Discussing the practice with the Institute’s Small and Medium Practitioners Committee
The accountancy profession is changing, a fact that is generally agreed upon and acknowledged by all. Undoubtedly this change is affecting all accountants working within their different roles as accountants or auditors, in public or private practice, regardless of the size of the entity within which they work. In this article the technical team sought the views and discussed some of these changes with the members of the Institute’s Small and Medium Practitioners (SMP) committee; what is their major concern, how they plan to address these changes, and how these changes are affecting their work-life balance.
Initially the members of the SMP Committee were asked to rank a list of some issues that sole practitioners and small firms are encountering in current times. It is interesting to note that replies received were quite varied, nonetheless ultimately results indicated that their topmost concern was attracting and retaining qualified staff, followed by workload compression and keeping up with changes and laws and regulations. Attracting new clients and succession planning ranked equally in the last position, as follows:
Following the chart above, the members of the SMP Committee were asked a number of questions with reference to the management of their practice in the current working environment.
Q. Do you believe that these issues are restricted to small and medium practitioners, or are the issues faced by the profession as a whole? Why?
A. Most of the respondents feel that the issues identified above are faced by most professionals in public practice, since they largely emanate from circumstances beyond the control of individual practitioners. On the other hand a few respondents feel that larger firms are better equipped to cope with certain issues, such as attracting and retaining staff and increase in the complexity of laws and regulations. They added that this is due to the fact that larger firms have more resources, and possibly also have the support of a larger multinational network. Interestingly one of the respondents replied that over the years he managed to improve the issue of seasonality, by planning adequately beforehand and occasionally asking his clients to change their financial year end. Noting that this is perhaps not as easy in the case of bigger firms with larger and more demanding clients. One of the respondents also expressed his concern with respect to succession planning, stating that due to the small size of the company it is difficult to find someone who is ready to take over the management of the practice, contrary to larger firms which are better equipped in ensuring adequate succession of the company.
Q. In what ways are you planning to address the highest ranking issue identified?
A. The highest ranking issue to SMPs is attracting and retaining qualified staff, followed by seasonality/ workload compression. The latter perhaps also linked to the need for more staff to cater for increased workload during certain times of the year. This invariably led to the respondents discussing the various ways with which they plan to address their staff related issues. Their replies included: introducing better IT systems, recruiting foreign employees, engaging agencies to assist in the recruitment, employing a human resource manager, organising team building events, introducing flexi hours and the possibility of working from home.
Q. Which legislative or regulatory change do you think will affect your practice most during 2018? What are your plans to prepare yourself for this change?
A. Presently the main concern to SMPs interviewed is the Fourth EU Anti Money Laundering Directive, followed by the new General Data Protection Regulation (GPDR). Other legislative or regulatory changes of concern are new EU directives and changes to International Financial Reporting Standards in general. One respondent also replied that they are also monitoring the transposition of the EU’s Anti-Tax Avoidance Directives into local tax laws. The approach taken by the SMPs to address these changes, mainly consisted of training, recruiting specialised staff or focusing present resources on the particular new legislation or regulation of concern. With reference to the new GDPR, replies focused on updating or outsourcing their IT systems and revising their data retention policies.
Q. Today’s environment is characterised by fast paced emerging technology. Do you believe this to be a challenge or opportunity? How do you plan to address this?
A. SMPs committee members were very positive in their replies. Although admitting that initially this might be perceived to be a challenge for their small practice, it can also be changed into an opportunity. They are of the opinion that technology will help them become more efficient, some of them already engaging in discussions with their outsourced IT experts to evaluate ways in which they can use new technologies to their advantage.
Q. Many auditors find that auditing standards are difficult to apply to the audits of SMEs. What are your views?
A. A unanimous view could not be drawn, since replies were approximately equally divided in terms of either ‘for’ or ‘against’ the requirement to use International Standards on Auditing (ISAs) when performing the statutory audit. Approximately half of the respondents feel that ISAs are an unnecessary burden for smaller audits. One of the respondents also expressing the view that the requirement for statutory audits for smaller companies should be eliminated. On other hand those in favour of ISAs pertain that one can use professional judgement, focus on risks and apply ISAs proportionately.
Q. How do you think auditing standards can best reflect scalability challenges while promoting high audit quality?
A. Respondents in favour of ISAs tend to agree that an audit is an audit, professional judgement should be applied and focus should be on risk. Whereas respondents of the opinion that ISAs are too cumbersome, suggested that the requirement of a full scope audit should be removed and instead introduce a review of financial statements. Other suggestions included changing small company audits to a more direct approach and possibly introduce local auditing standards applicable to Maltese entities.
The members of the Institute’s SMP Committee were then asked questions about the benefits an SMP can offer, whether they would do it again and how do they maintain a healthy work/ life balance. The following were their replies:
Q. What added benefit do you think an SMP can offer?
A. The SMPs response to this question was a unanimous “more personalised service”. Some respondents elaborating further that they have adapted their practice to focus on one or a few particular sectors, enabling them to offer not only a personalised service but also a highly professional one.
Q. What induced you to start operating as an SMP? Would you do it all over again?
A. Members of the SMP committee, mainly started out their practice either after working for one of the big four firms or to continue their father’s practice. In most cases, the main reason being that they preferred to work in an environment where they could manage their own time. However one of the replies which struck us as, and which we felt should be given its due importance is the following “The challenge, the passion, what it entails and the satisfaction of seeing your clients grow.”
Replies as to whether they would do it all over again varied from a “definite yes”, “not sure” to “do not think so”.
Q. Undoubtedly everyone should have a good work/ life balance, which is becoming more difficult. As a SMP what are your suggestions to attain such a balance?
A. The Institute’s SMP committee members offered an number of suggestions in this respect. Most replied that a practitioner should refuse clients if they cannot or do not have time to offer the required service. Others suggested that one should focus on organising, prioritising, and use technology to facilitate work practices. A number of suggestions were more personal, their advice included avoiding work during weekends and public holidays and enjoying time with families and friends, scheduling some time for exercise and blocking “free time” in advance.
The technical team would like to personally thank the SMP committee members who dedicated their time to answer our questions.