Accounting and Auditing

Deloitte China looks beyond audit to advisory services involving fintech, mergers and acquisitions

PUBLISHED : Sunday, 24 September, 2017, 1:24pm
UPDATED : Sunday, 24 September, 2017, 11:41pm

Deloitte China plans to develop more advisory services geared towards fintech and mergers and acquisitions as well as on crisis management as clients demand a greater range of services, according to its China chief executive Patrick Tsang.

Audit income dropped to only about 40 per cent of all business, down from 80 per cent in the early 1990s, Tsang told the South China Morning Post.

In contrast, managing consulting and advisory services for mergers and acquisitions as well as crisis management now represents 20 per cent of all revenue compared with just 5 per cent 20 years ago, he said.

“Companies nowadays are getting much bigger and more sophisticated. They want their accounting firms not just to audit their books, but they also want the consultancy services to help to conduct mergers and acquisitions, technology development, as well as crisis management such as debt restructuring,” Tsang said.

As Deloitte China is turning a century old this year, Tsang said the firm will have a lot of growth opportunities. China is the world’s second-largest economy while its going out policy and New Silk Road projects means there will be a lot of demand in Deloitte’s advisory services for mergers and acquisitions globally.

Deloitte is adviser for the Silk Road Fund, sponsored by China’s State Administration of Foreign Exchange.

“Many Chinese companies want us to help identify projects for investment and to offer them advice on how to manage these projects,” he said.

Technology and fintech development are additional areas where there has been growth in demand for advisory services, as many traditional firms want to work with technology firms to develop their business, he said.

Deloitte last year assisted a consortium led by China’s Apex Technology to acquire the global printing and imaging solutions provider Lexmark International. Tsang believes there will be growth in demand for similar transaction in the future.

He said in spite of capital controls designed to deter companies from purchasing overseas assets, Beijing’s intent is to make sure mainland companies “conduct rational investment which could help expand their core business”.

“Automotive, technology and health care are the three major areas Chinese companies want to develop,” he said.

Reviewing the past century of Deloitte, Tsang said the accounting firm first came to the China market in 1917, when Deloitte’s ancestor Great American Auditing set up an office at 29 Nanjing East Road in Shanghai but later pulled out of the country amid political uncertainty.

Deloitte re-entered the China market in 1972 when Deloitte Haskins&Sells established an office in Hong Kong with in Sheung Wan. It launched a representative office in Shanghai in 1981 and in Beijing in 1985.

In 1990, Deloitte Haskins&Sells and Touche Ross merged to become Deloitte Ross Tohmatsu, which was renamed as Deloitte Touche Tohmatsu in 1992.

Through an expansion in many mainland cities including Guangzhou, Dalian, Shenzhen, Chongqing and others, Deloitte China now has 21 offices with over 13,000 people.

Tsang said the firm will use technology and artificial intelligent to do simple audit work but that does not mean it plans to hire fewer workers.

“The challenge for our development is to hire the right talent. Technology or artificial intelligence would not replace accountants, but help them to do a better job,” he said.