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February 28, 2011

Adapting to demand

The French accountancy profession is adapting to meet growing demand for advisory services, replacing traditional accountancy services. At a time when audit reforms are hot on the agenda, The Accountant uncovers the French view on the profession.

Over the past couple of years, the French accountancy profession has weathered the storm of the global recession better than some of its European counterparts. In spite of its resilience, one of the biggest problems reported last year was fee pressure stemming from clients trying to cut costs in the face of the economic crisis.

Now, as the global economy continues down the road of recovery, the picture in France is very different to a year ago and the wider economic situation is positive according to analysts. Statistics released at the start of the year reveal that France’s economy will expand 1.3% in the first half of 2011, led by household consumption and construction investment.

Last year, The Accountant reported French law makers would update ethics codes. The updated codes have relaxed independence requirements, bringing the country in line with international and European procedures.

Some of these changes to regulation have also meant French accountancy bodies are now able to provide accountancy services to individuals, not just companies and enterprises.

France has two professional accountancy bodies: Conseil supérieur de l’ordre des experts comptables (CSEOC) and Companie Nationale des Commissaires aux Comptes (CNCC), responsible for only statutory audit.

Phillipe Arrou, vice-president for international affairs at CSEOC, says changes in regulation have been positive.

“Until now, our regulation has only been concentrated on business and now the government has allowed us to work out of these limits. One such area is tax declaration,” Arrou explains.

Shift in focus

Graph showing membership of CNCC and CSOEC, 2007-2011The number of qualified members at CSOEC increased from about 18,000 to 19,097 last year, and demand for 2010 was similar to 2009 levels, according to Arrou. But now there is a crucial change in the nature of this demand.

The biggest change to the work of the institute over the course of the past year has been a shift in focus, from all traditional accounting services to concentrating more on advisory services. Promoting and developing these advisory services was also the main focus for the organisation at its congress last year.

The growth of technology and IT applications used across the accountancy space has also contributed to this shift.

“We focus on this more than providing accounting services because there is less demand for accounting services, its done mainly by machines,” Arrou says.

“We are developing a web portal for the whole profession. It is the only one and is recognised by the administration,” he adds.

The CSOEC said it has invested heavily in a web project so all accountants working in France can use the technology.

Table showing result of survey of French accounting institutes: 2011

 

EC audit reform

The French accountancy profession is, like its neighbours, eagerly awaiting the results of the European Commission (EC) consultation on audit reform. Future direction and outcomes for the profession depend on the outcome of EC Green Paper.

Arrou says the Green Paper raises so many questions before highlighting his views over changes to rules affecting market concentration.

According to Arrou, market concentration is one of the most important subject areas the EC will be tackling and regulation is the best way to do this.

In response to the EC Green Paper consultation on audit reform, mid-tier firms have on the whole backed joint audits, saying the approach has worked well in France to lower market concentration.

“If EC wants to change anything about concentration, it should be with regulation. It is the only way to achieve it, because the market and the players will never do it by themselves”, Arrou says.

But he is also sceptical about whether some of the ideas proposed in the Green Paper will ultimately be successful.

“We don’t agree with some of the proposals, specifically SMEs. We are in favour of auditing SMEs but an adapted audit and special audit I wouldn’t say simplifies an audit, because it is no longer an audit.

“The way [the auditing process] is organised in France seems to be satisfying for everyone, there is no demand for change, so we are not in favour of what the EC is proposing.

His concerns were recently highlighted at a conference organised by the EC to discuss the latest proposals in the Green Paper.

According to Arrou: “Commissioner Michel Barnier’s latest speech was in line with the Green Paper, but not at all with the responses received.”

This reveals a disparity across the board, and not just from French firms and institutes.

Phillipe Castanac expands this point further and explains that the commission must understand differences in terms of skills, audit and other services when considering reforms to the audit procedure.

He is keen to point out these elements must not be confused with one another.

“In France we have clear rules,” Castanac explains. “When you audit you need very specific skills. It is important to clearly split the assignments and vital to develop specific skills sets for each type of assignment.

“It is also a source of great added value for the client to work with professionals who are able to rely on other experts in the content of their audit assignment.”

Discussing the other proposals laid out in the Green Paper, Castanac says the international market could be more open.

He believes the more progressive the position of the market in terms of incorporating different players, the better.

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