21st April 2022
Zoya Malik, Group Editor for the International Accounting Bulletin recently spoke to accounting C-suite and practice heads to gain their insights on what the industry can expect over the next 12-months. MGI Worldwide’s CEO, Clive Viegas Bennett, expressed his views on what 2022 has in store.
The current global situation
The world is dealing with the economic fallout from disrupted economies and trade routes, work-from-home converting to a ‘hybrid’ model, sustained supply chain disruptions, natural gas shortages and the ramifications of the international community’s withdrawal from Afghanistan and US/China disagreements on a range of issues – coupled with new concerns about a full-scale war on the Russia/Ukraine border which could draw in NATO.
It's not all doom-and-gloom though. The most onerous Covid restrictions have been lifted, global travel is opening up, there is an apparent economic resurgence in North America and Europe and, seemingly, greater global focus on climate change issues.
The impact on Audit
Due to increased scrutiny on audit quality and perceived conflicts of interest between audit and non-audit work, firms are having to develop their audit practices in terms of focus, staffing and training. Across the industry, 2022 is expected to be all about preparing their audit teams for ISA 315 Revised and the new ISQMs. Clive Viegas Bennett comments:
“Many firms in more heavily regulated jurisdictions are moving away from audit and focussing more on business advisory work. 95% of our firms’ audit work is for non-PIE clients, so it is a very different world from the big firms.”
The impact on Advisory
Regulatory pressures and commercial imperatives have driven the continued realignment of audit and advisory services, with the choice of specialisation critical. There are different paths and contributing factors towards this growth - technology is driving a digital transformation and cloud solutions, data intelligence, AI and data security are critical to this progress.
There has been a rise in cybercrime, but this has created opportunities for advisory firms to provide cyber security and forensic analysis advice. In addition, a growing focus on climate change, especially leading up to and beyond COP 26, is creating increased demand for advisory services.
Regional variation, geopolitics and regulation
Many firms report not seeing significant regional variance, but many can see differences in how specific regions are emerging from lockdown restrictions. This begs the question of how the industry can tweak their offerings to establish differentiation in various jurisdictions. In advanced economies, where firms often report they do not have the resources to take on more work, differentiation is focussed less on creating new business than on retaining and recruiting staff. Clive explains:
“Along with the need to improve margins/productivity, this also means a move away from transactional and repetitive work, better done by new technology, and into more intellectually challenging advisory work.”
What this means for Taxation
Even through COVID, the M&A market has remained buoyant so there has been high demand in tax due diligence work and M&A tax advisory. Tax structuring advice is in particular demand due to increased global expansion, changing tax laws (hyper-legislation) and BEPs/OECD initiatives. The capacity of any firm to carry out meaningful and realistic international tax planning is valued by clients.
The management of reputational risk, corporate governance, and senior executive and board-level responsibility for tax are now regarded as essential. For middle market businesses, expert external advice and support are essential in order to navigate through these ever-changing, complex areas.
Recruitment, Technology and Investment
The opportunity for tax technology investment is vast, so establishing priorities is key. Perhaps the biggest priority is to remember that people are at the heart of almost all systems and the need to keep them feeling valued, presents a tremendous challenge.
For many professional services employees, the period of remote working during the pandemic has opened up new possibilities. Many are now seeking flexible working as a permanent fixture in future roles and firms who lack flexibility when it comes to hybrid working, may struggle to attract and retain top talent.
Cyber security and cybercrime will continue to have a major impact on all industries in 2022. Organisations need to be aware of the growing risk and need to take all necessary steps to protect their infrastructure and train their people.
Cloud based services will enable the use of more benchmarking to provide added value services to clients. Some firms have started to use a range of apps to provide a more focused service to specific client groups. Of course, there are concerns about phishing, data protection, data theft and payment security but the consensus is that distributed ledger technologies, including zero-trust models, offer the prospect of a fundamental shift in the role of the auditor.
For more information contact Clive Bennett at firstname.lastname@example.org
MGI Worldwide with CPAAI, is a top 20 ranked global accounting network and association with almost 9,000 professionals, accountants and tax experts in some 400 locations in over 100 countries around the world.