In today’s world, globalisation is a reality to even the smallest businesses. Facing the challenges and embracing the opportunities is key to businesses’ success. This was the consensus from a European congress for SMPs in Denmark this month.
The importance of being able to offer SME clients a complete range of high quality services, through both specialising and building referral networks, was held to be key, while the question of whether audit is a suitable tool for small businesses was debated.
The congress chair, KPMG Denmark partner Henry Heiberg, illustrated the extent of globalisation for SMEs and SMPs. In the Nordic countries even the Big Four offices are SMPs – Heiberg’s KPMG office in the West of Denmark has about 45 people and many SME clients.
“One of my clients is a two-person business and all their production is in China and Korea, but all the sales are in Denmark,” Heiberg explained. “Have the accountants kept track of these developments?”
The modern SME expects the same level of knowledge and support from their SMP that larger entities get from larger practices. This includes risk management, IT and succession planning, according to Sylvie Voghel, chair of the International Federation of Accountants (IFAC) SMP Committee.
“Specialisation is imperative because if you do everything, you do nothing very well,” she said.
Rudd Wolffensperger, a member of the European Federation of Accountants’ (Fédération des Experts Comptables Européens – FEE) SME/SMP working party and a partner in a regional Dutch audit firm with two partners and five employees, agreed.
“You do not have to know everything, but you need to be able to refer,” he said. “It is vital for an accountant to be able to say ‘I don’t know the details of doing business in the Ukraine, but I know someone who does’.”
Wolffensperger said a recent Dutch study asked SMEs how they select their accountants and five main criteria arose: interpersonal relationship; price/quality ratio; reputation of the practice; availability of a network; and specialisation.
The networking between delegates looking to form referral networks was a particularly interesting element of the congress, Heiberg tells The Accountant, adding that he made a number of contacts at the event. The KPMG partner told the congress that in many ways it is harder for a Big Four SMP office to deal with the internationalisation of clients than it is for non-Big Four SMPs.
“Other SMPs can join networks of similar size practices with similar size clients, however for international work I often can’t refer to KPMG because in most countries they don’t have an SME practice. So please don’t leave me out of the networking,” he said.
The audit of SMEs was one particularly hotly-debated topic, with contrasting opinions as to whether different audit standards are needed for different size companies, or whether audit is actually a suitable tool for small companies.
Hurvé Puteaux, the France-based chief executive of accounting organisation JPA International, said there is no need for different audit standards for different size companies.
“An audit is an audit,” he said. “If you want things to be easier and easier, then one day it will be so easy that no one will need us anymore.”
In contrast, the Danish Institute of State Authorised Public Accountants (Foreningen af Statsautoriserede Revisorer – FSR) is currently in the process of preparing a draft set of simplified audit standards. The institute’s president, Kurt Gimsing, said he believes the use of the ISA framework for SME audits is overkill. He said this is not just the belief of auditors, but also of clients and the business community, and predicted that the statutory audit threshold in Denmark is likely to change considerably because political players see a very complex, one-size-fits-all structure that is used from micros up to the largest companies.
Gimsing suggested that using the review model rather than an audit was often not sufficient as it can only provide a negative conclusion. However, his compatriot, Heiberg, disagreed: “In my book, we have to stick to the conclusion that an audit is an audit and a review is a review and we should not have any ‘audit light’ as this would mean that we no longer could agree on what an audit is internationally.
“As I see it, we would end up in something that could seem like what is due practice in Denmark is different to what is due practice [in other jurisdictions]. As far as I can see, we had to find the solution for the SMEs within the framework that we know,” he said.
Heiberg said he is personally not in favour of retaining a statutory audit for all companies, regardless of size.
“I don’t think it is okay that someone has to buy audit when they don’t need it,” he said.
FEE president-elect Hans van Damme tells The Accountant he is a “happy man looking back to the conference”. The federation is considering whether to continue to hold the event on an annual basis or move to bi-annual.
“But we certainly need to continue doing events for the SME/SMP practice because it is an important part of our constituency,” van Damme says. “The beauty of such events is also getting the practitioners together – not only the acting auditors or acting accountants, but also business advisors and in certain cases entrepreneurs who are trained as auditors, but are no longer working as accountants and therefore doing different business practices.
“I think the exchange of information between those and also between the nationalities is a great benefit to a large group of our constituency.”
The event was staged by FEE and the Nordic Federation of Accountants. There were almost 300 delegates from 22 countries.