Conversations about Business with Kommersant: Interview with Sergey Shapiguzov

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As part of the project “Conversations about business” the Kommersant publishing house continues a series of meetings with Russian businessmen. This time Head of Finance Department of the Kommersant newspaper Ksenia Dementyeva is talking to one of the founders and President of FBK Grant Thornton Sergey Shapiguzov.

Interviewer: In spite of the public vacation, it is a hot season in the audit market. Change of the regulatory body is under discussion. As the head of one of the largest auditing firms in Russia, what do you think about the current situation? And how logical and reasonable are these changes, in your opinion? 

Sergey Shapiguzov: In fact, we have been waiting for these changes for a long time. And it seems to me that what is supposed to be changed will be primarily beneficial not to audit, but rather to our economy and our business. It seems to me that some genetic changes are needed here and they never come quickly. So the Central Bank has done quite a good job with the analysis of the current situation. And the solutions it suggests are the solutions which many auditors (including me) have considered necessary for a long time.

Interviewer: But there is no doubt that the reforms suggested by the Central Bank will reduce the number of players in the market. How many auditors do you feel to be enough for Russia? And how many auditors may be left after the reforms initiated by the Central Bank?

Sergey Shapiguzov: Audit is a rather complex technology which requires many people specialized in various fields. This includes audit planning, supervision, as well as documentation, control over compliance with standards and development of various methodologies. Only a big firm is able to audit big companies.

Interviewer: Now we have more than four thousand firms. In your opinion, how many of them are able to work with big players?

Sergey Shapiguzov: This is a good question. I would say that after the reform there may be from 800 to 1,500 auditing firms left (it is not my estimation). But how many of them can work with big companies – it seems to me that currently these firms already exist and work. I think it is not more than…

Interviewer: Six?

Sergey Shapiguzov: No. Let us expand the circle a bit. It is most likely, I would say… First, I wanted to say 20 but then I thought that maybe 30 will be good. No, I could not name 30. It may be hard to name even 20 firms which can actually conduct full-scale audit.

Interviewer: So you have nothing to worry about, do not you? Because you are a top six firm.

Sergey Shapiguzov: Well, yes.

Interviewer: You are the auditor of the Bank of Russia. How difficult is it for your firm to work as an auditor? I mean that an auditor needs to ask various questions and receive certain answers. And there should be even more secret issues than in ordinary banks, should not there?

Sergey Shapiguzov: Here is a, so to say, panegyric to our Central Bank. Especially following the appointment of the new chairman, there have been very serious reforms which affect almost all business processes in the bank. And we see how people are motivated and efficient in working on reformation of the bank to make it more modern. They are doing great. I am very glad that we have such people and such team who can…

Interviewer: And such client.

Sergey Shapiguzov: No, let us leave “the client” aside. I am just lucky to be able to see all this.

Interviewer: And which another regulatory body could you see? The Ministry of Finance?

Sergey Shapiguzov: You know, it is not the regulatory body that I would see. I have the following suggestion: assign regulation to the Central Bank. And leave monitoring for the Ministry of Finance.

Interviewer: We have been talking a lot about audit. But you firm provide not only audit but also advisory and legal services. You have been the head of this firm for a long time and you are one of the founders. What is more interesting for you and what is more promising now? And what is in fact your main area of business? Would you like to change such proportion?

Sergey Shapiguzov: I believe that business stands on four pillars being audit, management consulting, valuation and tax and legal. We are very successful in the latter area and we are included in almost all international rankings related to legal services.

Interviewer: What area is more interesting for you personally?

Sergey Shapiguzov: The fact is that initially while working at the Department of Accounting and Business Analysis of Moscow State University I was more involved in economic analysis. That is why various analytical issues are more interesting for me that just audit. That is why management consulting in a broad sense like mergers and acquisitions, due diligence, financial analysis…

Interviewer: You are a big six firm. There is also the Big Four. To what extent do you feel competition with them?

Sergey Shapiguzov: The Big Four phenomenon is common all over the world. And it is associated, first of all, with transnational corporations. In this sense a Big Four firm even if it is an absolutely national firm, in certain countries (not in our country, in fact) it still gives priority to “trans,” rather than “national”. Because global companies are the main clients of the Big Four. However, now it seems that the mood is changing in the world or the focus has been shifted from “trans” to “national”. This is asserted not only by the USA, but also by China, India and many other countries. And Russia among them, of course. In this sense it seems to me that the Big Four has been and will be an element which mainly serves the interests of transnational companies. Firms which come after the Big Four are actually national firms which do business for the benefit of the economy and the country where they operate and with the companies oriented to the internal market.

Interviewer: Let us talk about your business development plans. Which goals do you set for yourself for the near future? Or will you maybe have some new big interesting clients?

Sergey Shapiguzov: You know, I think that it will be the other way around and we will have more medium-sized clients.

Interviewer: Does this mean that you are optimistic about the future?

Sergey Shapiguzov: It is always kind of dangerous in our country…

Interviewer: To make forecasts?

Sergey Shapiguzov: Yes, to make forecasts. And it is not completely clear what will come of it in the end. But I would really like to see some changes. It is very important for our profession. And it will be great if the Central Bank gets involved, in terms of audit regulation.

Interviewer: This was “Conversations about business” with Kommersant. Today we have met and talked with Sergey Shapiguzov. Thank you very much for an interesting dialogue.

Sergey Shapiguzov: Thank you too. It was very interesting.

Interviewer: New conversations are coming soon!