annual review - Kreston International

ANNUAL REVIEW 2018-2019

Kreston International

Why Kreston

WHY KRESTON? Kreston members combine expertise with empathy better than any other professional services network. Of course we offer the very best financial advice there is – both locally and globally. But we also go beyond the traditional accountant role to mentor and advise our clients through thick and thin.

1971

125+

200+

FOUNDED

COUNTRIES

FIRMS

25,000+

12th*

$2.3bn+

PEOPLE

L ARGEST GLOBAL ACCOUNTANCY NET WORK

IN REVENUES

* Based on full network members and excludes correspondents.


CHAIRMAN’S STATEMENT

What a year it has been. While Kreston International has spread its wings with increasing confidence around the world – now with a trusted presence in 125 countries – that world has been changing at an astonishing speed.

Global shifts Brexit negotiations stagger on, the uncertainty stemming growth in the UK. The US president is busy implementing his isolationist vision, sparking fresh controversy every week. The push for Catalonian independence threatens a political crisis in Spain. Tensions are mounting in North Korea and conflict rumbles on in the Middle East. The stability of the global economy no longer feels like a given. And this is certain to have an impact on SMEs, who need expert guidance from trusted partners more than ever.

Time to innovate Following a long period of relative stagnation, the Eurozone has now returned to growth which is good news for business across all sectors.

China continues its shift away from being the manufacturer for the world towards an economy driven by the domestic consumer. Technology is changing the way we work, rest and play, with the boldest innovators capitalising on a generation that has grown up online. While political borders shift around the world, digital globalisation is flattening the playing field and granting new opportunities to SMEs. The smartest small businesses are grasping opportunities to take on industry juggernauts. As always, the most successful businesses will be the ones that embrace change rather than fear it. The ones who leverage radical new technology to drive scalability, competitiveness and growth. For Kreston, automation means streamlining administrative tasks to focus resources on the face-to-face, consultative work that our people excel at, providing our clients with the expertise to help them grow and innovate.

Chairman’s statement

Bent Kofoed, Chairman, Kreston International April 2018

The personal touch One thing that will never change is the importance of the personal touch in business. That has always been our great strength. And our decision to build our brand, Knowing you, around the unique relationships we have with clients – and each other – has borne fruit this year. With accountancy services being increasingly commoditised, clients truly value our role as a long-term trusted advisor – and a friendly voice at the end of the phone. As always, I’d like to thank staff in the International Office for their leadership and dedication this year – for making sure we bring the same mix of expertise and empathy to every assignment, and for always pushing us to be the best network we can possibly be. Trust. Responsiveness. Quality. Integrity. Collaboration. These values underpin everything we do – wherever we do it. For Kreston International and its clients, the future’s looking good.


REPORT FROM

THE CEO

Kreston International has thrived in a challenging global landscape this year. We’ve seen the network embrace our new brand, Knowing you, to forge ever-stronger personal connections and deliver razor-sharp expertise and prove that, with the right people on board, geography is no barrier to the growth of any business, big or small.

Spreading our wings I’m proud that our worldwide network now spans 200 firms and is home to over 25,000 talented employees in 125 countries. We are the 12th global accountancy network* and have grown seven per cent this year, with aggregate fees now totalling US$2.3 billion. That figure is in part thanks to impressive growth in important markets across Europe, Africa and Asia Pacific, where we continue to expand in China. In Africa, we now welcome colleagues in Congo, Cameroon, Algeria and Uganda. We’ve cemented our presence in Vietnam, Cambodia, Yemen, Gaza, Bolivia, Italy and The Philippines. None of this could have happened without the hard work of our members, regional

secretaries and the growing potency of the Kreston brand.

Brand new Indeed, our brand has played a huge role in our success this year, with colleagues demonstrating admirable commitment to the cause by embodying our new values. Knowing you has been well received by member firms, many of whom are incorporating it into their existing identities with great enthusiasm. Consistency is key and our new brand is an important investment, so we are continuing to boost internal awareness through guidance and communications that help us all to be more Kreston. We’re also helping the world to see more Kreston through quality external and internal communications such as our international website, a brand film and Klick, our collaboration portal.

Special interest Our special interest groups have been fundamental to raising the network’s profile in line with our strategy. Groups such as International Tax and Audit expedite business

Report from the CEO

Jon Lisby CEO, Kreston International April 2018

development and encourage crucial referral opportunities. Through regular meetings and communications, they provide an excellent way for members to work collaboratively and absorb the kind of specialist regional expertise that clients love Kreston for. We encourage everyone to get involved with these groups where they can.

Regulatory pressure Regulatory shifts continue to put pressure on our industry, while also throwing up opportunities for the network. Audit quality is a major focus for regulators and, in the coming years, pressure on firms to harness technology to deliver high-quality audits is set to grow. As well as ensuring compliance with rising auditing standards, we will be challenged to get client buy-in, manage data security and ensure systems and processes are up to date. The steady rise of Blockchain, may transform the market for assurance services. In many markets the statutory audit requirement is reducing; this, combined with technology changes, means a shift for firms towards advisory services.


Report from the CEO

Leaders of tomorrow We don't take it for granted that Kreston will continue the current upward curve; we know our future success lies in the hands of the next generation. That’s why we’re actively planning for leadership succession. Last year we held our first Future Leaders Conference in Berlin, which aimed to give our bright young colleagues the skills they need to head up firms, forge international connections and drive business expansion in the decades to come. The conference was both challenging and fun; I was genuinely inspired by the fresh thinking and talent in the room. We hope to make it an annual event.

intelligence and Blockchain are transforming life and business, looking at how we can help member firms and their clients innovate and profit. At the end of another strong year, all that remains is for me to thank every single one of Kreston’s people for their hard work and belief in the network – and for the unique personal qualities each of them brings to the table. * Ranking is based on full network members and excludes correspondents.

Future focus At our 2017 World Conference we explored the future of work more broadly. We explored the many ways smart leaders can keep ahead of change by building and adapting a future-focused skill set. We also gained a fascinating insight into the young millennial workforce of today and learned the importance of integrating these digital natives into the business. I was delighted that so many of our members took the opportunity to travel to such a fascinating country as Cambodia for the event. We’ll take this a step further this year – the theme for the 2018 World Conference is Winning the Revolution. It will focus on the way technologies such as artificial

“I’m proud that our worldwide network now spans 200 firms and is home to over 25,000 talented employees.”


Our Services

Kreston members act as trusted, long-term counsellors, guiding individuals and their organisations through professional challenges to enable them to achieve both business and personal goals. Offering quality advice across all sectors our services include: • 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

OUR SERVICES


Aggregate fees

2,261 2,200

2,105 2,035 2,000

1,965 2,045 1,945

1,800

1,673

1,734

1,758

1,600

1,642

1,400

1,320 1,200

1000

1,061 2006

2007

2008

2009

2010

AGGREGATE FEES US$M

2011

2012

2013

2014

2015

2016

2017


Global resource of

OVER 25,000 PROFESSIONAL

and support staff:

Europe

8,292 North America

Asia Pacific

4,083

9,592 Middle East

Africa

1,154 Latin America

1,793

614

Our People


LATIN AMERICA Argentina Bolivia Brazil Cayman Islands Chile Colombia Costa Rica Dominican Republic Ecuador El Salvador Guadeloupe Guatemala Honduras Martinique Mexico Nicaragua Panama Paraguay Peru Puerto Rico Uruguay Venezuela

NORTH AMERICA

Our Coverage

EUROPE Albania Andorra Austria Belarus Belgium Bulgaria Croatia Cyprus Czech Republic Denmark Estonia France Georgia Germany Greece Hungary Ireland Isle of Man Italy Jersey Liechtenstein Lithuania Luxembourg Malta Netherlands

British Virgin Islands Canada USA

OUR COVERAGE

Norway Poland Portugal Romania Russia Serbia Spain Sweden Switzerland Turkey Ukraine United Kingdom

MIDDLE EAST Israel Jordan Kuwait Lebanon Oman Palestine Qatar Saudi Arabia United Arab Emirates

AFRICA Algeria Benin Burkina Faso Burundi Cameroon Chad Congo Egypt Ethiopia Gabon Ghana Ivory Coast Kenya La Réunion Mali Mauritania Mauritius Morocco Niger Nigeria Rwanda Senegal Seychelles South Africa Sudan Tanzania Togo Tunisia Uganda

ASIA PACIFIC Armenia Australia Azerbaijan Bangladesh Cambodia China Hong Kong India Indonesia Japan Kazakhstan Korea Kyrgyzstan Malaysia New Zealand Pakistan Philippines Singapore Sri Lanka Taiwan Tajikistan Thailand Uzbekistan Vietnam Yemen


Knowing you. stories

GOING THE EXTRA MILE Collaboration is one of our great strengths and our ability to refer clients to trusted colleagues in other parts of the world is just one of the reasons clients work with us. So, it’s important that we make the process as seamless – and enjoyable – as possible. That means making sure work is placed with the right people who have the right knowledge and expertise. We go above and beyond for clients who have big ambitions – with a global resource of quality-assured accounting firms that share a common culture and values. Our Knowing you. stories here reflect several situations where members have gone that extra mile resulting in great outcomes for both clients and other member firms.

Transatlantic trust “We regularly work with Kreston firms in the US, and we value those relationships very highly. So when a major acquisition opportunity came up with a Dutch firm, we turned to our friends at Kreston for a recommendation. In partnership, CBIZ and Kreston Grip undertook due diligence into quality of earnings. The way they worked together gave us ample comfort that all major risks were considered and that we were armed with the critical facts upon which to negotiate the final purchase price. It’s great to know we can expand confidently into Europe with Kreston at our side.” Dan Fraser, Chief Accounting Officer, GTT Communications Inc.


Knowing you. stories

Connecting across continents

Second to none

“The work that Rock-It Cargo does is often complex and always time-critical. When we were looking to expand into Europe, we turned to a familiar face for guidance in Debbie Nager. She immediately picked up the phone to Andrew Griggs, a UK colleague she trusted implicitly to handle Rock-It’s business. Andrew made sure distance and time difference were never a barrier.

“There are lots of benefits to being part of the Kreston network, but a big one for me is the opportunity employees have to build our experience across different cultures. It means each of us has a global outlook that clients really value.

For many years, we have relied upon the Kreston network as trusted advisors. Kreston member firms specialise in responding rapidly to clients’ needs and we will continue to rely upon their advice in our global endeavours.” Gary Yost, Controller, Rock-It Cargo

The team at Alex Picot made me feel right at home when I joined them for a secondment in Jersey. It was a fantastic chance to improve my English and absorb a new culture while gaining crucial offshore trust company experience. I learned so much about auditing investment structures, local trading and financial services businesses. And I had a lot of fun – watching colleagues run the Jersey marathon, experiencing Guy Fawkes Night and at many after work social events. I was delighted when my secondment was extended.” Linda Verweij, Van Herwijnen Kreston


The Power of the Brand

THE POWER OF THE BRAND The Kreston network is now in its 47th year of operation and the Kreston brand is a promise of our global service offering which encapsulates the networks engrained value of trust and its promise to deliver the highest quality of technical skills to all clients. The brand provides assurance and creates a compelling impression in the minds of our clients, prospective clients, introducers and our staff. Momentum continues to build and with over 70 branded firms in 55 countries, we are making great progress towards our goal of uniting behind a strong cohesive brand. Our members, branded and unbranded, continue to demonstrate commitment to the brand by embodying our new internal values and our Knowing you. strategy has been well received by our firms, with many beginning the transition to incorporate it into their existing identities. Consistency is key and here are several examples of how some of our firms are investing in and making the transition to, our new brand platform. SEE MORE KRESTON – BE MORE KRESTON.

Our network in Spain, Kreston Iberaudit, completed the transition to full Kreston branding in 2017 after adopting all elements of the brand platform portfolio. Completely embracing the Kreston name, they say “We want to be More Kreston, Knowing you. is the essence of what makes us unique: the combination of expertise and empathy that underpins the relationships Kreston members have with clients – and with one another”.

Empathy


The Power of the Brand

Knowing you. We provide a full range of accountancy, business advisory and financial services to dynamic businesses, not for profit organisations, private individuals and families. We help you make confident decisions about the future.

Kreston BSG, a member of Kreston in Mexico, continues to help raise Kreston’s profile in the region, having adopted all elements of Knowing you. into their brand strategy. The use of branded material to date is in line with that of the global network and their values, including vision, competence, honesty and teamwork; closely align with those that are so important to Kreston, assuring clients and members alike of a personal and quality service.

Teamwork

A leading member of Kreston International for 25 years, Kreston Reeves was the first UK Kreston member firm, alongside James Cowper Kreston, to incorporate ‘Kreston’ into their respective names in 2015. Since then, Kreston Reeves has continued to move towards being More Kreston. In 2017, the firm adopted Kreston’s Knowing you. tagline across Marketing materials as well as the ‘Knowing you." phraseology in the firm’s proposition, design elements and colour palette. For all your business, tax and wealth needs.

Call: +44 (0)330 124 1399 Email: [email protected] Visit: www.krestonreeves.com

Knowing you.

Kreston International Quality

Andrew Collier Director of Quality and Professional Standards April 2018

QUALITY STANDARDS

QUALITY MONITORING

Kreston is a global network of independent accounting firms and this allows our members to share resources, knowledge and skills. We know that our members maintain and develop quality practices so they 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 and financial reporting, training, 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: • 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

“…this allows our members to share resources, knowledge and skills”

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.

Working together, Succeeding together

Kreston. Knowing you.


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 (the IESBA 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 IESBA 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 to carry out targeted independence and conflict of interest checks. The effectiveness of the Kreston International independence policies and procedures is reviewed on an annual basis.

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.


Transparency

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. The Directors act in the interest of the member firms and the network as a whole. 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 General Meetings or, if a poll is called, votes are allocated by size of firm.

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 will, in some cases, enter into relationships with firms referred to as "Kreston Alliance Members" to perform certain services on behalf of member firms' clients. Kreston Alliance Members are not member firms of Kreston and are not subject to the globally directed quality control review programme. Kreston Alliance Members are not permitted to use the Kreston name. For the purposes of the IESBA Code of Ethics, Kreston Alliance Members are not considered to be part of the Kreston International Network.


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 protected]

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