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ERNST & YOUNG: WE DO NOT COMPROMISE IN THE QUALITY OF OUR SERVICES OR OUR INDEPENDENCE
ArmInfo's interview with Eric Hayrapetyan, Ernst & Young Yerevan Office Leader
ARMINFO
Wednesday, March 27, 13:11
Ernst & Young is a global leader in assurance, tax, transaction
and advisory services. Worldwide, the company's 167,000 people are
united by shared values and an unwavering commitment to quality. The
company makes a difference by helping its employees, its clients and
wider communities achieve their potential. Ernst & Young expands its
services and resources in accordance with clients' needs throughout the
CIS. 4,000 professionals work at 19 offices in the post-Soviet space.
Ernst & Young (EY) entered the Armenian market in 2008. What results
has the company managed to achieve over the five years of its presence
in the market of advisory and auditing services in Armenia? Would you
tell us the competitive advantages of the company? How seriously has
the spectrum of services been extended?
Our company has been operating in the market since 1999; however, we
have been carrying out vigorous activity since 2008, when the Yerevan
Office was included in the CIS Sub Area. We prepared for that step
beforehand. In particular, in 2007 our employees attended training
courses at the Moscow Office of the company, and we took advantage
of the experience of our compatriots working at various offices of
the company worldwide. This was one of our advantages - due to the
"lack of borders" principle advocated by Ernst & Young, and thanks to
the experience of the employees from Armenia, we launched the process
of concentration of competence in each specific task and were able
to ensure the high quality of services our clients worldwide have
been accustomed to.
One more important competitive advantage is the presence of many of
our global clients in Armenia. I can say that almost all the big
international companies in Armenia are global clients of Ernst &
Young. Now that five years have passed, the Yerevan Office of EY
has become self-sufficient to a great extent. We have nearly 40
specialists, and we provide services in four key service areas -
audit and related services, tax and legal consulting, transactions
services and advisory services. Our clients are big Armenian companies
and foreign investors that are ready to develop their businesses
in Armenia.
What significant changes have occurred in the market of advisory and
auditing services in Armenia over the past five years, including the
legislative initiatives? Is the demand for the consulting companies'
services growing?
The legislative regulation mostly covers the market of auditing
services. Over the past five years this field has undergone simply
revolutionary changes. Transition to international standards of
financial statements and audit and the introduction of standards of
compulsory audit for large companies have drastically changed the state
of the market of auditing services and have given a positive impetus
to its development. The adoption of International Financial Reporting
Standards (IFRS) as the only standards of accounting statements is a
very important step towards enhancing the investment attractiveness
of the country and a very good opportunity for our company to use its
immense experience in the sphere of IFRS. As a contribution to this,
Ernst & Young released a sample of consolidated financial statements
prepared in line with IFRS - "Good Group (International) Limited 2011"
in the Armenian language. Later, the company released the Armenian
versions of the samples of financial statements, particularly,
"Good First-time Adopter (International) Limited 2011" for companies
applying IFRS for the first time and "Good Mining 2011" for the
companies engaged in the mining sphere. These samples of financial
statements are only a small part of all the samples prepared by Ernst
& Young and aim to help the companies to prepare their own financial
statements. They are well known and widely used by various companies
worldwide, and we are proud of making them available for Armenian
users as well. We will update them every year.
Regarding the market of advisory services, it is one of the key
directions of EY's global business, and today it is a rapidly
developing area of the company's activity in Armenia as well. The
spectrum of the company's advisory services is very wide. It includes
tax services, legal services, business consulting and transactions
services. The demand for tax and legal advisory services is especially
high. Recently, interest in advisory services in the fields of
accounting, staff motivation and productivity management has also
risen considerably. Among our advisory clients, there are large
international companies working in the Armenian market or planning
to enter the local market in the near future.
Thanks to what innovations is the company going to increase its share
in the Armenian market in the future?
I have already mentioned that we were preparing for two years before
rendering audit services. The same is true regarding the practice of
the tax consulting. We invest heavily in professional training for
our staff and accept no compromises in the matter of service quality
and our independence. I don't think that we need innovations here.
Ensuring the highest quality of services is our key to success. We are
going to extend the list of services offered to Armenian companies,
including advisory services on human resources management, legal
consulting, assessment and business modeling.
The economic authorities of Armenia reported earlier that the year
2013 would be a crucial year for improving the investment climate
in Armenia. However, direct investments declined by 40% last year,
and the volume of portfolio investments is very small. Have the
necessary conditions been created in the country for the investment
climate to improve?
I would not rely on last year's indices, as pre-electoral processes
could affect these indices very much. Unfortunately, in developing
countries political risks have a big effect on economic indices. As
for our country, investors are not ready to take additional risks. For
this reason, the country's risk should be decreased. Much should
be done to ensure the rules of the game and equal conditions for
all the participants in the market, which would help create an
attractive investment climate. An investor needs to be confident
that his investments are safe. Investors need to know how taxes are
levied in our country and what should be done in order to meet the
legal requirements.
Last year more than 800 big companies of Armenia underwent an external
audit, according to the results of which more than 250 organizations
did not get a positive conclusion and some of them did not pass the
audit. What mistakes, including those related to incorrect maintenance
of accounting records, were revealed in the Armenian companies?
One should pay close attention to audit terms - details are very
important here. The thing is that according to the International
Standards on Auditing, an audit conclusion may express an unmodified
opinion, a modified opinion, an adverse opinion or a disclaimer of
opinion. In addition, the opinion may contain an emphasis-of-matter
paragraph. This addresses additional communications in the auditor's
report when the auditor considers it necessary to draw users'
attention to a matter or matters presented or disclosed in the
financial statements that are of such importance that they are
fundamental to users' understanding of the financial statements.
So, the presence of such a paragraph doesn't mean that the opinion
is modified or adverse. In practice we have come across an ambiguous
interpretation of this situation in the press, even regarding an audit
report signed by our company. Very often they incorrectly perceive
any audit report, which differs from an unmodified opinion or without
an emphasis-of-matter paragraph, as an "adverse opinion". And your
question is direct evidence of that. However, it is not so. Judging
by the information presented by the Finance Ministry, 234 out of 250
companies (244, to be more precise) got audit reports expressing a
modified opinion or an unmodified opinion, which however, contains an
emphasis-of-matter paragraph. Eight more companies got a disclaimer
of opinion, and only 2 companies received audit reports containing an
adverse opinion. I see nothing horrible in these figures; it is much
more unpleasant that 167 companies failed to have their financial
statements audited and thereby violated the law.
As regards mistakes when preparing the financial statements, they
are quite diverse. I would rather mention the impartial problems
Armenian companies come across when maintaining accounting records
and preparing financial statements. The most important of them is
the lack of a developed, active market. Modern standards of financial
statements consider fair value as the key method of evaluating assets
and liabilities. Fair value itself can be precisely evaluated only
the case of an active and developed country. That is to say, this
problem is impartial and we should hope that it will be solved as
the economy develops.
Were equal conditions ensured for all participants in the market of
audit services? Some independent experts say that little-known and not
so professional local audit companies took part in the audit process.
I am not going to discuss the quality of my colleagues' work, but
I would say that there are enough professionals in the market. The
client's approach is of much importance - if the client needs a
really independent, high-quality audit report, he will seek out the
professionals, and if the audit is just to observe formalities, the
client will go to the most affordable and negotiable supplier. We
believe that in the course of time the absolute majority of property
owners will appreciate all the advantages of business transparency and
the demand for high-quality services will be natural. The Government
and the professional community are exerting efforts to ensure high
quality services provided by market participants. We welcome these
measures.
EY consultants have reviewed the salaries and compensations in Armenia
for the fourth year in a row. How do our entrepreneurs view staff
motivation? What trends can one observe in the given segment?
The annual salary and compensation surveys became the first service
in the sphere of employee performance management and reward that was
offered to the Armenian clients by the Human Capital Group of our
company. This demonstrates the demand for this type of service in
the Armenian labor market. Ernst & Young has extensive experience in
making compensation and benefits reports that are in demand worldwide.
The big international companies that use this information about the
state of the labor market to make important decisions in the field of
personnel management have contributed to the popularization of this
culture in the Armenian market. We have no doubt that in the course
of time the interest in this type of service among local companies
will also grow considerably. The market is developing by its own
rules. The demand for highly skilled personnel is gradually rising
despite the consequences of the global economic crisis, and the data
of our reports are direct evidence of that. As a result, the winner
is the one who follows the changes and trends that enable timely and
grounded decisions.
How many companies participated in last year's reports? What mechanisms
do Armenian companies use in the sphere of personnel management?
Nearly 40 companies from various industries participated in last
year's EY compensation and benefits reports. In addition, detailed
specialized surveys of financial and pharmaceutical industries were
conducted. In addition to regular revision of salaries, many companies
offer serious packages of non-cash benefits to their employees and use
various systems of motivation. Though some indices have deteriorated
as compared with the previous year, the plans for the future are more
optimistic. For instance, the share of companies planning staff cuts
next year is incomparably smaller than those planning to increase
staff. In 2013 we are also going to conduct specialized industry
surveys of the spheres of IT and fast-moving consumer goods (FMCG).
Thanks for the informative interview!
ArmInfo News Agency
ArmInfo's interview with Eric Hayrapetyan, Ernst & Young Yerevan Office Leader
ARMINFO
Wednesday, March 27, 13:11
Ernst & Young is a global leader in assurance, tax, transaction
and advisory services. Worldwide, the company's 167,000 people are
united by shared values and an unwavering commitment to quality. The
company makes a difference by helping its employees, its clients and
wider communities achieve their potential. Ernst & Young expands its
services and resources in accordance with clients' needs throughout the
CIS. 4,000 professionals work at 19 offices in the post-Soviet space.
Ernst & Young (EY) entered the Armenian market in 2008. What results
has the company managed to achieve over the five years of its presence
in the market of advisory and auditing services in Armenia? Would you
tell us the competitive advantages of the company? How seriously has
the spectrum of services been extended?
Our company has been operating in the market since 1999; however, we
have been carrying out vigorous activity since 2008, when the Yerevan
Office was included in the CIS Sub Area. We prepared for that step
beforehand. In particular, in 2007 our employees attended training
courses at the Moscow Office of the company, and we took advantage
of the experience of our compatriots working at various offices of
the company worldwide. This was one of our advantages - due to the
"lack of borders" principle advocated by Ernst & Young, and thanks to
the experience of the employees from Armenia, we launched the process
of concentration of competence in each specific task and were able
to ensure the high quality of services our clients worldwide have
been accustomed to.
One more important competitive advantage is the presence of many of
our global clients in Armenia. I can say that almost all the big
international companies in Armenia are global clients of Ernst &
Young. Now that five years have passed, the Yerevan Office of EY
has become self-sufficient to a great extent. We have nearly 40
specialists, and we provide services in four key service areas -
audit and related services, tax and legal consulting, transactions
services and advisory services. Our clients are big Armenian companies
and foreign investors that are ready to develop their businesses
in Armenia.
What significant changes have occurred in the market of advisory and
auditing services in Armenia over the past five years, including the
legislative initiatives? Is the demand for the consulting companies'
services growing?
The legislative regulation mostly covers the market of auditing
services. Over the past five years this field has undergone simply
revolutionary changes. Transition to international standards of
financial statements and audit and the introduction of standards of
compulsory audit for large companies have drastically changed the state
of the market of auditing services and have given a positive impetus
to its development. The adoption of International Financial Reporting
Standards (IFRS) as the only standards of accounting statements is a
very important step towards enhancing the investment attractiveness
of the country and a very good opportunity for our company to use its
immense experience in the sphere of IFRS. As a contribution to this,
Ernst & Young released a sample of consolidated financial statements
prepared in line with IFRS - "Good Group (International) Limited 2011"
in the Armenian language. Later, the company released the Armenian
versions of the samples of financial statements, particularly,
"Good First-time Adopter (International) Limited 2011" for companies
applying IFRS for the first time and "Good Mining 2011" for the
companies engaged in the mining sphere. These samples of financial
statements are only a small part of all the samples prepared by Ernst
& Young and aim to help the companies to prepare their own financial
statements. They are well known and widely used by various companies
worldwide, and we are proud of making them available for Armenian
users as well. We will update them every year.
Regarding the market of advisory services, it is one of the key
directions of EY's global business, and today it is a rapidly
developing area of the company's activity in Armenia as well. The
spectrum of the company's advisory services is very wide. It includes
tax services, legal services, business consulting and transactions
services. The demand for tax and legal advisory services is especially
high. Recently, interest in advisory services in the fields of
accounting, staff motivation and productivity management has also
risen considerably. Among our advisory clients, there are large
international companies working in the Armenian market or planning
to enter the local market in the near future.
Thanks to what innovations is the company going to increase its share
in the Armenian market in the future?
I have already mentioned that we were preparing for two years before
rendering audit services. The same is true regarding the practice of
the tax consulting. We invest heavily in professional training for
our staff and accept no compromises in the matter of service quality
and our independence. I don't think that we need innovations here.
Ensuring the highest quality of services is our key to success. We are
going to extend the list of services offered to Armenian companies,
including advisory services on human resources management, legal
consulting, assessment and business modeling.
The economic authorities of Armenia reported earlier that the year
2013 would be a crucial year for improving the investment climate
in Armenia. However, direct investments declined by 40% last year,
and the volume of portfolio investments is very small. Have the
necessary conditions been created in the country for the investment
climate to improve?
I would not rely on last year's indices, as pre-electoral processes
could affect these indices very much. Unfortunately, in developing
countries political risks have a big effect on economic indices. As
for our country, investors are not ready to take additional risks. For
this reason, the country's risk should be decreased. Much should
be done to ensure the rules of the game and equal conditions for
all the participants in the market, which would help create an
attractive investment climate. An investor needs to be confident
that his investments are safe. Investors need to know how taxes are
levied in our country and what should be done in order to meet the
legal requirements.
Last year more than 800 big companies of Armenia underwent an external
audit, according to the results of which more than 250 organizations
did not get a positive conclusion and some of them did not pass the
audit. What mistakes, including those related to incorrect maintenance
of accounting records, were revealed in the Armenian companies?
One should pay close attention to audit terms - details are very
important here. The thing is that according to the International
Standards on Auditing, an audit conclusion may express an unmodified
opinion, a modified opinion, an adverse opinion or a disclaimer of
opinion. In addition, the opinion may contain an emphasis-of-matter
paragraph. This addresses additional communications in the auditor's
report when the auditor considers it necessary to draw users'
attention to a matter or matters presented or disclosed in the
financial statements that are of such importance that they are
fundamental to users' understanding of the financial statements.
So, the presence of such a paragraph doesn't mean that the opinion
is modified or adverse. In practice we have come across an ambiguous
interpretation of this situation in the press, even regarding an audit
report signed by our company. Very often they incorrectly perceive
any audit report, which differs from an unmodified opinion or without
an emphasis-of-matter paragraph, as an "adverse opinion". And your
question is direct evidence of that. However, it is not so. Judging
by the information presented by the Finance Ministry, 234 out of 250
companies (244, to be more precise) got audit reports expressing a
modified opinion or an unmodified opinion, which however, contains an
emphasis-of-matter paragraph. Eight more companies got a disclaimer
of opinion, and only 2 companies received audit reports containing an
adverse opinion. I see nothing horrible in these figures; it is much
more unpleasant that 167 companies failed to have their financial
statements audited and thereby violated the law.
As regards mistakes when preparing the financial statements, they
are quite diverse. I would rather mention the impartial problems
Armenian companies come across when maintaining accounting records
and preparing financial statements. The most important of them is
the lack of a developed, active market. Modern standards of financial
statements consider fair value as the key method of evaluating assets
and liabilities. Fair value itself can be precisely evaluated only
the case of an active and developed country. That is to say, this
problem is impartial and we should hope that it will be solved as
the economy develops.
Were equal conditions ensured for all participants in the market of
audit services? Some independent experts say that little-known and not
so professional local audit companies took part in the audit process.
I am not going to discuss the quality of my colleagues' work, but
I would say that there are enough professionals in the market. The
client's approach is of much importance - if the client needs a
really independent, high-quality audit report, he will seek out the
professionals, and if the audit is just to observe formalities, the
client will go to the most affordable and negotiable supplier. We
believe that in the course of time the absolute majority of property
owners will appreciate all the advantages of business transparency and
the demand for high-quality services will be natural. The Government
and the professional community are exerting efforts to ensure high
quality services provided by market participants. We welcome these
measures.
EY consultants have reviewed the salaries and compensations in Armenia
for the fourth year in a row. How do our entrepreneurs view staff
motivation? What trends can one observe in the given segment?
The annual salary and compensation surveys became the first service
in the sphere of employee performance management and reward that was
offered to the Armenian clients by the Human Capital Group of our
company. This demonstrates the demand for this type of service in
the Armenian labor market. Ernst & Young has extensive experience in
making compensation and benefits reports that are in demand worldwide.
The big international companies that use this information about the
state of the labor market to make important decisions in the field of
personnel management have contributed to the popularization of this
culture in the Armenian market. We have no doubt that in the course
of time the interest in this type of service among local companies
will also grow considerably. The market is developing by its own
rules. The demand for highly skilled personnel is gradually rising
despite the consequences of the global economic crisis, and the data
of our reports are direct evidence of that. As a result, the winner
is the one who follows the changes and trends that enable timely and
grounded decisions.
How many companies participated in last year's reports? What mechanisms
do Armenian companies use in the sphere of personnel management?
Nearly 40 companies from various industries participated in last
year's EY compensation and benefits reports. In addition, detailed
specialized surveys of financial and pharmaceutical industries were
conducted. In addition to regular revision of salaries, many companies
offer serious packages of non-cash benefits to their employees and use
various systems of motivation. Though some indices have deteriorated
as compared with the previous year, the plans for the future are more
optimistic. For instance, the share of companies planning staff cuts
next year is incomparably smaller than those planning to increase
staff. In 2013 we are also going to conduct specialized industry
surveys of the spheres of IT and fast-moving consumer goods (FMCG).
Thanks for the informative interview!
ArmInfo News Agency