it was quite a culture shock. We’ve had
member firms on the verge of leaving but they’ve come around. None
have left.”

Goodyear explained the forum is now proving to be a driver of
growth for the network. He said: “It shows an attention to quality,
which has attracted new members because they know that we have very
up to date information on each of our member firms and they also
want to have the intrusiveness of a quality control review. We’ve
picked up more members in the US than we’ve had in the past… We
certainly have gained some European members by reason of [Forum of
Firms membership] and it has proven to be, on the membership
recruitment side, a selling point.”

Goodyear said forum membership should also help define Russell
Bedford as truly global network in the marketplace. Baker Tilly
International said accountancy groups that have joined the forum
should be defined as networks rather than associations.

Members announced

Full members: Baker Tilly International, BDO
International, Constantin Associates, Deloitte Global, Ernst &
Young Global, Grant Thornton International, HLB International,
Horwath International, INPACT Audit, KPMG International, Mazars,
PKF International, PricewaterhouseCoopers International, RSM
International Limited, Russell Bedford International, Talal
Abu-Ghazaleh International and UHY International.

Provisional members: IEC, JHI, Moore Stephens
International and Polaris International.

Arvind Hickman