Industry news from Germany and France
In the latest edition of the IAB, members Jan Schmeisky, partner at MGI Worldwide member firm Menold Bezler, Germany, and Chloe Marques, Partner at FCN, France join the discussion on the current state of the accounting industry in their local markets.
Following the Wirecard scandal, the German government enacted the Financial Market Integrity Strengthening Act (FISG) to enhance auditor independence. However, as Jan points out, the increased regulation has led to a stark reality where the demand for auditing services far exceeds the available supply.
"It’s not just us - our colleagues at medium-sized auditing firms are also having to turn down orders. We have massive worries about finding qualified and motivated young talent. In particular, clients looking for short-term inquiries, large and complex clients, and clients in the public sector must increasingly expect that they will receive few offers or, for example, that the audit will be significantly more expensive."
The article goes on to underscore the challenges faced by small and medium-sized auditing firms, which are compelled to withdraw from capital market-oriented audits due to heightened regulation and increased costs under the FISG. The skills shortage exacerbates these issues, making it increasingly challenging for firms to secure qualified professionals. Despite these challenges, the industry has witnessed substantial fee revenue growth, driven by the scarcity of skilled personnel.
Navigating the aftermath of the pandemic and the energy crisis, French accounting firms have demonstrated resilience, adapting to challenges like a skills shortage and inflation with the aid of government spending.
Chloé offers insights into the changing landscape, particularly with the introduction of new legislation such as the EU Corporate Sustainability Reporting Directive (CSRD), pension reform, and the transition to electronic invoicing.
“Awareness of the growing importance of non-financial indicators is gradually pushing companies to take an interest in these issues. Also, most of the companies that are expected to comply with CSRD will ask their suppliers and sub-contractors (often much smaller businesses) to meet certain ESG requirements. This will give to the entire accounting profession an opportunity to develop new services regarding ESG.”
The article also highlights the surge in demand for advice on retirement and business transfers, driven by the recent pension reform and the delayed introduction of electronic invoicing. Despite challenges in recruiting talent and fee pressures, French accounting professionals are aiming to provide more value-added services, particularly through digitalization, to differentiate themselves in a competitive market. Despite challenges, French firms express confidence in continued business success in 2024.
To read the full article in the November edition of the IAB, members can click here (login to the MGI Worldwide member portal will be required).