Once again, the vibrant, changing and even dynamic nature of the accounting world means that there have been numerous stories in the press. Here is a selection of them.
Getting your practice online
Accountancy Age Insight allows accountants to keep up to date with the most recently added briefings to its online service. Sage is a regular contributor or whitepapers and the latest one is called: Getting your practice online: Phase 1 – Get your practice ready.
• Are you ready to adopt the ‘cloud’?
• Overcoming your fears about moving online.
• Getting to grips with new cloud accounting software.
You can access the paper here. Registration is required.
The Future of the Accounting and Legal Professions in China
This was a story posted by China Briefing, here. The accounting profession in China and, more generally, Asia, will undergo dramatic changes over the next decade as competition intensifies and business complexity increases, according to the Intuit 2013 Future of Accounting Report. More accounting or tax-related products and services will enter the market as banks, financial services companies, software and Internet firms, and even governmental bodies, innovate and develop new offerings.
According to the report over the next decade, accounting firms will need to be alert not only to competition from other accountants, but also from consulting and business advisory firms. Using the new accounting or tax-related products and services, these firms will soon be able to provide accounting-related services alongside their current services, encroaching on what has traditionally been the domain of accountants.
In summary, the Intuit 2013 Future of Accounting Report concludes that the next decade will see:
- Greater automation of low value, or manual processes;
- Greater outsourcing of bookkeeping and finance services;
- Increased complexity in business and regulation, leading to more specialization by accounting and legal professions;
- Increased collaboration among accounting and other professional services firms as a result of that specialization;
- Increased globalization, leading to more demanding compliance workloads but also increased opportunities; and
- A shift in the role of accountants from performing routine tasks into a role providing more consulting and advisory services.
Running Out of Rapport?
In another article I read in accountingTODAY, Greg Weismantel wrote that business strategy means a lot to firms nowadays. Today, growth from new clients is stagnant at best. The main initiative is to fend off the constant raiding of your customer base by smaller firms offering lower prices, or larger firms soliciting your partner base to join them and bring their clients with them.
This is a good article, well worth reading. Greg Weismantel is president of Epic Group, a management consulting firm and advisor on strategy for small and large firms and companies.
FRC guidance on Housing Associations
Julia Irvine at ICAEW reported (here) that The Financial Reporting Council has issued guidance on the audit of the UK’s 1,700 housing associations. It says that this economically important regulated sector of the UK economy has its own particular business and audit risks that auditors need to be aware of, as well as a changing regulatory environment.
The impact of welfare reform and reductions in grant funding and access to finance has persuaded many associations to diversify into more commercial activities – such as the provision of student accommodation or care homes. They have also changed their funding models, moving away from long-term bank financing to bond financing and greater use of interest rate swaps.
The new guidance, Practice Note 14, The Audit of Housing Associations in the UK, which has been prepared with the help of the four regulators, is based on the legislation and regulations in effect at 31 December 2013.
China and rotation of audit firms
Sally Percy at ICAEW (reported here) about China and the rotation of audit firm. The world’s second-largest economy is an early and rigorous adopter of mandatory auditor rotation. Will the rest of us end up learning from its example or its mistake, Sally Percy asks.
China appears to be the place where the global dominance of the Big Four has been broken. However, we may all learn from China, which adopted mandatory auditor rotation rules in 2010.
The auditing profession in China
Sally Percy writes: The Chinese private audit industry in China began in the 1920s, but large foreign firms did not arrive in the country until several decades later. The firms we now know as the Big Four entered China through Hong Kong in the 1980s and then as joint ventures with Chinese firms in 1992. This followed government reforms that opened up the domestic audit industry to foreign accountancy practices. By 2015, China is expected to have 10 “super” audit firms, 200 medium-sized firms and 7,000 small and specialised firms, according to a report by the London School of Economics. Guidelines issued by the Ministry of Finance in 2012 stated that the senior partner of a Chinese audit firm must be a Chinese national and a certified public accountant (CPA).
Structuring your practice: part 4 – the niche practice
In the final article in a series of four presented by John O’Donnell, ICAEW Practice Consultant, he explores the different ways in which you might consider structuring your practice to make it as effective as possible and achieve your objectives.
Part 1 in this series considered the solo practitioner – a practitioner operating alone, with no staff, while Part 2 considered two interesting and different models in which the practitioner might delegate and/or specialise. Part 3 explored further the concept of delegation.
Mr O’Donnell says that we have seen a variety of structures used effectively. ICAEW believe it could be particularly profitable and efficient to focus on a niche. This is a particular area where the smaller firm may prove a profitable business model in the future.
A good, practical article. You can read it here.
Changes to the directors’ report: impact on small- and medium-sized companies
This is a reminder really. Again it comes from ICAEW who seem to have been rather busy recently.
I’m sure that readers are aware of the changes to the directors’ report for listed companies but the question remains what effect they will have on small and medium-sized companies. The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 (SI 2013/1970) came into force on 01 October 2013 and apply to accounting periods ending on or after 30 September 2013.
ICAEW say that:
- The requirement to introduce a strategic report has been well publicised. For medium-sized companies this will effectively mean that the business review section of the directors’ report will now be shown as a separate strategic report. For the medium-sized company the strategic report will contain:
– a fair review of the business, including financial KPI information;
– a description of the principal risks and uncertainties facing the company.
The review should be balanced, comprehensive and commensurate with the size and complexity of the company. It appears that many software providers have not got to grips with this change yet.
- There are other changes to the directors’ report that have not been as well publicised and which remove the requirement for medium-sized companies to show the following information:
– the principal activities of the company or group;
– details of charitable donations;
– statement of policy for the payment of creditors;
– information on the purchase of own shares;
– disclosure of the difference between book value and market value of land and buildings where there is a substantial difference between the two.
- Small companies were previously also required to show details of the principal activities of the company, charitable donations and purchase of own shares. To ensure consistency with medium-sized companies, the statutory instrument removed the requirement for this information to be shown in small company directors’ reports. However, note that the requirement to show details of political donations remains.
The ICAEW briefing is here.
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