THE FRIDAY INTERVIEW:  Joe Carr, Irish managing partner at accountancy firm Mazars THROUGH HIS position on the international board of accountancy firm Mazars, Irish managing partner Joe Carr used to find himself being quizzed about what was going on in Ireland during the property bubble years.

“I had heated discussions with our German partners who could not understand the Irish appetite for property in Berlin and elsewhere.

“Similarly, our New York partners couldn’t understand the Irish appetite for property. It was extremely difficult to explain to people what was happening and why.”

He laughs as he finds himself saying the latter sentence, obviously not considering it necessary to explain that when you can’t define why something is happening, it should serve as a warning sign that there is something odd afoot.

Carr has been a partner in his firm for 25 years. He started out in audit and then moved into business planning and management consultancy generally. The firm with which he started out teamed up with Mazars 20 years ago and became part of its integrated European practice (the firm originated in France). The Irish firm has about 200 staff, with offices in Dublin, Belfast and Galway.

Carr has been managing partner for the past eight years and was recently re-elected to the position by the 13 Irish partners.

He won’t give any figures for the profitability of the business. Fee income in the year to August 2009 was €27 million, down from €30 million the previous year.

The figure for this financial year, he says, is likely to be similar to last year. “Peak to trough has been about 5 per cent. We have a steadier model because of our spread.”

The firm has reduced salaries and reduced its fees. “Overall you would have seen about a 10 per cent reduction. It depends on the sector. Certain competitions are particularly severe in terms of price reductions.”

However volume of work has been increased in other areas, such as insolvency.

Overall, he says the “price issue” for professionals has been dealt with. “Where people had been taking super profits, in all professions, that has changed, although there still are niche areas where there could be more competition.”

In particular, there are niche areas where only the large firms are considered by clients and where competition is not as it should be.

It is a self-serving point but one about which he appears to feel strongly. Mazars audits and provides advice to about 15 per cent of the top 300 companies in Europe but in some places the market is not open to Mazars because clients do not fully accept that firms outside the big four have the competence to do the job. “There is nothing Mazars can’t do,” he says.

He suggests that major companies in Ireland should give more consideration to the benefits of joint audits, or audits that are conducted by two firms.

“About 25 per cent of the larger European companies have joint audits. We believe that is a good thing. It allows in fresh ideas and fresh approaches.”

Because it is part of an integrated international firm Carr’s office works on the Irish subsidiaries of multinationals that are being subjected to joint audits. However large Irish companies tend to favour single-firm audits.

“In the Anglo American world they are not popular [joint audits]. Some say it is more cumbersome and it probably is, but we think the benefits outweigh the costs.”

Mazars itself is audited by joint auditors.

He says it is fair to question the role played by auditors in the banking and property scandals. “We all have a duty to ask if we could have done better.”

By and large he thinks the system has done well in terms of producing sets of accounts that are a picture of where a company is at a particular time. There is no complicated issue for auditors in relation to how to treat “straightforward window dressing”.

The issue that has emerged has more to do with the treatment of risk. “The falling down that has occurred is in relation to predicting the future, which in turn affects the value put on assets. Some companies raced full steam ahead to the end of the bubble. Could more have been done by directors, auditors? But if audits need to be more forward looking, then how on earth is that done?”

Carr points out that auditors can be held liable for losses arising from “getting it wrong. If you don’t call it and you are held to be liable, you have to pay a lot of money.”

On the other hand, calling attention to real problems is part and parcel of what auditors do.

Prudence as a fundamental accountancy principle got lost during the boom/bubble years. We “should not make investment decisions that require everything to go swimmingly as really that is impossible”.

Perhaps because of his engagement with Mazars, a global firm with European roots, he peppers his remarks with praise for European and German prudence and conservatism.

To his mind, Ireland has yet to “mature” but he expresses the hope that the shock of the bust will help us do so. What is required of Ireland now is “good thinking and good execution”. The Government does not have huge resources to put into the creation of employment but it does have to clearly identify objectives the State can work towards.

“We need a bit of inspiration, a bit of drive. We don’t have money but inspiration and clarity of vision does not cost much.”

To his mind Ireland has been too “intuitive”, too anti-thinking.

“Those countries that think through their plans seem to do a lot better than those that seem not to.”

His work with clients over the years has led him to believe that SME management has improved in terms of quality of execution, but “the quality of strategy and business positioning still needs significant improvement”.

One consequence of the sharp downturn and the huge loss of jobs is that the State now has an infrastructure that is too large for the number of jobs in the economy.

The State needs to concentrate on the smart economy, new start- ups, foreign direct investment, but also our existing SMEs.

“If each of the good ones could do that little bit more, perform that little bit better”, that could contribute significantly to a return to the employment levels of three years ago.

An increase in employment numbers is also needed if we are to support our current levels of public expenditure. Society needs to decide what level of services it wants, and how it is going to pay for these services. “I think we need to work out what type of society we want.”

His view is that Irish people would prefer the European model, with its greater emphasis on “fairness and certainty” than the “boom and bust” US model. European society “leans towards greater prudence”.

ON THE RECORD:

Name:Joe Carr

Age:52

Family:married to Anne, two daughters Dearbhla and Muireann.

Why is he in the news?He has just been re-elected as managing partner of Mazars.

Hobbies:rugby, (played rugby for Clondalkin RFC and still a member); sea fishing; GAA; popular science reading.

Something you might expect:He believes major Irish companies should give more work to non-big four accountancy firms.

Something you might not expect:He believes the Irish want a conservative, European type regulatory regime.