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October 22, 2009

Kreston International plans to become Top 10 network

Kreston International has outlined plans to become among the 10 leading accountancy networks over the next three years. The association of independent firms is the 13th largest group with combined fee income of $2.09 billion in the year to 31 December 2008.

Executive director Jon Lisby told the International Accounting Bulletin Kreston’s plan to be classified a ‘network’ is motivated by a desire to make firms more cohesive and profitable with the ultimate aim of becoming a part of the top 10.

“It’s driven by profit,” Lisby explained. “We wanted to be in a position where our members win more work, can service more economically and efficiently, and as a consequence make more profit. At the moment we don’t win enough work because of the difference in perception between an association and a network.”

Kreston plans to become a network by implementing a globally co-ordinated quality control monitoring programme and providing the option to use a common brand name to sign off assurance reports, which would satisfy the International Federation of Accountant’s definition of a ‘network’.

The group hinted at a strategic shift last month when it appointed Sue Almond, an experienced director of quality control and professional standards. Almond is Kreston’s first dedicated manager of audit quality and will roll out an inspection and review programme.

“I would say 70 percent to 80 percent of the network is using one common [audit] tool, which gives us a headstart,” she said.

Almond believes there are opportunities to improve cohesion by developing support tools for clarity ISAs and establishing group standards. She said Kreston’s independence policies were more advanced than she had expected leading into the role.

Kreston has not yet established a strategy to introduce a common brand but this is a high priority for the board.

Member firms are required to sign a new membership agreement. This binds them to the network strategy from November 17.

The cost of implementing this strategy is partly being funded by a membership fee hike of 30 percent.

Kreston’s member firm combined revenue has grown by 83 percent in the past three years. In 2008, the combined fee income grew 22 percent; 10 percent was the result of net firm additions and 12 percent was organic.

Lisby predicts this year’s revenue could flatten or fall due to the economic slowdown and some firms leaving the association because of the change in strategy.

COUNTRY SURVEY

Kreston International fee and staff data by country: 2008

Country

IAB Rank

Growth (%)

Revenue ($m)

Kreston (%)

Total staff

US

11

26

1,053

50

7,154

UK

18

8

100

5

947

Australia

16

13

31

1

326

Germany

14

7

79

4

688

China

8

25

72

3

1,654

Japan

6

4

62

3

383

The Netherlands

11

20

80

4

809

France

8

-10

170

8

1,794

Russia

7

87

39

2

595

Mexico

5

129

25

1

1,084

Overall

13

22

2,087

100

20,234

Notes: International Accounting Bulletin ranking has combined networks and associations on this occasion. Kreston % is the proportion of a nation’s revenue in relation to Kreston International’s global revenue. Source: International Accounting Bulletin

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