Has there been regulation to improve the quality of audit work? Has the demand for ESG reporting forced higher standards?

The Brazilian Security Exchange Commission, CVM (Comissão de Valores Mobiliários), has published a new regulation in December 2022, to be implemented in 2023, to regulate private equity funds. This is not directly related to the improvement on the quality of audit work but thrives to an impact on the audit engagements and audit committees as it brings an agenda that demands disclosures regarding ESG. It has addressed a clear and common definition of what are the ESG culture and actions for a fund or a company to be able to be considered as a “green/sustainable/social”. The articles that address this in the new regulation text, seem to have the objective of dismissing the greenwashing and establishing rules for implementation and disclosure of the ESG agenda.

Since the election has there been an increase in IPOs and M&As?

Brazil leads the operations of IPOs and M&As in Latin America in 2023. Even considering a decrease on the number of operations when compared to 2022 (34% drop), the scenario is positive considering the geopolitical circumstances and the recent election. The specialists consider that the election had a low impact on the number of transactions and that the market behavior is a consequence of the new opportunities considering the establishment of the interest rate drop and inflation control. It takes into consideration that Brazil is the biggest country in Latin America and has a diversified business field. Also, the operations sector has been developed over the past years and has achieved a more professionalized and sustainable sector in Brazil.

Have there been any other significant regulatory developments in Brazil over the last 12 months?

The ESG agenda has been the focus, it has led to new regulatory developments for medium and small businesses to be able to accompany the agenda as the larger companies and listed companies have been following the European developments. Also, a Tax Reform is under discussion. Brazil is considered one of the most regulated markets (considering specifically regulations for the insurance sector and healthcare sector as well as has been facing an increase on regulations for large companies and listed companies.

How would you describe the health of the accounting industry in Brazil in terms of customer demand, fee pressure, and staff recruitment and retention?

The customer demand for accounting in Brazil has increased significantly over the past 5 years as the companies seek transparency and sustainable growth. The fee pressure that was an enormous challenge is getting better as the companies are being educated on the importance of this industry to achieve the aforementioned sustainable growth. Yet it is a huge challenge to recruit and retain staff as we’ve faced a diversion of career interests and models in Brazil and throughout the globe.

Are there any service areas where demand has grown over the last 12 months?

Yes, the Audit of Financial Statements and a form of the company to get to know better its own numbers and be able to demonstrate it to the market. The assurance services of all kind has increased a lot considering, also, the forementioned increase in the transparency culture in Brazil. We are now watching the demand for ESG related services, such as, preparation of ESG reports and implementation of ESG departments and agenda to increase significantly as well.

Has there been any significant consolidation or merger activity in the accounting profession?

No merger has happened, what we see is a growth of the existing firms and the consolidation of new firms.

What are your expectations for the next 12 months - are there any potentially significant developments in the pipeline?

The expectations are for the accounting and auditing industry to grow over 12% as the consolidation of the ESG agenda occurs and demands the market to increase transparency even more. Also, the business sector is expected to increase in Brazil in alignment with the GNP growth and the stability of the economic scenario which demands the companies to invest in data, analysis and well-prepared disclosures for which the accounting and audit firms play a central role.