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.”
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.