The FINANCIAL — “I started off as a regular college guy in very bad times in Georgia and I am grateful for each and every chance I’ve been given since then that have made me be where I am now,” Zurab Lalazashvili, Managing Partner of public accounting firm BDO, told The FINANCIAL.
“Together with my partners I decided to establish and run our own practice after a few years of working in one of the largest audit firms at the time at an age of 25. The first years of our firm were the most challenging and at the same time very interesting for us. We worked more than 12 hours a day and almost 7 days a week. This resulted in success for our firm and for the last several years we have been clear leaders in the Georgian audit and advisory market. We consider ourselves to be strong with our clients, the network and our people and intend to keep our ambitions open to much higher achievements,” Lalazashvili said.
BDO has maintained the leading positions in Georgia for the past several years, currently ranking 4th among the largest audit firms on the market. BDO is the world’s fifth largest network of public accounting firms. The firm provides advisory services in over 135 countries, with almost 48,000 people working out of 1,082 offices worldwide.
“I moved from professional practice to a managing role a few years ago and am now looking at the whole business from this perspective,” continued Lalazashvili. “I should say, this is a much more complex and challenging job than any engagement I was a part of when in practice.
For years now I have been with the Georgian Federation of Professional Accountants and Auditors (GFPAA) and I’m glad to have contributed my share in the development of the profession. I had the honour to recently be elected Chairman of the Board at GFPAA.
I am also heading the customs and tax committee at the Business Association of Georgia and work closely with my colleagues from different businesses to liaise with the Government for the best possible business environment provisions.”
Q. How many partners does the firm have and who are they?
A. We currently have seven partners: Zurab Lalazashvili – managing partner, Levan Mklavishvili – senior partner, Ivane Zhuzhunashvili – assurance & advisory, Mikheil Enukidze – tax, Jaba Mklavishvili – valuation, David Gelashvili – legal, and David Khrikadze – legal.
Each service line partner runs the respective department within the firm.
These are the people who have been with the firm for many years now, who have grown with the firm and contributed their knowledge, time and effort to the constant development, and now also engage as mentors for the future leaders in the company.
Q. BDO established its office in Georgia in 1999. How has the audit sector as well as the attitude of Georgian companies towards audit service changed since that period?
A. When we started, the overall field of business advisory was new to the region, but we faced the challenge and never regretted it. We practically grew with the profession having participated in almost all major developments in the country. The audit sector since then has grown rapidly. The businesses now have deeper and more accurate understanding of the need of assurance and advisory for their everyday and strategic matters. They have grown used to having a reliable business advisor who they consider a friend, a supporter, rather than someone who just inspects and investigates their files all the time.
Q. Among your wide spectrum of services offered including assurance, tax, transaction and advisory services, which are the most demanded in Georgia?
A. It’s true; we offer a wide spectrum of services – audit & business advisory, internal audit and control systems, tax advisory, outsourcing, valuation, legal advisory and IT consulting. We see that all the service lines are demanded in Georgia right now and we believe that demand for business advisory services will grow.
Q. What is the share of each service in total BDO revenue?
A. About 38% comes from audit & assurance service in total BDO revenue, 28% is earned by outsourcing, 22% is tax, about 8% comes from legal advisory and up to 4% – valuation.
Q. Please could you name and list the sectors and companies, in particular foreign ones, which you serve.
A. Here is an incomplete list of our clients with the industries: TBC Bank, Imedi L International – insurance, Saknakhshiri and GIG Group – coal mining, Wissol Group – oil & gas, Finca – microfinancing, British American Tobacco, Oriflame – perfumery, Microsoft Georgia, Polzug Intermodal – international logistics, Schering Plough – pharmaceuticals, Strabag AG – construction, Representative of Huawei in Georgia – high tech.
Q. What should the first step be for foreign investors entering Georgia?
A. The first things to consider when entering the Georgian market are: any investor should conduct proper research, make sure they have talented local people on the ground and seek good, solid advice in tax and legal matters.
Q. In your opinion, what procedures should guide business in today’s climate to operate properly and successfully?
A. I believe that good management and professional staff are the two most important factors for the success of any business. Ability to adapt to the constantly changing environment, stay socially active and up to date, take challenges, allow novelties and initiative – these would not exactly be called procedures, rather just qualities to be guided by for a successful business.
Q. In your opinion, what are companies’ expectations from their auditors?
A. What our clients expect from us as their auditors is the ultimate risk awareness. Most importantly, our clients require the adviser’s availability to attend without impediments to all matters they deem significant. Some of them expect and welcome initiative from the adviser; the others prefer smooth cooperation with their management. Anyway, flexibility, although in line with our common professional approaches, and the insider’s attitude is I believe what our clients expect from their trusted auditors.
Q. Each firm has its own standards and guidelines while accepting a client. What circumstances should clients satisfy to be audited by BDO?
A. We are committed to BDO’s international standards on client acceptance, which cover all significant topics including information about the potential client’s activity, ownership matters, any tax avoidance or illegal transaction records, etc. However, in general there should definitely be no conflict of interests or independence issues when accepting an audit client. We need to be sure that our sector expertise for the potential client will let us perform with the highest standards. We need to be sure that the client shall be willing to cooperate and provide all necessary information.
Q. Due to the high expenses many SMEs cannot afford the cost of being audited. Do you serve SMEs in Georgia and what are your offers for them?
A. We do serve SMEs. All assurance engagements are conducted using the Audit Process Tool (APT), the BDO Network-wide software applied by all member firms. APT is an advanced adapted tool which allows serving a variety of clients with equal quality, including SMEs in a specific, effective manner considering the circumstances. We offer methodology and specific approaches tailored to the size and needs of the enterprise.
Q. Please name the advantages of having an internal audit department within the company. In your opinion, is the service becoming popular within Georgian companies?
A. Georgian businesses aspire to Western standards of operation and management, i.e. risk management and proper controls. Having an internal audit department within the company allows the board to make sure that all processes in the firm run just as they should; an internal audit adviser adds value to enhancing the control systems and risk management.
The recent developments on the Georgian market reveal the increasing need of proper internal controls within the firms because risk management is becoming a major issue for businesses. The best tool to evaluate and enhance the risk management and internal control system efficiency for the firm is an internal audit advisory service provided by audit and consulting companies.
We can say that today both public and private sector companies express a fair level of demand for internal control system improvement.
Q. What are the main aspects of the Georgian tax system that could encourage foreign investments?
A. The main issues in Georgia’s tax system that could largely be in favour of attracting foreign investments are lower tax rates and less tax burden thereon; considering the various business sectors – introduction of special tax regimes oriented towards tax reliefs and stimulation, also towards minimizing for the businesses the technical barriers and time costs inherent to the tax administration process. The tax compliance procedures are also simplified and less time-consuming; I am referring to registration, reorganization, liquidation, tax return submissions, payments, etc. These are now possible to perform distantly, through electronic means or on spot in one window.
Q. You are auditing international firms in Georgia, what are the major concerns and obstacles foreign businesses face in Georgia?
A. I think that the major concerns for international companies in Georgia are a lack of qualified local personnel and in most cases not enough knowledge of the local business environment and regulations. Compliance with legislation in terms of both operations and management is critical when doing business in some place that’s not home. But even at home having a knowledgeable trusted adviser is a must.
Q. Please name the most important recent changes in the tax system of Georgia?
A. In my opinion the most important recent changes in the tax system of Georgia concern the re-exportation of foreign goods from Georgia, which imply introduction of special trade enterprises and simplifying the re-exportation procedures and allowing tax relieves. This should significantly contribute to Georgia’s function as a transit territory.
Q. How many employees does the firm have? How does the firm support the career development of its employees and how does ACCA influence the auditors’ career path?
A. We have about 80 employees right now, including all partners and staff. We consider our people the most important asset of the firm and set their development as a top priority. Extensive internal and external trainings, all useful and interesting resources available, a mentoring and coaching system within the firm, a friendly environment which we highly value, provide the full support for our staff to develop, and most importantly to be willing to develop.
We are the ACCA Approved Employer, Gold level, meaning that the majority of our people being successful ACCA students will be exempt from Practical Experience Requirements. Needless to say, this is the valuable knowledge and experience that brings confidence and accuracy to the profession.
Q. What is the main challenge for BDO Georgia in 2011?
A. Our main challenges in 2011 are better positions on the market and increased business advisory service.
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