PrimeGlobal CEO Steve Heathcote took the helm of the international association of independent accounting firms in June, and he plans to expand it further, especially in Asia and Europe.
“Currently we have about 300 members worldwide and about $2.7 billion [in combined revenue] for the firms,” he told Accounting Today. “Very soon we will be in 90 countries. The firms range from small to medium to large. Geographically we’re trying to strengthen Europe and Asia. In the future, putting trade wars aside, the direction of businesses will be touched by China. We would like to have some strong firms to support our members globally, so we are looking at China, Russia, India and Africa.”
He is seeing big changes in how accounting firms use technology.
“Sectorwise, what’s really interesting is the changing nature of practices,” said Heathcote. “You’re seeing digital in particular transform the way practices work, touching on cybersecurity and data analytics. We are trying to help them be ready for change to help their clients, to help firms with emerging practices make sure they have access to the best practice areas in the world. That’s always a challenge.”
Smaller independent firms like PrimeGlobal's members are aiming more and more to compete with the Big Four, which dominate the audit market for public companies both in the U.S. and around the world.
The United Kingdom and the European Union have been making efforts to open the audit market to smaller firms and encouraging the Big Four firms to do joint audits, although the Big Four still dominate the audit market.
“It does have an impact on the profession as a whole,” said Heathcote. ‘A lot of the regulatory efforts are directed toward the Big Four firms because of their dominance in the market. The general public and even some companies are starting to [question] whether they can trust the professional advice. That’s dangerous because there are alternatives such as technology service providers coming into the space.”
Accounting firms are not only competing with the Big Four, but with tech companies that are expanding their consulting capabilities.
“For an association like PrimeGlobal, we have very close relationships with clients that have developed,” said Heathcote. “We can help them with support and guidance that’s relevant to them. The bigger firms can see that audit is becoming more regulated. They’re going into the markets in which many of our members have practices. You see the big firms coming in. What that means is I have to become really good at helping our firms compete with the larger firms, to help them connect together and coordinate across geographic boundaries.”
He believes an association like PrimeGlobal offers greater flexibility to its members than a network. “These are independent accounting firms,” said Heathcote. “They still have all those connections globally, but they can do it in a way that’s very much customized to what a company is looking for. The bigger accounting firms tend to standardize and not be as flexible.”
Many of PrimeGlobal’s firms still perform audits, and some are beginning to do the kinds of joint audits that European regulators are encouraging. “There’s an opportunity where the bigger firms are going to have to do more to share audits,” said Heathcote. “Joint audits and joint assurance around particular engagements are opportunities for some of the members of PrimeGlobal to work with some of the bigger firms.”
He also foresees some of PrimeGlobal’s member firms providing specialist advice in areas such as taxation, sustainability and cybersecurity for the larger firms. Heathcote pointed out that associations don’t require firms to standardize around particular brand names and the use of specific software and processes as the major firm networks do.
“The network model is quite fixed,” said Heathcote. “With an association we’re working with a whole range of firms and partners, including service providers. We help a firm have a range of choices. We’re more about the diversity. We’re seeing larger firms turn away from networks. It’s more about mentoring and connections. We’re always thinking about how we can connect the firms. Many of them think they don’t need the brand name. The brand may have been tarnished. We’re not about the brand PrimeGlobal.”
PrimeGlobal was created by the merger in 2011 of three associations — Polaris International, Fidunion International and IGAF Worldwide — but Heathcote sees that as the distant past. PrimeGlobal has been growing in the U.S. this year, adding firms such as K-Coe Isom, Hogan Taylor and C&D LLP in recent months.
“In the future, we don’t think about it being separate regions or separate associations,” said Heathcote. “We are trying to do a lot more globally. In North America and the U.S., a lot of the firms and their clients don’t necessarily operate globally. They operate within the states or between the states. What we’re trying to do a lot more is to recognize that and offer access to the best practices in other countries and regions. ... At the moment, some firms may not deal with international business. We want to be always ready to help them wherever they are in their development.”