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August 15, 2010

Malaysian firms report improving conditions

Malaysian mid-tier firms
experienced the worst of the recession between late 2008 and
mid-2009, but conditions have returned to normal with opportunities
opening up in IPO work, consulting and other niche areas, research
has found.

 

Malaysiian miditier "At a glance" box

The major issue affecting the mid-tier
market was an overhaul of audit firm registration and oversight
requirements, which is squeezing smaller audit firms out of the
publicly-listed company market. Firms that continue to audit listed
companies will have to contend with regular inspections from a new
independent watchdog.

The study, launched last month by
International Accounting Bulletin’s sister publication
Accountancy Asia, surveyed data from 21 leading mid-tier
firms.

The largest mid-tier firm in Malaysia
is Crowe Horwath AF1018, which grew revenue 24% to MYR57.6m
($17.9m) in the year to 31 December 2009. The firm has 18 partners
and 560 staff. Baker Tilly Monteiro Heng, another market leader,
grew revenue 60% to MYR24.6m.

New opportunities

As competition intensifies, leading
mid-tier firms are starting to tender for clients that
traditionally would choose the Big Four. Such opportunism tends to
occur during recessions and offers mid-tier firms a chance to prove
their worth to new listed clients where previously the audit
committee door might have been shut.

Crowe Horwath AF1018 managing partner
Poon Yew Hoe said part of the reason for this is the Big Four have
been increasing their prices at a higher rate than the
mid-tier.

In April, an Audit Oversight Board
(AOB) was formed and charged with registering and inspecting firms
that audit publicly-listed entities. This created costly
registration requirements that made the audit of these companies
too burdensome for smaller firms, leading to consolidation.

There is now an independent body to
police audit firms required to comply with International Standard
on Quality Control 1 (ISQC1), which was introduced in 2006.

“We have started to receive calls from
clients using smaller auditors because their auditors may not want
to register themselves with the AOB due to the cost issue,” said
Baker Tilly Monteiro Heng partner Lock Peng Kuan.

Firms in Malaysia are also benefitting
because of a recent trend for Chinese companies to list on the
Malaysian Stock Exchange. Lock said in the first three months of
2010, his firm carried out as much IPO work as it did in the whole
of 2009.

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