The FINANCIAL — According to the fiscal statistics gathered by the Audit Council at the Parliament of Georgia, in the 2010 calendar year Ernst & Young LLC was the largest professional services firm in Georgia, followed by PriceWaterhouseCoopers Central Asia & Caucasus B.V. Georgia Branch, Tbilisi Branch of KPMG CIS Limited and BDO.
Ernst & Young LLC is a member firm of Ernst & Young, one of the largest professional services firms in the world and one of the "Big Four" accountancy firms along with Deloitte, KPMG and PricewaterhouseCoopers. Ernst & Young is a global organization of member firms in more than 140 countries, headquartered in London, UK. It was ranked by Forbes magazine as the 9th largest private company in the United States in 2010.
Ernst & Young established its office in Georgia in 2003. During this period, Ernst & Young, which has one of the world’s largest assurance, tax and transaction advisory practices, has been gaining success in Georgia. Since 2003, the company has been a leading professional services provider in the Georgian market. It’s one of the most trusted, respected and influential organizations in the country.
Ernst & Young celebrated the promotion of Mr. Ruslan Khoroshvili to Assurance Partner on 1 July 2011. Mr. Khoroshvili returned to Georgia in 2008 after working for several years in Ernst & Young’s Moscow, Almaty and Astana offices. He is currently leading Ernst & Young Georgia’s Assurance services.
At this time there are three partners leading the company: Mr. George Bazgadze, Country Managing Partner, Mr. Zurab Nikvashvili, Partner, Head of Tax and Law in Georgia and Armenia, and Mr. Ruslan Khoroshvili, Partner, Head of Assurance.
“Appointment of a new partner is a significant achievement for our office,” said Mr. Nikvashvili. “This allows us to assign our local partner on Assurance works performed by our office, and thus address the needs of our clients even faster than it was possible to before. We are proud to say that Ruslan started his professional career in our office. After gaining relevant experience working both at Tbilisi and foreign offices of Ernst & Young, he became a director and, a year later, a partner heading the Assurance practice of our office. Ruslan possesses a combination of international and local expertise which is unique in the market”.
“The key factor behind our success is the investment we make in our people,” Mr. Khoroshvili told The FINANCIAL. “We contribute to the professional growth and promotion of the people working for us. There are many people who started working at Ernst & Young who are now working in the UK, the USA, the Netherlands and the other countries. Our alumni hold top positions in banking and other industry sectors in Georgia.”
“We are successful because we never compromise,” said Mr. Nikvashvili. “For us, nothing costs too much when it comes to quality of service. ‘Quality in everything we do’ is the key to our success. ”
According to statistics compiled by The FINANCIAL, Ernst & Young is one of the leading companies that business faculty students want to work for. At the moment, Ernst & Young has 77 people working at their Tbilisi office. The company finances its employees’ certifications, like CPA and ACCA. They annually send at least one person to work in other Ernst & Young offices.
“In my opinion, such development opportunities are unique for Georgia,” Mr.Khoroshvili noted.
In 2003, when Ernst & Young was first established in Tbilisi, their services were Assurance and Tax. Since that time, the company has experienced great development and become a leader in the market. Still, these two services remain their main lines. Being a member of an integrated global firm means that Ernst & Young’s service offerings in Georgia are identical to those in every other country where the company operates. If there is a client need for a specific service, the service is delivered using the unlimited pool of resources Ernst & Young possesses globally.
“A large portion of our Assurance clients is comprised of financial institutions,” said Mr. Khoroshvili. “However, our client base outside the financial sector is also very important and growing at a greater rate. We serve multinational and local organizations working in heavy industry, transportation, oil & gas, and almost all other sectors of economy.”
“Unlike our Assurance service, which has several big clients, our Tax service has a lot of smaller customers representing various industries such as financial markets, communication, energy, hospitality, utility and transportation,” Mr. Nikvashvili added.
Company representatives say that there are two types of potential clients in Georgia and that their requirements and expectations of an auditor differ significantly. Some entities look at an audit as a mere formality and are satisfied with a simple sheet of paper with the name of a reputable auditing firm on it. Others are searching for the value that cooperation with a professional advisor can bring them.
“We only serve clients from the second group,” said Mr.Khoroshvili. “In such cases, companies are looking for a well-recognized and reliable auditor. They need a team which can help to resolve issues, meet deadlines and, of course, provide high quality service. That is what we offer our clients. Being flexible and always reacting to the clients’ needs are essential as well.”
Ernst & Young welcomes all potential clients, but the firm has its own standards and guidelines when choosing which clients to accept. Transparency is one the most important requirements a client should satisfy.
“We should know about controlling shareholders, their business standing and background information. Their reputation has to be good and they must have good standing in the market. All our clients should be looking at us as a business advisor and not just looking for a piece of paper signed by Ernst and Young,” stated Mr.Khoroshvili.
“We have strict requirements for clients as well as for ourselves,” added Mr.Nikvashvili. “Before agreeing on an engagement, we check our possibilities. We ask ourselves if we can provide the requested service. If they need a specific service Ernst & Young can’t provide, we don’t take on the responsibility. If everything is satisfactory for both sides though, then we proceed to negotiating the price and other terms of our services.”
Having high standards doesn’t mean that Ernst & Young isn’t working for new companies and start-up businesses. The firm is open for all companies which have good business potential. Small and medium businesses, however, are somehow limited for audit service due to the high expenses and costs. Ernst & Young has fewer small and medium size businesses as their clients as they don’t have any special terms for them.
“In general I appreciate that audit service isn’t mandatory in Georgia,” said Mr.Khosroshvili. “But for successful development of a business, an audit is essential. Audits clearly play a key role in today’s economy since they create trust between investors and businesses. Without audits, the flow of financial resources would be very limited.
“Currently in Georgia, only the companies which have foreign investors or seek to have them tend to do audits. In my opinion, auditing has a great future in Georgia and will soon be more widespread as foreign investment continues to grow.”
Ernst & Young was the first of the “Big Four” auditing companies to open a permanent office in Georgia. Since then, all other “Big Four” auditing firms have established permanent offices in Georgia, and lately we have seen the opening of smaller international auditing firms as well. The competition in the market has grown dramatically. The quality of service offered by them has also improved significantly. Ernst &Young, however, remains the lead company in the auditing sector.
“We now have a much stronger position in the market. The first year was quite difficult as we had to learn how to operate as a part of a much bigger company,” said Mr. Nikvashvili.
According to Mr.Nikvashvili, “Ernst &Young has supported the Georgian government in developing a tax environment that facilitates business in Georgia and contributes to the inflow of foreign investments. Namely, we have been taking an active role in commenting on tax and business legislation in Georgia. We recommend improvements to the legislation that reflect the needs of the local and foreign business communities. This way, we contribute to making Georgian business legislation more advanced, which ultimately creates better opportunities for investors.”
One of the examples of Ernst & Young’s cooperation with the Georgian government is a Georgian Pocket Tax Book, which can be found on the official webpage of the Ministry of Finance at www.mof.ge. Georgian Pocket Tax Book is considered a document of first reference by foreign investors who plan to start their operations in Georgia.
“Many positive and unique changes have taken place in the Georgian tax system, including liberalization and simplification of the tax code, launching of alternative tax audit and advance tax ruling mechanisms, introduction of the tax ombudsman position, improvement in the quality of tax services etc” added Mr. Nikvashvili. “Nevertheless, we always believe there is always room for improvement. One of the changes the business community is looking for is an increase in the stability of local tax legislation. Frequent changes, especially those introduced in the middle of a fiscal year, put businesses in a difficult situation when trying to fulfill their financial and general business plans. Another step in the right direction would be further improvement of the dispute resolution mechanism, especially at the court level. As statistics show, the amount of positive (to the taxpayers) outcome at the court stage is still considerably lower than at the Ministry of Finance stage”
“We, at Ernst & Young, look very optimistic on the long-term prospects of Georgian economy. Our economy is considerably young and lacks characteristics of mature economies of the west. Significant effort is necessary to put our economy on a firm development platform. To my belief, it is mainly up the business community to foster economic development and growth, while the role a government should be provision of a support and an even playground. And not vise-versa, as often perceived by many in Georgia” added Mr. Khoroshvili. “As Ernst & Young is concerned, we will continue investing in development of our business and economy at large to support quality growth, because quality is in everything we do”.