Interview of the Grant Thornton Amyot (GTA) shareholder, Head of the Financial Institutions Audit Department Armen Hovhannisyan to Mediamax and Banks.am portal

- What is the reason for the fact that only certain companies out of approximately 30 audit companies functioning in Armenia provide their services to financial institutions? Which part of the financial market participants uses the services of your department?

- The overwhelming majority of financial institutions, which use audit services of our Department, represent banks and credit organizations. Following the results of the last year, we held audit of 50% of the banks and almost 40% of credit organizations.

The banks are maintained mainly by 2-3 audit companies, which enjoy international recognition, which is basically conditioned by the requirements of international organizations and companies, as well as the external investors.

According to legislative changes, from now on the investment and insurance companies also have to publicize financial statements basing on audit realized, which, naturally, increases the demand in audit market.

However, we are not that active yet in the given market. This is first of all conditioned by the fact that the dates for publicizing the financial statements of the above-mentioned organizations coincide with the period for publicizing the financial statements of Armenian banks and credit organizations, as well as the banks of the CIS states. That means that this is the heaviest period of activity for us. Secondly, the majority of investment and insurance companies are not yet obliged to undergo audit in companies, which enjoy international recognition.

- Judging from the results of the list of 300 largest taxpayers in Armenia, Grant Thornton Amyot is the leader of the Armenian audit market. Nevertheless, as opposed to the results of the last year, in the first half of the year your company occupied a lower position. What is the reason?

- Just as in 2007, following the results of the first half of the year, we again preserve a leading position among audit companies. At the same time, as you correctly noted, following the results of the first six months of 2008, the company yielded its positions for approximately 50 points. And this happens despite the fact that, as compared to 2007, we are working with over 30% turnover growth. To my mind, there is one explanation here: as a result of the policy of economic and financial reforms, held by the government, the share of shadow economy reduced, which became a reason of redistribution of positions in the above-mentioned list.

- Lately talks have become more frequent concerning the fact that the standards, which regulate the financial sphere, are imperfect. We would like to learn your opinion.

- Today the legislative field, regulating the accounting and audit sphere, to say the least, is far from being perfect. I believe that the fact is conditioned by the under-developed characteristic of the public professional structures in Armenia, or by the lack of necessary opportunities in them.

As a result, our accounting standards hopelessly fall behind the international ones and the fact is followed by additional expenditures and difficulties for our banks and other financial organizations, which work in international markets.

The Armenian standards, which regulate the audit sphere, are not accepted by the corresponding international structures. Let alone the qualification examinations in this sphere, which are absurd as to their nature and content, do not meet the requirements of the International Federation of Accountants, as well as the educational standards of the 8th directive of the EU, which is a guideline today not only for European countries, but also for Russia, Ukraine, Georgia, etc.

By the way, the mentioned problems may have negative consequences already in September. And we informed on this the government and the Ministry of Finance of Armenia 6 months ago.

Nevertheless, it is comforting that the reforms, in process of realization in the financial sphere, finally touched upon the sphere of audit as well: at the meeting with auditors of Armenia, recently organized by the Ministry of Finance, a discussion of the present situation and the ways out took place.

Our stance is that the transition to new educational standards is an inevitable and necessary process, which, undoubtedly, will require preparatory efforts. Quite volume work was been carried out in this direction by the Association of Auditors and Accountants of Armenia, due to which the organization became a correspondent-member of the International Federation of Accountants. The above-mentioned unsettled issues, as well as the problem that the Association is not provided corresponding authority, represent obstacles on the way of full membership in the given organizations, and correspondingly, integration into the international community of accountants and auditors.

We believe that before the mentioned problems are solved, corresponding opportunities should be established, which would allow the present auditors freely continuing their activity. What concerns the auditors, which have international qualification; they should gain the same opportunity mechanically, and not face, as before, such additional artificial obstacles as the absurd examinations with tests taken from standards, which have lost effect for already a long time.

The mentioned problems gain more importance, taking into account the financial reforms, realized by the government of the country, and the aspiration to turn Armenia into the regional financial center.

- By the way, do you consider the idea of turning Armenia into a regional financial center realistic?

- Any idea can be realized, if there is a clearly elaborated program, readiness at the level of the country’s leadership, as well as faith and adherence of each citizen of the country. It is clear that long-time hard work will be needed and the main driving force will be the representatives of our new generation.

I think that already today there are serious perquisites to start the realization of the given process. And among them the potential of our Diaspora can be mentioned, the presence of international money transfer systems, the involvement of certain Armenian banks in large financial groups –international ones and at the level of CIS states, also the export of financial services of certain Armenian audit and consulting companies to post-soviet, European and Asian markets.

And since some of our neighboring countries have also expressed a wish to become the regional financial center, according to me, our priority tasks should be the formation of a corresponding legislative field, as well as the realization of corresponding educational programs, and in this issue our privilege over the neighboring countries is obvious already today.