|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 years.
“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 do.”
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 penalties
“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.