RSM International’s Turkish member firm
Kapital Karden has entered Azerbaijan to serve a growing demand for
audit services and inward flow of investment into the former Soviet

Alan Greenhalgh
Alan Greenhalgh, Kapital Karden

The firm, which already has established offices in Turkey,
including Ankara, Bursa and Istanbul, has opened an office in
Azerbaijan’s capital, Baku.

Kapital Karden head of international development Alan Greenhalgh
told the International Accounting Bulletin that Turkey has
had long and close ties with its neighbour for a number of

“Turkey is Azerbaijan’s gateway to the European market,” he
said. “The two markets are extremely close in terms of
sociocultural, political, demographic and economic ties. To develop
a cross-border extension was almost an evolutionary thing to

Another reason for the expansion is the increase in demand for
audit services in Azerbaijan. In 2009, the country is expected to
implement new audit rules that require all limited liability
companies to be audited. Noncompliance will result in large

“At present the country is still recovering from an old Soviet
style, which was just a sort of filling out forms and tax
reporting,” Greenhalgh said. “The audit profession is still quite
new there, quite inexperienced and the government has stringent
regulations on what they should be doing. This is changing but the
number of audit companies is still very small.

“The opening of our office in Azerbaijan is well timed to guide
clients through the changes being introduced next year to Azeri’s
statutory requirements that will have a significant impact on
business in the region.

“When we went to Baku and started speaking to prospective
clients, they said that they had audit on the go but it was not
being delivered quickly enough. There is such a demand that there
isn’t the supply in terms of auditors.

“There is a lot of activity in Azerbaijan with Turkish companies
in terms of infrastructure investments, energy flows through the
Baku-Tbilisi-Ceyhan pipeline and also Turkey puts in an inflow of
$1.5 billion a year in investments. So we will represent some
Turkish companies who have cross-border needs and we can also serve
them better and give a more personable service by being there.”

Established in 1996, Kapital Karden specialises in audit, tax
and accounting services. The firm recorded revenue of about $7
million in 2008. The new Baku office will initially focus on SME
audit services, in particular IFRS-related work. Partners predict
the office could generate revenue of $1.2 million in its first year
of operations.

“We want a slice of the PIE [public interest entity],”
Greenhalgh said. “Some of our smaller work focuses on Turkish GAAP
but our main work is IFRS compliance. Azerbaijan is going all the
way with IFRS, which is good news for us and also good news for
business there because they are moving to a free market economy
away from oil.”

He explains that Azerbaijan’s oil production is anticipated to
peak in 2010. Non-oil sectors are expected to develop by a gradual
shift from collateral-based lending decisions to lending decisions
based on the financial performance of the prospective borrower.

“It will be very important companies have financial statements
that are transparent and work with cash flows, etcetera, so you can
get a truer picture of the business in terms of raising capital and
operating in the banking services,” Greenhalgh said.

Greenhalgh said Kapital Karden is hoping to double the size of
its Baku office within six months. He believes the demand for
statutory audit will enable this. He also hopes to develop the firm
within the Caucasian market, with a specific focus on targeting
countries such as Georgia, Kazakhstan and Turkmenistan.

Melanie White