A lobby group has pressured KPMG into ending its
affiliation with Iranian firm Bayat Rayan.
Arvind Hickman interviews industry leaders to discuss the
circumstances surrounding KPMG’s departure and the repercussions it
will have for the developing profession in the


KPMG has fled Iran amid fierce US lobby
group pressure. It is the last Big Four firm to leave the embattled
country, raising questions about the future of the Iran’s
accounting profession as well as the moral integrity of using
economic sanctions to remove an unpopular regime.

Experts, including the leader of the
International Federation of Accountants (IFAC) warn the Big Four’s
departure could stall the development of Iran’s profession. A
broader exodus of foreign companies will seriously destabilise the
country’s economy, which is already suffering chronic inflation due
to a shortage of imported goods.

Bayat Rayan, a part of the KPMG family a month
ago, believes foreign companies will still use its services as
there is little choice in the market, and the Big Four will return
to the resource rich nation once the political situation is


Lobby group pressure

KPMG’s departure was engineered by the United
Against Nuclear Iran (UANI), a coalition of lobby groups that wants
to prevent Iran from becoming a regional power with nuclear
weapons, although scratch the surface and it is clear the lobby
group has other interests, including regime change.

The lobby group dismissed concerns about Iran’s
accounting profession while lauding KPMG’s decision as “helpful to
our cause on a greater level than any company operating in

For its part, KPMG has remained largely silent
on this issue, confirming it ended its working relationship with
Bayat Rayan due to concerns raised by the UANI. KPMG’s silence is
common among accounting firms who often shy away from politically
sensitive issues.


Iran’s top 10

Bayat Rayan is a top-six domestic firm
with 55 staff that provides audit, accountancy, tax and advisory
services, primarily to Iran’s private sector.

The Iranian profession is dominated by 10 audit
firms: Audit Organization, Dayarayan, Agahan Moshar, Bayat Rayan,
Behrad Moshar, Behmand, Fater, Iran Mashhood, Rymand & Co and
Tadvin, according to Dayarayan managing partner Gholamhossein

The Accountant’s sister
publication, International Accounting Bulletin, researched
the Iranian accounting profession and found there are at least
seven global mid-tier networks that still have Iranian affiliates
(see chart below). These groups play and will continue to
play an important role in assisting their Iranian affiliates to
develop international standards and best practices.

Quote from Ali Jan, Bayat RayanDavani explains the
state-owned Audit Organization is the largest firm and audits 80%
of the audit market, including Iran’s government companies and
public institutes. The rest of the pack focuses on the private
sector. Davani estimates the total revenue generated by the audit
market is about $90m of which Audit Organization earns $60m.

It is unclear what cut Bayat Rayan takes out of
the Iranian audit market but it is significantly less than what
KPMG earns from US federal contracts each year – the Big Four firm
is reported to have earned $1.2bn in the past decade.

For this reason alone, Bayat Rayan partner Ali
Jan believes KPMG had “little choice” but to end its working

“Common sense tells me that if my interests is
somewhere else and they are going to make me subject to sanctions,
then I really need to make a decision on where I am going to lose
most if I am not following the rules,” Jan says.


No alternative

Jan does not believe the break-up will
have a major impact upon Bayat Rayan’s bottom line because a large
bulk of its business is local and there’s little alternative for
foreign companies in Iran.

“We’ve got international clients which operate
here and under law have to have their accounts audited in
accordance with the local laws,” he explains.

“Either they use us or they use another firm
like us, so really at the end of it [they shouldn’t go elsewhere] because there is no alternative. All the major international firms
have gone so there is no choice.

“One way or another we may get affected
slightly but we still have expatriate clients ringing us still
making enquiries. I do not expect a major upheaval. It all has to
be sorted out at a much higher level than KPMG, what is happening
in the world, in the UN.

“At the diplomatic level this has to be
resolved and once that’s resolved the business will follow.”


Threat to the economy

Davani is concerned that foreign firms and
companies leaving Iran will not only directly affect the local
audit market but also collapse the economy.

“It is self evident that if they comply with
the sanctions, foreign companies shall be out of Iran and the
revenue of audit firms who are engaged with foreign clients will be
reduce so much,” Davani says. 

“Even revenue of other audit firms [will
be affected] because the economy will collapse.”

Both Jan and Davani point out the Iranian
profession went through a similar exodus following the Islamic
Revolution in 1979 and recovered.

“We have been through this before, it is not
the first time and I’m sure multinationals will come here,” Jan

“Once you start working in this part of the
world, disappointment doesn’t mean much. You have to survive and
you do survive.”


Development headache

Even if firms do survive the desertion
of foreign companies, the departure of the Big Four could delay
professional development in Iran, according to one of the world’s
leading accountants.

Iranian professional accountants are trained by
professional accounting bodies and at firms like Bayat Rayan. Being
affiliated with a Big Four network allows domestic firms to tap
into vast technical resources, training programmes and global best
practices. This is particularly important for keeping up to speed
with international changes to accounting and auditing

IFAC president Robert Bunting says the Big Four
leaving any country could be “potentially devastating”,
highlighting the important role these networks play in providing
on-the-job training. Big Four networks also provide support and
resources to professional accounting bodies, such as the Iranian
Association of Certified Public Accountants.

“You are cut off from resources and you’re cut
off from colleague contacts,” Bunting says.

“There is no more inbound investment [by the
Big Four firms]. In a lot of countries the large firms and large
networks are net investors because they don’t profit at all from
being in the country, they are simply financially supporting their
office there.

“So you look at that and it is potentially
devastating to the profession. Certainly it is going to delay the
development of the profession for a long time.”Quote from Robert Bunting, International Federation of Accountants

accepts that belonging to a network has its own
benefits, “because you get the technical know how, you have access
to research, access to training and things like that which are
within that international domain”.

“But having said that, we are now back on the
same footing as all other firms operating in Iran,” he adds.

Both Jan and Davani contend that resources are
still largely available on the internet and through staff
membership of professional bodies abroad.

At Bayat Rayan, several professionals have
access to resources from the Institute of Chartered Accountants in
England and Wales, among other bodies. He hopes these connections
will help mitigate the loss of materials and support from KPMG.

Another effect KPMG’s departure could have on
Bayat Rayan is the removal of KPMG’s strict quality control
infrastructure, which polices auditor practice across the

Firms that belong to networks such as KPMG are
regularly inspected to ensure they comply with high global
standards. The loss of this oversight could eventually filter down
to audit quality if careful monitoring is not picked up


Sending a message

The UANI argues that KPMG’s departure
from the country will not devastate the domestic accounting

“I can’t imagine KPMG is the only accounting
firm left in Iran,” UANI spokesperson Kimberlyn Lipscomb says.

“It certainly sends a message to the Iranian
regime that the Big Four international accounting firms are not
willing to provide services to a brutal regime.”

Lipscomb also does not believe economic
sanctions will affect the people of Iran more so than its
government – a common criticism of economic intervention

“I don’t think it is hard to argue that what
the Iranian regime is doing to its own people is significantly more
brutal than KPMG’s decision not to operate in Iran,” she says.

Lipscomb cites South Africa as an example of
where the “divestment movement during apartheid proved to be

An example closer to Iran is the brutal UN
Security Council-imposed economic sanctions forced on Iraq between
1990 and 2003.

The United Nations Children’s Fund estimates
these sanctions were responsible for the deaths of at least half a
million children while doing little to affect the powerbase of
Saddam Hussein.

Davani questions the UANI’s motives and
believes all professions – such as accounting, lawyers and medicine
“must be [left] out of political matters”.


Profession battles on

Iran’s profession has undergone
setbacks before when global organisations have left for political
reasons and industry leaders are confident they will return when
the time is right.

Further, it’s important to note that several
mid-tier networks are active in Iran, playing an important role in
helping the local profession develop global standards. Iranian
professionals are also well educated, resourceful and often qualify
with globally recognised professional bodies.

Other organisations, such as IFAC, provide
assistance, whether this is on a formal or informal basis.

However, there is certainly the risk that a
potentially toxic political situation could spiral further out of
control and economic sanctions become much harder hitting. In
addition, the UANI’s campaign against foreign organisations could
yet threaten the Iranian operations of other international
accounting groups.

Iranian accounting firms won’t hold their
breath in the hope stability will return any time soon. But also
don’t expect this profession to stagnate or go backwards, it has
battled hardship before and will survive this latest setback.

Mid-tier firms with Iranian affiliates