Grant Thornton Baltic’s audit partner Aivar Kangust, who has been a sworn auditor for almost 30 years, points out that while indeed an audit probably wouldn’t benefit a small business very much, directors of small businesses should really be more inclined to ask for advice from auditors and business consultants – no one can possibly know everything, but it’s always good to talk to someone who does know.
This year's audit season is the last for Aivar in Grant Thornton - why he decided to leave and what he will do next, Aivar explains in an interview.
You joined Grant Thornton Baltic in 2010 as an audit partner. What’s required to become partner in an audit company?
An audit partner should have gone through all of the career stages in the audit field. They could start out as an audit assistant, become an audit manager, and that makes it possible to become partner. There’s also the option of choosing a partner who’s an expert in some specific area, such as a banking specialist who learns auditing as a second field and specializes in auditing banks. But such an approach is more of the exception in Estonia.
The other expectation is that the audit partner has to be capable of generating new business, i.e. new sales, and building new customer relationships. Plus of course, supervising and checking the audit managers’ work, maintaining customer relationships.
So passing the sworn auditor exam isn’t a requirement for making partner?
Right, it doesn’t guarantee becoming a partner in a bigger audit firm, but it is possible in smaller companies or if you start your own office.
The Auditors’ Association website has a long list of auditor businesses. How should a business go about choosing an auditor from that list, what do you recommend?
I’m a good one to ask for a recommendation – choose me (laughs)! I’ve heard that indeed some choose 30 companies from the association’s website and ask them for a quote. I think that’s not a good strategy. It would be better to know an auditor or get pointed in the right direction by friends and co-workers, e.g., so-and-so is a good auditor.
Why have clients chosen Grant Thornton Baltic?
The reasons vary but mainly because of the people. All of our audit partners were remembered by clients from some previous cooperation.
For some companies and institutions, audits are obligatory but for the majority it is voluntary. Has the number of companies that voluntarily opt for an audit increased over the years?
We don’t have very many companies who opt for an audit on their own. They’re generally small subsidiaries of large groups, but the subsidiaries themselves have to be big enough to have an interest in being audited. I think the number of voluntary audits has not increased lately.
Should there be more of them, though?
Well, we would get more work that way. But for one-man companies, an auditor can’t generate great value, because they know much more about their company than an auditor can discover over a short period of time. What they need instead is consultation and advice how to do certain procedures and recognize them in accounting – various contracts, accounting for cost price etc. If something was done wrong, the question comes up: did they not know the right way to do it or did they do it wrong on purpose? In the latter case, there’s no point in an auditor saying, “you did this wrong” – they know it already.
The auditor’s decision on financial statements can be unqualified (the auditor didn’t find any material misstatement), qualified, or adverse. Or it’s also possible that the auditor withholds an opinion as they could not collect enough evidence about a given fact. How many of the 150 decisions you make each year are unqualified?
In general, I can say the share of unqualified decisions in my portfolio has increased over the years. It really also depends on the client portfolio of a specific auditor – they may have clients who always get a clean report and those who for years get qualified or even adverse opinions but don’t correct their reporting. In Estonia, it’s unfortunately common for qualified opinions to be taken cavalierly, and the Commercial Register doesn’t draw any conclusions about this either.
You also provide advisory services for business sales. Has the number of these transactions increased lately?
Yes, in the last ten years the transaction count is up, because companies have attained a certain size and the owners who started the business in the 1990s are nearing pension age. They have a decision to make – whether to leave the company to their children or if they don’t have that option, then sell off the company. Of course, they can also sell the business before retiring and then pursue something else they like.
In your bio on the Grant Thornton Baltic website, it says good relations on the team ensure impeccable customer service. How do you build good relations on your team?
That’s a question from the genre of “how do you live your life” (laughs). I just try to be human, even if someone should err. We all make mistakes. A good sense of humour is also necessary.
It’s important to understand the people you work with and put the work to work for you. We have 30 employee in our auditing department, and we put together a team especially for each client – I issue about 150 opinions each year, so there are just as many teams. Sometimes it happens that people aren’t compatible with each other and there are also some who aren’t compatible with a specific client. Then you need to change team members and talk about the reasons openly, no matter in beating around the bush.
What makes a great client for you?
A great client’s business is one where the people working there take an understanding and reasonable attitude toward you. For example, they provide the information I ask for, they understand why I want a given piece of information, they don’t say, “you already asked that last year”, or “why do you need that?”
The client’s area of activity should also be interesting – in the sense that there are changes taking place, interesting transactions, etc. For example, if a client has conducted many transactions between two companies they own, and the purpose can’t be understood at first, that makes you try harder and piques your interest. If the activities are routine and nothing has changed year after year, there’s nothing for the auditor to learn, either.
If you had to describe Grant Thornton Baltic with three adjectives, what would they be?
Developing, ambitious and fun. I’ve worked here for over 10 years and I’ve always been glad to come to work. The work is interesting and colleagues and clients are great – that’s very important.
Yet this year marks a new stage for you, because you will be leaving Grant Thornton after this audit season. What will you be doing?
I'm at an age where retirement is already in sight, although it’s hard to believe for even me. I’ve reflected that we have many young people at our company who want to manage the company so I can give them that opportunity.
I’ll continue a bit of consulting and conducting audits through my own business, and my other half also has an accounting company where I help out with customer relations. I wouldn’t want to be in day-to-day management at a large office, but I’m glad to pass on my experience and knowledge. I have amassed quite a bit of them over the years – I worked for PwC for 10 years, then my own audit office, and now Grant Thornton Baltic. Each stage has given me plenty of experience and skills for professional work and interaction with people.
What do you like to do in your time off work?
Six or seven years ago, I discovered golf. I started really liking the sport and also succeeded in getting my kids golfing. My 16-year-old son and soon to be 18-year-old daughter are both better players, they surpassed me quite a few years back already. But I’m happy, because that’s the way it has to be – the young generation outdoes you.
What’s your handicap? The lower the better, right?
I’m a 24. I think I would outperform that, too, but I’m not aiming to get my handicap down to 15 or 10. Instead I’m working on my technique so that I would enjoy the game even more and the ball would go where I hit it, not where the ball wants to go.
You have another hobby, fishing?
I'm an amateur fisherman in the summers, yes – it’s a good way to pass the time. In my father’s hometown of Käsmu, I remember how the fishermen came in the morning with their catch, often I got a pail full of flounder for the smoker. Now in the evenings at my home in Juminda, I put out the nets, and in the morning it’s exciting to see whether I got something or not. I’m not going for a big catch – what would I do with 100 flounder? Ten or so is a good number – I put them in the smoker and enjoy them later.