The imminent introduction of compulsory audit and a new stock
exchange promises a bright future for Cambodia’s accountancy
profession. David Hayes profiles one of the nation’s leading firms
and the story of a profession that, in fewer than two decades, has
rebuilt from scratch.

Devastated by the Khmer Rouge regime and decades of civil war,
Cambodia’s accountancy profession is preparing for much better
times. This year, the market is expected to witness a sudden
expansion following the introduction of statutory audits for large
companies from the year ended 31 December 2007. There are also
plans for the full adoption of international standards – fewer than
two decades after the profession reopened its doors for

New audit regulation has come into effect as Cambodia prepares to
establish its first stock exchange by the end of 2009. This is part
of a government programme to accelerate economic development and
catch up with more advanced neighbouring Southeast Asian

“Statutory audit is being introduced to [improve] financial
transparency. The Ministry of Economy and Finance is saying that
statutory audit is preparatory to establishing [the] Phnom Penh
Stock Exchange,” remarks Senaka Fernando, country director and
director of assurance services at Price¬waterhouseCoopers Cambodia
(PwC). “The Ministry announced this on 26 July 2007. When the stock
exchange is established, accounting firms will have to be

Audit criteria

Statutory audit is being introduced for certain categories of
companies, including those involved in investments approved by the
Council for Development of Cambodia, which generally are larger

Statutory audit is required for other enterprises with Ministry of
Commerce registration if the companies meet two of three criteria,
which are: their revenue for the year ended 31 December 2007 was
more than KHR3 billion ($750,000); the value of their total assets
at the end of 31 December 2007 was above KHR2 billion; or the
company employed more than 100 staff on 31 December 2007.

The government’s tax office estimates the new statutory audit
requirement will involve about 400 additional companies, which
should benefit the audit profession. Until now, only commercial
banks, microfinance institutions and qualifying investment projects
have had to undertake a statutory audit.

“The 400 new companies requiring a statutory audit can go to any of
the 15 accounting firms here. It depends on whether they want their
books audited by a Big Four firm, a mid-tier firm or a local
accounting firm,” Fernando explains.

The accounting profession is small but growing as demand for
accounting services rises each year. PwC is one of 15 firms
registered with the Kampuchea Institute of Certified Public
Accountants and Auditors (KICPAA), Cambodia’s professional body.
Ernst & Young (E&Y) and KPMG are the two other Big Four
firms registered to practice in Cambodia, while the two
international mid-tier networks with local practices are Grant
Thornton International and Morison International. “The rest of the
registered firms are local Cambodian accounting firms though some
have foreign partners and management,” Fernando observes. “These do
bookkeeping, accounting and work for small non-government

Starting from scratch

Because of its tragic recent history, Cambodia is a unique
accounting market where accounting laws, regulations and the
profession itself have gradually had to restart from scratch since
the mid-1990s. Cambodia is a developing country still traumatised
by the brutal Khmer Rouge regime from 1975 to 1979, when 1.7
million people were murdered, and by the two decades of civil war
and poverty that followed.

“Accounting staff development is an issue. The Khmer Rouge regime
murdered all professionals including accountants, doctors and
others. Considering what the country went through they have come a
long way since then,” Fernando comments.

Cambodia’s present accounting market dates back to the mid-1990s
when the United Nations took charge of ensuring national security
as the international community provided food aid along with
economic and technical support to restore civil and democratic rule
to the country.

With relatively few Cambodian accountants having survived the Khmer
Rouge years, Big Four accounting firms working with UN agencies and
other humanitarian and development agencies began to open offices
in the capital, Phnom Penh, in the mid-1990s.

The local offices supported international and domestic clients,
which soon included government ministries. The World Bank and Asian
Development Bank awarded Big Four firms consultancy and training
contracts to train a new cohort of government finance officials and
to oversee the introduction of modern government accounting

Other accounting firms then began to set up in Phnom Penh employing
foreign accountants and Cambodian accountants who began returning
home from exile. The number of Cambodian accountants also grew as
newly-qualified young accountants began to enter the

Coopers & Lybrand set up in Cambodia in August 1995 and later
bought the E&Y Cambodia practice in 2000. E&Y was the first
major international firm to open in Cambodia when it opened its
Phnom Penh practice in March 1994. Under the terms of the Coopers
& Lybrand sale, E&Y was not permitted to return to Cambodia
for five years afterwards. E&Y has since returned to Cambodia
but serves the market from its Ho Chi Minh City office in

Today, PwC is the leading accounting firm in Cambodia though
details of the firm’s revenue are not published, according to
Fernando. The firm has 92 employees, including 68 professional

“KICPAA membership fees are based on revenue. We pay the highest
fee as we lead the market,” Fernando explains. “I don’t expect the
international mid-tier market to grow here. It will be either Big
Four firms or small local firms that clients choose.”

PwC Cambodia is part of PwC’s Mekong practice which covers four of
the countries through which the Mekong River flows – Cambodia,
Thailand, Vietnam and Laos. The Mekong practice is run out of the
PwC Thailand office and was established with the trial merger of
PwC Cambodia, PwC Laos and PwC Thailand on 1 July 2006. PwC Mekong
was enlarged with the addition of PwC Vietnam a year later.

“The trial went well as Cambodia and Laos are small territories. It
was a matter of time before the PwC Mekong practice got together,
which includes all service lines,” Fernando comments. “The four
Mekong practice countries are different but our work approach is

Bread and butter

Audit is PwC Mekong’s main service line followed by advisory, which
includes transaction services such as M&A services, enterprise
risk management and performance improvement. Other service lines
offered include tax and consulting.

Fernando explains that assurance services represent about 70
percent of the fee split, while taxation and advisory work makes up
the remainder. “We have seen business grow here over the years.
Year-on-year there has been 8 percent to 10 percent growth for the
past five years,” Fernando says. “Advisory work is done by PwC
professionals from Thailand who come here on a project basis using
our local staff support because of the language requirement.”

Economic development and social stability during the past decade
has encouraged a steadily increasing number of multinational
corporations to establish a presence in Cambodia as domestic
spending grows and tourism blossoms. PwC’s client mix has grown as
multinational clients establish local operations after initially
serving Cambodia from other regional bases in Singapore and

“Our clients include a mix of global clients such as British
American Tobacco, Coca Cola, Asia-Pacific Breweries [and] tele-communications company Mobitel,” Fernando says. “Other clients
include Telekom Malaysia, the National Bank of Cambodia, power
company Électricité du Cambodge, also the World Bank, Asian
Development Bank and EU-funded projects. All the major aid donors
are here too, so our client base is a mix of commercial
enterprises, local non-government organisations funded by foreign
donors and multilateral development loan project clients.

“Inward referrals are common. These could become some of the new
statutory audit clients. There is no specific trend in new clients.
It’s a steady growth across the board in audit, tax and advisory
work. Normally new clients start with company registration then tax
advisory services. When they are up and running they go for audit.
Company registration work here usually is for a global

Led by South Korea and China, foreign direct investment in Cambodia
rose from $121 million in 2004 to $475 million in 2006, according
to data from the National Bank of Cambodia and the International
Monetary Fund. This has helped push annual GDP growth up to almost
10 percent.

Cambodia’s most important sources of foreign exchange at present
are tourism and the growing garment export industry. Most clothing
factories are locally owned. More than 260 factories have been
established so far, producing a wide range of garments for export

Potential oil and gas exports are expected to bankroll further
economic development and Phnom Penh already is beginning to
experience the rumblings of its first property boom. Cement
consumption, for example, grew more than 37 percent in 2007, double
the rate of growth recorded the previous year.

Fast paced

The development of the accountancy profession is also accelerating.
The government continues to work towards the introduction of
International Accounting Standards (IAS) although it is keen to
exercise national control over accounting policy and

PwC has been involved in the development of professional services
in Cambodia and assisted the government to prepare the Accounting
Law (2002). More recently, Fernando notes: “Cambodia adopted 15
accounting standards based on International Accounting Standards,
which were [then tailored to the Cambodian market]. The World Bank
with the Ministry of Economy and Finance came up with 15 standards
that were most relevant. They did the same to introduce ten
Cambodian audit standards based on International Standards of

“Currently if a company has a transaction and there is no Cambodian
standard… then the path we use is the latest [international] standard. That works well at the moment. Eventually Cambodia will
go to full blown IAS and IFRS, but it’s not a pressing

Since the Accounting Law came into effect in 2003, all firms need a
licence from the government and require registration with KICPAA to
operate legally. Although the number of accounting firms is
expected to grow in future, it remains to be seen how the
accounting market will develop.

“The accounting profession will expand here as the Stock Exchange
is due to be established in 2009. The government is pushing for
this and the Korean Stock Exchange is providing the technical
assistance,” Fernando says, noting that although the stock exchange
will create additional work for accounting firms, the volume of new
business generated remains to be seen.

Although it is unclear how many companies will list, work to
prepare for the Stock Exchange could begin as soon as this year.
Regardless, Cambodia’s young accounting market is poised to

Cambodian’s global path to

Cambodia does not have its own CPA qualification process. The
Kampuchea Institute of Certified Public Accountants and Auditors
(KICPAA) recognises qualifications from various foreign institutes,
including the Association of Certified Chartered Accountants (ACCA)
and bodies in Australia, New Zealand, Thailand, Hong Kong and Sri
Lanka. All Cambodian members of KICPAA have studied the ACCA

PricewaterhouseCoopers (PwC) Cambodia was the first accounting firm
to use the ACCA programme to train local staff, according to the
firm’s country director Senaka Fernando. PwC Cambodia recruits from
ten to 14 graduates a year who start training in July. After
completion of the ACCA programme, PwC Cambodia sends some staff on
overseas secondments.

“Accounting is one of the popular professions here. PwC Cambodia is
considered a training ground for accountants,” Fernando remarks.
“Staff retention is always an issue when the job market is
expanding. Staff poaching is mostly by clients and non-clients.
Losing staff overseas is mostly because of scholarships, such as
studying for masters degrees.”

Source: PricewaterhouseCoopers Cambodia