Deloitte CEO gives high marks to Korean accounting industry
The Korea Herald
Jo, Ki Hoon (Alex)
Deloitte Anjin LLC
After rigorously applying tougher standards, Korea has raised the level of accounting transparency by several notches, says the chief of a leading accounting firm.
"We believe the industry is maturing in Korea. The level of proficiency is seen to be appropriate," said William G. Parrett, CEO of Deloitte Touche Tohmatsu in an interview with The Korea Herald.
The executive was here to take part in celebrations of the recent merger between two localized Deloitte companies-Anjin Deloitte LLC and Deloitte & Touche Hana.
Higher marks for the local accounting sector come at a time when the corporate sector is being pushed to step up accounting transparency as part of the reforms in the wake of the financial crisis in 1997.
One of the most significant changes is that companies are coming clean with their fraudulent records.
"I understand the Korean government has encouraged companies to correct any past accounting errors; and place a renewed emphasis on accounting transparency - this is to be applauded as companies enter a new era of more open and transparent accounting standards," said Parrett.
Over the past eight years following the economic crisis, quite a few conglomerates were discovered to have dressed up their accounting books to inflate profits.
The outbreak of a string of scandals prompted the Korean government to devise a tougher regulatory environment that was modeled on the Sarbanes-Oxley Act of the United States.
While welcoming the progress since then, Parrett stressed there is still more room to improve in order to meet the shifting demands of the customers, clients, the government and all else involved.
Especially in accounting, where regulations continue to evolve, being progressive and moving with the times is seen as a top priority.
"There is always room to improve, in every country," he said.
And the CEO sees Korea is doing just that as reflected in its increasing efforts to abide by global financial reporting standards.
Addressing local industry concerns of an overflowing market, Parrett noted that there is room for a "full array of small and larger firms" as demand expands and varies.
But more consolidation may be in order as the industry further expands and matures, he added.
With the maturation that would trigger higher corporate expenses, fees should also rise to more reasonable levels, Parrett predicted.
Regarding the merger between Hana and Anjin, Parrett expects it to herald a new era for Korea where auditing services will come in a complete financial package for consumers.
"It`s an important merger in Korea because it brings together the resources of two goods firms. It now provides clients a full array of financial consultancies and expertise," said Parrett.
For Deloitte, this marks the third merger in Asia-Pacific, a region that the company believes holds great potential for growth in the coming years.
About 15 percent of the company`s global revenue comes from Asia-Pacific. The figure is expected to rise to 25 percent by 2010.
As more foreign investors eye the Asian emerging markets, so grows the volume of mergers with foreign-owned companies.
Deloitte`s own recipe for running a multinational company with offices in so many countries - 141 to be exact - is to embrace localization and show due respect for the different cultures.
At the same time, the overseas offices are required to meet the standards set by Deloitte, which was the largest accounting firm in the world last year.
"There are mandates and procedures that our member companies need to follow to make sure they live up to our standards, which are very high standards," said Parrett.
In a word of advice for the Korean economy, the financial experts said sustaining growth should be a top priority.
This year, Asia`s fourth-largest economy expects growth of around 4 percent following 4.6 percent in 2004.
Parrett plans to further his relationship with the country via the International United Way of America to help instill a heightened sense of corporate social responsibility, especially in plus-sized companies.
By Kim Ji-hyun