Kommersant's Business Guide has some new information about auditing in Russia
Russia Blog has received another contribution from our reader Vladimir Kuznetsov, director of equity financing at the Finam Investment Company in Moscow. In this piece, Mr. Kuznetsov analyizes why Russian companies increasingly choose local, internationally affiliated accounting firms to perform their audits over the so-called "Big Four" (KPMG, Ernst & Young, Deloitte & Touche, and Price Waterhouse Coopers).
-The Editors
During my last five years working with Russian companies, one of the most delicate issues was the necessity of presenting an audit statement according to international standards. This was the major obstacle in ANY transaction, besides the usual stuff (like consolidation, both legal and financial).
This week Kommersant’s Business Guide features a “Financial Reporting” section with some nice numbers. I have written previously about EXPERT-RA ratings. Now Kommersant adds more details to the facts I reported earlier:
- Ernst & Young has 21% of the surveyed companies and is oriented towards the ones that are controlled by the government
- KPMG and Price Waterhouse Coopers like any sector - both private and state owned companies.
- Out of the 13 biggest companies in Russia – 10 use IFRS reporting, while oil, telecommunications and metallurgy companies use U.S. GAAP.
- Russian companies that are getting ready for IPOs try to shorten their preparation time for an audit opinion (e.g. Rosneft cut short the time by 40 days)
- Gradually the preferred time for releasing the annual audit opinion is shifting towards the first quarter of the year, as opposed to the 1H earlier.
Logo of DFK International
When speaking about the whole picture, auditing was the prerogative of the Big Five (later changed to the Big Four after the collapse of Arthur Anderson in 2005) accounting firms, and this was the only feasible solution for any Russian company that was involved in raising capital from foreign investors. Yes, it was a tedious task to persuade the owners to allocate funds for the audit. The big players were not very timid in their pricing. A couple of years ago, a typical big auditing company asked for about $70K -$90K to perform an annual audit that might take as long as 150-250 days. While these numbers have not drastically changed, today we do see more and more opportunities for their Russian competitors.
Today we see a number of Russian accounting companies that are members of international auditing chains (BKR-Interkom-Audit, DFK - just to name a few of them). This changes the picture drastically. These Russian accounting companies can perform a highly qualified audit for their clients in Russia, and at the same time they receive the stamp on their opinion of one of the international chains. Why is this so good?
- These Russian companies (especially the ones that have existed for a long time) have a solid background in auditing domestic companies.
- These Russian auditors do the job faster and with (in some cases) higher quality than their big peers (everyone knows here that the big accounting players assign their routine audits to the novice accountants who are less experienced, and then they just stamp their opinion on the document).
-On expenses, the Russian accountants do the job for less.
Recruitment advertisement calling for accountants to come to Moscow
In our day-to-day operations our clients find it very practical to use a Russian firm, rather then spend more money to hire one of the Big Four. I have been working for a number of years with a couple of these Russian firms (e.g. BKR-Interkom-Audit) which do an excellent job and satisfy all the international auditing standards.
My guess is that we are now witnessing a gradual shift from the Big Four foreign accounting firms to domestic auditors. As one Russian business owner recently complained to me: “Well I asked one of the big guys [to do our auditing], and we need to stand in line for about three months, pay a lot and them wait another three months for the results. This is no good.”
To read the original post at Mr. Kuznetsov's blog Equity Financing in Russia, click here.
