Monica Foerster, Chair of the IFAC Small and Medium Practices (SMP) Committee, tells Jemelyn Yadao about the work the strategic advisory body is doing to raise global awareness of SMPs’ evolving role and ability to create value
Monica Foerster is the SMP Director and Coordinator of the SMP Working Group at Instituto dos Auditores Independentes do Brasil (Ibracon).
Despite social media channels opening new opportunities for accountants to communicate with clients, some companies continue to prefer an approach more personal than a tweet. According to a recent research report by the International Federation of Accountants (IFAC), The Role of SMPs in Providing Business Support to SMEs – New Evidence, small and medium entities (SMEs) prefer face-to-face meetings, and for small accounting firms this is good news.
“SMPs have a unique advantage,” says Monica Foerster, Chair of the IFAC Small and Medium Practices Committee, “because their interactions are often long-term and centred on personal relationships based on trust and reliable communication.”
However, trust has three dimensions: integrity, ability, and empathy, and is not easy for SMPs to obtain, notes the report. To help SMPs build trust and capacity, Foerster, together with committee members and IFAC leadership and staff, has been busy directing activities, including responding to formal exposure drafts and consultations issued by the International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA).
“On the audit side, we recently responded to the proposed new standard on auditing accounting estimates. On the ethics side, we recently responded to the proposed changes related to professional scepticism and judgment, and the IESBA strategy and work plan beyond 2018. In all three instances, we considered how, or if, the proposals would affect SMPs and their ability to support their clients,” she tells A Plus.
“We are also finalizing the fourth edition of the Guide to Using International Standards on Auditing in the Audits of SMEs and updating the Guide to Practice Management for SMPs, which will feature a new chapter on technology as its importance to practices of all sizes is increasing.”
Indeed, technology and innovation, together with hiring and talent retention, are key trends impacting SMPs today, notes Foerster. “SMPs must be willing and able to change and evolve their business models,” she says. “SMPs’ daily practices are directly related and involved with technology, although the extent will vary in different jurisdictions.” Technology developments provide them with opportunities to offer services in emerging areas, such as cybersecurity assurance, she adds.
Foerster has been playing an active role in SMP and SME affairs, both in her home country of Brazil and internationally, for more than 24 years. She is a partner at Confidor, an accounting, tax, and law firm, which has offices in São Paulo and her birthplace of Porto Alegre in southern Brazil. She is also the SMP Director and Coordinator of the SMP Working Group at Instituto dos Auditores Independentes do Brasil (Ibracon), the Brazilian Institute of Independent Auditors, and Counsellor at the Brazilian Accounting Council, one of Brazil’s regional accounting boards.
In 2014, she was nominated to be a representative from Latin America on the IFAC Small and Medium Practices Committee, became its deputy chair in 2015 and was appointed chair at the start of 2017. The committee’s goal is to enhance SMPs’ recognition through regular input to the international standard-setting process, ensuring the relevance of international standards to SMPs and their SME clients, and by developing materials that help them meet client needs. “It has been fulfilling to contribute to the work IFAC does on the global stage to support and advocate for SMPs and SMEs, and to bring my personal and professional perspective as a female Brazilian accountant,” says Foerster.
Active participation in discussions with a range of stakeholders, including regulators, helps SMPs to be heard both locally and globally, says Foerster. “One of the really useful elements of the Global SMP Survey is providing IFAC member organizations with country-level data to help inform them of the local challenges facing SMPs and SMEs and provide a basis for advocacy and dialogue. “One of the most important things IFAC member organizations can do to help raise SMP visibility is to nominate qualified professionals to the international, independent standard-setting boards and IFAC committees. Our voices need to be included in all aspects of their work.”
The recent progress made by these boards in accommodating SMPs has been promising, says Foerster, highlighting how the IAASB in particular has enhanced its SMP and SME focus in 2017-2018. In January, the board co-hosted a working conference on the challenges of SMPs using International Standards on Auditing and stakeholder needs relating to services provided to SMEs. “You can see the results of our efforts in board work plans, such as the IAASB quality control and IESBA restructure projects,” says Foerster.
One of the top challenges SMPs face worldwide is keeping up with new regulations and standards. Foerster notes that the committee’s work ties directly to this concern, particularly through its input to the boards. “Our work is key to helping ensure the standard-setting boards continue to give due consideration to SMP and SME issues and I encourage all professional accountancy organizations, including the Hong Kong Institute of CPAs, to prioritize providing responses to the boards’ various consultations.”
Foerster is also a Partner at Confidor, an accounting, tax, and law firm with offices in Porto Alegre and São Paulo, Brazil. Here, she is speaking during the IAASB’s event “Addressing the Unique Challenges of SMPs and SMEs” in Paris in January, covering the guides developed by IFAC to help SMPs implement international standards.
Irrespective of jurisdiction, accountants, especially SMPs, continue to be the preferred advisors to SMEs, says Foerster. In recent years, the proportion of SMPs undertaking audits of SMEs in some countries has fallen, partly as a result of the introduction, or rise, of audit thresholds, she adds. At the same time, the advisory role of SMPs continues to evolve. While most of SMPs’ revenue is generated by traditional services, including audit, last year’s IFAC Global SMP Survey found that the fastest growing service area is advisory and consulting services, with 35 percent of SMPs reporting fee increases in this area in 2016 and 45 percent predicting increases for this year.
According to Foerster, the most frequently provided services include corporate advisory (financing, mergers, due diligence, valuations and legal); management accounting (planning, performance and risk management and internal control); and, human resource procedures and employment regulatory services (hiring and firing, employee contracts, maternity, paternity, sick pay and remuneration structures). “The wide range of services really highlights the potential for future revenue growth through business advisory services – it’s a significant opportunity for SMPs.”
Offering financial reporting services tailored to the needs of SME clients is another opportunity. The 2016 survey found that 14 percent of SMPs provided some form of enhanced corporate reporting service (e.g. integrated reporting and corporate social responsibility reporting). Sustainability reporting as a service area for SMPs is new but fast growing, given that SMEs are keen to realize the financial benefits of integrating sustainable practices into their business strategy. To help SMPs better advise clients in this area, the committee released the publication Creating Value for SMEs through Integrated Thinking in August. “It highlights how smaller organizations and the professional accountants serving them can benefit from integrated thinking and develop a better understanding of how their business creates value.”
In order for SMPs to differentiate themselves from competition, Foerster urges them to think about diversification and supporting the internationalization of SMEs. “An important ingredient for SMPs’ success is the right service portfolio with value-added services and delivering excellent quality. I believe that a multidisciplinary approach is essential,” she says. “An international perspective is also important. In some cases, local markets are limited but opportunities for SMEs to change their business model and look internationally are increasing.
“SMPs need to consider mergers, associations, or other means of expanding their capabilities to convince potential clients their practice can meet their needs.”
Serving SMEs has been a focus of Foerster since she was very young. Coming from a family of accountants and working at a family member’s small practice, she had been engrossed in discussions over accounting and audit issues. “From early on, I understood I could make a difference and help – as an accountant – my clients and their future. This became a life choice.”
She started her career as a trainee at the family firm just as she was starting a degree in accounting at the Universidade Federal do Rio Grande do Sul. “Since the firm had, indeed, still has, several SME clients with international associations, and since the firm is a member of an international alliance, I developed a strong expertise in international standards from the beginning of my career. This was especially unusual in Brazil more than 20 years ago.”
When it comes to her personal life, one thing keeps her driven to take on the daily work challenges: “My whole family – husband and children. They give me all the energy and emotional support I need, and help me to keep positive and proactive to achieve consistent results.”
Her early experience in international liaison exposed her to different cultures, which built upon her upbringing – Brazil being a well-known melting pot of nationalities and cultures. “This mix of different cultures and habits generates a unique experience – both for my personal and professional life.”
This continues to help her today in her role at her firm and as an IFAC committee chair. “It has enabled me to identify and appreciate the diversity and breadth of skills and talent in practice and on the SMP committee, whose activities are driven not only by myself as chair but through the great dedication of all the members and technical advisors as well as the IFAC staff team.”
of SMPs provide some form of consulting services with the three most commonly provided being corporate advisory, management accounting, and human resources policies, procedures and employment regulations. (Source: 2016 IFAC Global SMP Survey)
There are a number of helpful articles, videos and resources featured on the IFAC Global Knowledge Gateway (www.ifac.org/gateway).