ANNUAL REVIEW 2013-2014
I am delighted to have been selected to serve as Kreston’s new Chairman; only the fourth in our 42 year history. As a Frenchman, my appointment further evidences the truly international nature of our network, with my predecessors having been drawn from Germany (Gabriel Brösztl, Kreston’s founder 1971-2000), USA (Ned Futter, 2000-2005) and the UK (Clive Stevens, 2005-2012). This Annual Review provides the perfect opportunity to thank Clive. The network’s advancement over the past seven years is testimony to his leadership and I would like to highlight three significant achievements in particular:-
Franck Parker, Chairman Kreston International March 2013
“Our focus now is for the future”.
• Growth - Kreston has doubled in size in terms of both aggregate fee revenues and the volume of international referral business; • Culture – our structure progressed from a referral association to a fully cohesive network; and • Quality – we have embedded a coordinated quality monitoring and inspection system to underpin our global procedures. These achievements gained recognition within the global accounting profession last year with the International Accounting Bulletin’s inaugural award “Rising Star Network”. It is particularly pleasing that Kreston has been shortlisted to retain this Award for 2013. Our focus now is for the future. The marketplace is set to remain extremely difficult in the developed
economies and we anticipate that many clients will struggle or experience very slow or little growth. Whilst growth rates in North America and Europe are expected to recover after 2013 from the current almost flat line levels, the long-term global slowdown is projected to continue for a further decade as the emerging economies of China, India, Brazil and others move from the fast catch up growth and high investment of recent years to more balanced economies with lower and more sustainable growth rates. The accounting profession will similarly find conditions tough with growth hard to achieve other than through mergers and acquisitions and with sustained pressure on fees and margins. Alongside these market conditions, we will undoubtedly face having to operate under increasing global regulation. To meet these challenges, the Kreston Board has recognised the need to renew the vision for the network and the plans to further build our global business. The foundation of this strategy remains the commitment to the highest standards of quality and professional ethics, together with the key targets of additional strengthening in terms of capability, resource and geographical coverage, coupled with a broadening of international business development initiatives particularly in our niche market sectors. I look forward to 2013/14 and am confident that Kreston can sustain the current momentum of success.
Report from the CEO
Jon Lisby, Chief Executive Officer Kreston International March 2013
Report from the CEO
Strong performance in a tough market place I am delighted to report that 2012 saw Kreston progress to 13th in the global rankings, achieving a 12% increase in aggregate fee revenues to US$1,965m (2011 US$1,757m) with total staff numbers rising by 10% to 21,000. Our firms have continued to perform well in a global economy that has still to shake off the fallout from the crisis of 2008-2009. The network has now grown every year since the crisis and our exceptional performance in this year’s rankings has particularly benefited from a robust member recruitment programme, coupled with significant organic growth achieved by Kreston member firms in the Latin America and Asia Pacific regions, particularly Kreston China. We were pleased to welcome new member firms in Belgium, British Virgin Islands, Burundi, Canada, China, Ecuador, Georgia, Germany, India, Japan, Netherlands, Nicaragua, Nigeria, Peru, Poland, Puerto Rico, Qatar, Rwanda, Scotland and South Africa.
“A brand is more than a logo – it’s about shared values, personality and behaviours”.
New brand ...…..but no change in Kreston’s personality and purpose 2013 will see the refreshing of the network’s brand, but whilst our appearance may have been updated, there will be no change in Kreston’s traditional culture and values.
Report from the CEO
The new logo underlines what the Kreston brand stands for. The strength at the logo’s centre is created from convergence and is a visual representation of the power of Kreston’s cohesive international teamwork. But a brand is more than a logo – it’s about shared values, personality and behaviours. Beyond assured quality and experience, our clients enjoy the unique synergy that stems from the trusted relationships Kreston members have created globally and which support the consistent delivery of exceptional international service.
The future of audit and international taxation The debate around the role and responsibilities of the auditor, together with the structure of the audit market, continued throughout 2012. Despite two years having passed since the original Green Paper was issued by the European Commissioner, Michel Barnier, there is still little clarity over the changes that will be implemented in Europe. In addition to potential changes in the market, regulators in a number of territories are challenging the quality of work performed by auditors. Main concerns are the application of professional scepticism and the audit of key fair value estimates, such as goodwill and financial instruments. Kreston continues to be actively involved in the debate on the development of the audit profession, both by
submitting comments on proposals and through our members holding influential positions within the professional bodies. The role of the profession in tax planning has also come under criticism from politicians as governments seek to protect their tax base in this period of planned austerity. There is a natural element of competition at a national level as governments seek to attract inward investment and, therefore, it is understandable that businesses will look to arrange their global activities in the most tax efficient manner possible to maximise returns and the resources they can retain for future investment. In all professional areas, Kreston members comply with the highest ethical, independence and quality standards. We also invest in centralised training sessions for member firms to ensure that partners and staff are kept up to date with the latest technical developments and deliver consistency when serving clients. An effective professional services market can play an important role in enabling business growth; vital for employment prospects and economic growth on which many countries are dependent. Governments and regulators need to be careful that their actions do not unnecessarily hamper business activity.
Recruitment remains a priority Last year’s recruitment programme saw the number of countries in which Kreston is represented rise to 104. Whilst we have excellent coverage in the majority of the major markets, there remains a number of locations where we are keen to identify suitable firms to represent our interests, or further strengthen our existing capabilities. We anticipate that 2013/14 will see additional capacity being added in North and Latin America, Eastern Europe, China, India, and East, Central and Southern Africa. Our continued success stems from the hard work and commitment of everyone in Kreston, and I should particularly like to thank the Chairman, the Kreston International Board, the Regional Secretaries, those that contribute to the development of our service line and industry sector groups and finally to the International Office Staff.
12% growth achieved this year
Aggregate fees and growth
Aggregate fees and growth
Aggregate fees US$m 1,965
1,800 1,758 1,673 1,600
“Like Kreston International, Hull Speed Associates works with clients to help make expanding abroad uncomplicated and manageable. We provide on-going comprehensive back office and day-to-day operational services to international subsidiaries anywhere in the world.
Hull Speed looks forward to increasing its global connections with Kreston.” William K. Hite CEO & Founder, Hull Speed Associates GmbH, Boston, USA and Holzkirchen, Germany Jon Lisby, Kreston’s CEO comments:
We appreciate the value of operating on a truly local level with local experts, and have been delighted to engage Kreston members across the world whenever assistance is required leveraging their expertise, experience and networks. To date we are working with Kreston in The Netherlands, Spain, Brazil, and Sweden. Every Kreston member we have worked with has been incredibly responsive and delivered precisely what our clients required. There is certainly truth in the Kreston strapline –
“People do business with people they know, like and trust”.
“We have enjoyed working with Bill and his team to support his clients’ international needs. International success is going to be essential for a growing percentage of future business, and having local experts available to deal with local laws and customs provides enormous value. Bill and I share a passion for sailing and I really appreciate his choice of company name - the old nautical term ‘hull speed’ refers to ‘speed limit’ for a sailing boat’s design. Reaching or exceeding hull speed means even smoother sailing and Bill’s company “strives to provide smooth sailing when navigating through the waters of international expansion”.
“We engaged the Kreston network to assist with the acquisition of our operation in Turkey, now renamed Hawle Özkan. The Kreston firms assisted us in a really efficient and professional manner and created solutions to overcome the problems we faced. The Kreston team’s execution of the project was remarkable” Dr. Christian Reisinger CEO, Hawle Holding GmbH The Hawle Group is a long established family owned business and one of the European leaders in the supply of valves and fittings for the water, gas and waste water industry. The Group is headquartered in Austria with subsidiaries in Bulgaria, Poland, Russia, Slovakia, Czech Republic, Turkey and United Arab Emirates. Associate companies operate in Germany, Romania, Switzerland and USA.
"Schölly is headquartered in Germany with subsidiaries operating in US, Brazil, Bulgaria, China, Hong Kong, India and Malaysia. We have engaged Kreston to prepare our consolidated financial statements for many years now and the work is excellently co-ordinated. We have total confidence in the Kreston partners and the quality and reliability of their work. Our international subsidiaries enjoy the benefit of Kreston’s local knowledge which delivers outstanding cohesion to the overall project”. Mirko Beiser Chief Financial Officer Schölly Fiberoptic GmbH Since its establishment in 1973, Schölly has evolved from a single-product manufacturer to a vendor of highly sophisticated visualization systems for both medical and industrial applications. Today more than 500 employees work in 11 locations in 8 countries for the Schölly group. All products made by Schölly are targeted at making concealed structures visible and accessible for non-destructive/minimal invasive treatment, using technologies such as micro-optics, fiberoptics and electronics.
“Seamless service delivery from the Kreston member firms in Australia, UK and in Qatar supported our company’s expansion into Europe and The Middle East” Arnold E Dix Director, Alarp Pty Ltd. ALARP is an assembly of the most highly experienced, respected and awarded Tunneling, Transport and special purpose Building risk and fire life safety professionals in the World. With operations in Hong Kong, Doha, London, New York and Sydney, ALARP can advise and support leaders, decision makers, governments, institutions and the private sector with their most challenging projects. ALARP - “We do”.
“Every Kreston member we have worked with has been incredibly responsive and has delivered precisely what our clients required”
Andrew Collier Director of Quality and Professional Standards
Kreston is a global network of independent firms and this allows our members to share resources, knowledge and skills. We know that quality is essential in meeting our client service goals and all our member firms are fully supported in maintaining and developing quality practices that mean members can deliver services to a consistently excellent standard both internationally and locally. Kreston International also provides resources to help member firms maintain and develop quality practices. These include audit training and support tools and an intranet based library of information and guidance.
As part of the admission process for new member firms a detailed risk management and due diligence review is undertaken before membership is confirmed.
Kreston International member firms commit to compliance with the professional standards appropriate in their respective countries and to adhere to the following international standards:
“…quality is essential in meeting our client service goals”
• Code of Ethics issued by the International Ethics Standards Board for Accountants • International Standards on Quality Control • International Standards on auditing for the conduct of transnational audits
Each of our member firms is reviewed at least every five years (with all firms that conduct transnational audits reviewed at least every three) by suitably qualified, independent partners and managers from other member firms, under the direction of the Director of Quality and Professional Standards. This is part of a globally co-ordinated quality monitoring and review programme and the process involves a comprehensive evaluation of the member firm’s policies and procedures as well as a review of working papers and files and interviews with key personnel. This review is followed by the agreement of an action plan, which is then continuously monitored. The Quality Review programme is overseen by a committee of senior partners from member firms which considers the findings from reviews and considers whether any changes are needed to Kreston International’s policies and procedures. A summary of the key findings from all reviews together with any required actions is delivered to all member firms on an annual basis.
Ethics, Independence and Objectivity
Ethics, Independence and Objectivity Kreston International member firms commit to adhere, as a minimum, to the ethical requirements of the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants of the International Federation of Accountants (the IFAC Code of Ethics). Member firms are also bound by their national standards on independence and ethics, some of which may exceed the requirements of the IFAC Code. Member firms commit to the operation of policies to safeguard independence including the review of a global register of public interest entities and where appropriate carrying out targeted independence and conflict of interest checks.
Forum of Firms Kreston International is a full member of the Forum of Firms. The Forum is an association of international audit networks, its goal being to promote consistent and high quality standards of financial reporting and auditing practices worldwide. The Forum of Firms is increasingly recognised by regulators and global organisations as a kite-mark for audit quality. In order to achieve full membership status, Kreston International had to commit to meet the Forum’s membership obligations, which require members to: • Maintain appropriate quality control standards in accordance with International Standards on Quality Control issued by the International
Auditing and Assurance Standards Board (IAASB) in addition to relevant national quality control standards and conduct, to the extent not prohibited by national regulation, regular globally coordinated internal quality assurance reviews; • Have policies and methodologies for the conduct of transnational audits that are based, to the extent practicable, on ISAs issued by the IAASB; and • Have policies and methodologies that conform to the International Ethics Standards Board for Accountants’ (IESBA) Code of Ethics for Professional Accountants and national codes of ethics.
Governance The Kreston network is governed by a Board of twelve directors who are elected by the membership to serve for terms of two years. Ten of the directors are elected on a regional basis and two by the global membership. The Board selects the Kreston Chairman to serve for a period of three years. These Board members, all of whom are active senior
professionals, approve all strategy, budgetary and membership changes. They also appoint the Chief Executive Officer, who, together with the Director of Quality and Professional Standards and the International Office team implement the global strategy. Each member firm is entitled to one vote at the Annual General Meeting
Legal Structure and Ownership Kreston International (Kreston) is a global network of accounting firms that provide independent professional services to clients. Each firm is a member of Kreston International Limited, a UK company limited by guarantee which provides no services to the clients of its members and has no liability for the acts and omissions of any member
firm. Members of Kreston are separate legal entities and, as such, have no liability for the acts and omissions of any other member firm. Kreston member firms are each responsible for the design, implementation and monitoring of the quality and ethical standards that apply to the provision of services to clients.
Kreston International members offer partner led advisory and compliance services covering: • Statutory audit and attest services • Tax efficient structuring and compliance – both corporate and personal • Consultancy • Cross border acquisitions and due diligence for both purchaser and vendor • Corporate recovery and restructuring • Global indirect taxes and customs duties • Forensic accounting, valuations and litigation support • Transfer pricing • International fund raising, initial public offerings, venture capital, private equity • Compliance with International Financial Reporting Standards and US GAAP • Risk management and internal auditing services • International business planning, strategy, budgets and forecasts • Global technology and software selection services • Multinational corporate and employment law • International Wealth and Fiduciary Services • Outsourcing of accounting, payroll, company secretarial and other functions
Global resource of over 21,000 professional and support staff:
7,075 North America
5,326 Middle East
490 Asia Pacific Africa
Contact Us: For a confidential initial consultation without obligation, please contact any Kreston International member, who will be pleased to listen to your requirements and explain how the members can be of service, both locally and internationally. Alternatively, please contact: Jon Lisby Chief Executive Officer Kreston International T +44(0)1245 449266 E email@example.com
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A global network of independent accounting firms