Russia’s Expert-Ural journal and analytical center held a roundtable in Ekaterinburg on April 15, 2010, focusing on the Urals’ audit service market and its new strategies in the aftermath of the financial crisis.
Regional auditors and consultancies, local branches of Russia’s so-called self-regulated organizations, as well as partners at the international Big-4, took part in the event.
Roundtable participants were presented the findings of 2009 research prepared by the Expert-Ural analytical center for the Urals and West Siberia’s auditors and consultancies. Here they are in a nutshell:
For companies covered by the research, their aggregate proceeds from audit and related consulting services rose 6% y/y to $47m. About 30% of the firms researched exited 2009 with a gain; the rest shed 20-30% off their prior turnover. It was the lowest market in years, the researchers emphasized. In the two years that preceded the market had shown 40% annual growth.
The think-tank also unveiled preliminary results of its rating among regional firms. Tyumen’s RASTAM is a reported number one in sales, followed by Nexia CIS, which is part of Group Finances.
The Ural market showed greater vibrancy than the overall national one, the researchers noted. According to the Expert RA rating agency, the aggregate revenue of Russia’s 100 largest auditors and consultancies grew a modest 2% y/y last year.
With growth in audit and consulting proceeds analyzed separately, the former revealed less energy than the latter: 3% and 6% y/y, respectively.
In 2010, two factors (outside demand fluctuations) are expected to impact the sector. The first one is a likely amendment to federal legislation on auditing; a draft has been submitted to the RF State Duma. The bill calls for a higher revenue threshold for firms required to have their books audited. Today’s legislation covers companies that generate $1.7m in revenue and about $670k in assets; the bill suggests the thresholds be raised to $13m and $5.3m, respectively. If the draft passes as is, regional auditors will lose a lot of clients.
Factor #2 is the sector’s transition to self-regulation. After January 1, 2010 auditors are no longer licensed; to do auditing business a firm must be a member of a self-regulated organization. It is an advantage compared to government regulation, but the self-regulated org concept still implies excessive centralization. There are six such organizations in Russia, and their head offices are all in Moscow.
“They don’t fully understand regional problems and are hardly ever concerned about them. Regional firms should get their home matters under control, and employing more qualified auditors and ameliorating the quality of auditing services are the ways to ensure it,” said Galina Novikova from Group Finances’ Perm branch office participating in the roundtable.
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