PKF SA network expands national auditing footprint

SOUTH Africa’s auditing firms are preparing for “what promises to be a number of years of profound change in the audit profession”, says PKF South Africa network chief executive officer Kevin Gertenbach.

He says part of PKF’s preparation was building capacity.

It has recently completed a process of admitting new member offices – with the latest being Johannesburg-based audit and accounting firm Octagon’s joining the PKF South Africa network, to round off the latter’s national footprint.

The strategy is to find independent firms in good standing in each of SA’s major economic hubs. The reinstatement of a Johannesburg North office means the firm is now represented in every major economic centre in SA, he says.

“The entire audit profession is positioning for change, with the advent of regulations such as audit rotation, as well as issues around the integrity of the entire audit profession and the function of annual audits.

“This creates a lot of opportunity for a firm such as ours to acquire new clients, provided we build the capacity to take over audits being rotated.

“There are companies which have had the same audit firm for decades, and will be anxious to find a comparable audit firm with the technical capacity to take over an audit without a prolonged learning curve. The next few years will be highly disruptive to the profession as audit methodologies will be required to become more predictive and sophisticated. I’m positive for the future, but concerned at the imminent effects that will be produced by this shake-up,” he said.

It was for this reason that PKF admitted as its latest member firm Octagon Chartered Accountants, Gertenbach says.

The reinstatement of the Johannesburg, Pretoria and Cape Town offices consolidates PKF’s position as the eighth-largest audit and accounting network in South Africa, returning it to its position before the network’s shake-up of four years ago, but well ahead of that level in terms of revenue.

Managing partner of the rebranded PKF Octagon, Clifford Livingstone, says the firm will retain its independence and the primary change will be in its adoption of the PKF brand as well as becoming part of a highly respected international network, with technical and training expertise.

Gertenbach says the network has been in no hurry to re-establish its full national footprint – rather ensuring it finds new offices that closely match its needs.

These include: alignment with the future direction of auditing globally, such as audit rotation; and the imperative to retain high levels of audit quality.

“Our need was for a firm with a young, energetic and entrepreneurial culture, as well as a good reputation in its market, which we found in Octagon.

“Octagon values its independence, and fortunately for us realised more recently the need for an international footprint to more appropriately service a client base which was starting to expand offshore.”

Livingstone says: “Octagon clients will henceforth benefit from us being part of an international network which boasts the same quality of service throughout the more than 400 offices in the PKF network – and that was the primary motivation for our joining PKF.

“Many of our clients require guidance in foreign jurisdictions, and we are now able to refer them to fellow firms in the confidence they will be serviced as professionally abroad as they are at home in South Africa.”

It simultaneously gives the firm greater credibility and presence in the recruitment market, where candidates who value the opportunity to be seconded to offices around the world have generally been drawn to one of the Big Four audit firms.

Intra-group work referrals are also expected to make a meaningful difference to Octagon’s total revenue over the coming years.

Livingstone says that in a digital, globalised world, firms in high base-cost developed countries see the value of referring certain work to a country such as South Africa to take advantage of the favourable exchange rate – as has already occurred in the call centre industry. PKF South Africa project leader for memberships, Butch Abbott, says the discussions had taken nine months.

“The PKF South Africa network operates in the mid-sized space, and the other three contenders in this mid-market were all national players. We needed a presence in Johannesburg, and would have had to build an office from scratch had Octagon not joined our network.

“We have a unique structure, which is a credible alternative to the Big Four, where all the firms have total independence but work together to become a national practice – that is, a network,” says Abbott.

Gertenbach adds that to be relevant in the South African market, PKF needed to have a Johannesburg office with sufficient resources to be a presence, hence Octagon’s recent expansion.

“In terms of quality, they have the right technical and tax professionals, as well as a wide, diversified client base of largely self-made entrepreneurs.

Octagon will give the PKF network an edge in our industry, in that there is a vast amount of intellectual capital within Octagon.

“Many chartered accountants want to be in our sort of business. We are an attractive proposition and are able to deal with the new regulatory environment,” says Gertenbach