Opening Address By Mrs Lim Hwee Hua, Minister Of State For Finance And Transport At The CPA Forum Swissotel The Stamford Friday, 17 August 200717 Aug 2007
Distinguished Guests, Ladies and Gentlemen, Good morning.
2 It is a pleasure to join you here at the CPA Forum 2007, jointly organised by ICPAS and CPA Australia.
RISE OF CHINA AND INDIA
3 This year's topic - "Connecting Asian Economies" is a timely and relevant one, given that Asia is still the most dynamic and fastest growing region in the world. Growth continues to be propelled by the strong expansion of China and India, of more than 8% over the past few years. This is an impressive figure given that in the same period, the growth of OECD countries remained relatively subdued at around 3%.
4 China, in particular, represents a huge market for businesses all over the world. China today boasts a GDP of at least US$2.7 trillion1 . According to the World Bank, China is already an integral part of the global supply chain as it has become one of the world's largest trading nations and producer of information technology. India, on other hand, is a dominant player in the area of services outsourcing. 30% of all financing and accounting work outsourced globally in 2006 went to India. Regional companies have been riding on this new wave, and this in turn has contributed to regional growth and prosperity.
5 We are able to participate in the rapid economic expansion of China and India because we are living in a globalised world - an environment where goods, services and capital flow relatively freely and easily across national borders. Companies and countries are consequently able to harness the comparative advantages that they have to bring better value for their customers and citizens.
GLOBALISATION AND ITS IMPLICATIONS
6 The Chinese have a saying, "????????" (pronounced as "Shui(3) Neng(2) Zai(4) Zhou(1) Ye(3) Neng(2) Fu(4) Zhou(1)")which means that currents have the ability to both carry and capsize a boat. Similarly, globalisation is a double-edged sword, as the increased interconnectedness not only creates opportunities but also presents risks. I am sure all of you still recall the speed at which financial panic spread and economies collapsed overnight during the Asian Financial Crisis in 1997. Similarly, the current volatility in the financial markets around the world, even though the trigger was the sub-prime market in the US, shows how interconnected and inter-dependent we have become.
COMPLIANCE WITH INTERNATIONAL STANDARDS TO ENHANCE COMPARABILITY
7 With rising globalisation and liberalization of capital markets all over the world, issuers and investors are increasingly looking beyond their borders for opportunities to invest and raise capital. It is thus important to have robust financial reporting systems which can ensure that the financial information investors have to use is accurate and timely.
8 One obstacle that investors have to overcome when making investment decisions is the way financial information is prepared and disclosed. It is not surprising that everyone, namely issuers, investors and stakeholders, believes that capital markets would benefit from the widespread acceptance and use of high-quality global accounting standards.
9 The rationale for a global standard, rather than the Babel of competing and sometimes contradictory national standards, is that it would ultimately improve investor confidence in the market. Standardisation would allow investors to draw better comparisons among the different investment options. It would also lower costs for issuers, who no longer have to incur the cost of preparing different sets of financial statements according to different accounting standards. And lower costs would benefit shareholders ultimately.
10 In Singapore, we recognise the need for the harmonisation of standards and have, since 2002, through the Council on Corporate Disclosure and Governance, adopted the International Financial Reporting Standards (IFRSs) and International Accounting Standards (IASs) issued by the International Accounting Standards Board.
11 The IFRSs are objective oriented and belong to the common accounting language adopted in many other major jurisdictions such as the European Union, China, Hong Kong, Australia, Russia, South Africa etc. In fact, nearly 100 countries currently require or permit the use of, or have a policy of convergence with, IFRSs.
12 We believe the adoption of the international accounting standards gives companies and auditors the ability to deliver numbers grounded in economic reality, while providing the comparability the market needs. However in order for the framework to really work, we need the preparers of accounts and auditors to focus on the spirit of the standards. This is crucial as consistency and faithfulness in the interpretation and application of IFRSs are two key factors to the creation of a seamless, integrated capital market.
POSITIONING SINGAPORE AS THE REGIONAL HUB FOR PUBLIC ACCOUNTANCY PROFESSIONAL SERVICES
13 Let me now move on to another important development. Besides the need to adopt international accounting standards in order to make accounting records compatible and comparable, another effect of globalisation is the increased mobility of human talent.
14 This need for talent is especially evident in the accounting profession. Consider this. According to a report in Accountancy Age, as a result of its growth, China currently needs at least 300,000 qualified accountants. As for India, it was estimated that it would need at least 50,000 Chartered Accountants by 2010.
15 Just as we have become one of the financial hubs for the Asia Pacific region, we see the accounting profession in Singapore as having the potential and capability to grow and become a regional professional service industry to serve not only the Singapore business community but also overseas markets. I am pleased to note that the accounting profession has already made inroads into countries such as Vietnam, as evidenced by the Memorandum of Cooperation signed between ICPAS and the Vietnam Association of Certified Public Accountants in June this year.
16 Our local accounting professionals have a strong reputation for being competent and reliable, and are highly sought after in many other markets. At present, we have about 165 members of ICPAS working in Australia, 108 in China, 139 in Hong Kong, 218 in Malaysia and the numbers have been rising over the years.
17 Take China for example, Singaporean accountants are popular there because they are effectively bilingual, fluent in both Mandarin and English. Besides being familiar with Mandarin, there is also the shared culture affinity and of course, our familiarity with international accounting standards. This is crucial because in China, there is a growing trend for companies who want to make a public statement about the soundness of their governance by publishing IFRS-compliant accounts for global investors.
18 Our accountants who work overseas must continue to uphold high standards wherever they are. They must always strive to present accounts in a fair and accurate fashion.
PRACTICE MONITORING PROGRAMME
19 I have been told that what makes our accountants stand out is Singapore's reputation for trustworthiness, integrity and competence. This is a hard-won reputation. And it is to safeguard and ensure the high auditing standards that we have initiated the Practice Monitoring Programme or PMP in Singapore. Under the PMP, the professional standards and practices of public accountants are audited. Such reviews of the work done by auditors in Singapore are a valuable means to further raise the confidence of businesses and investors in the financial systems in Singapore.
20 ACRA recently announced the results of PMP reviews conducted on p ublic accountants for the period from April 2005 to March 2007. Though the majority of the public accountants received either a "Good" or "Satisfactory" review outcome, media attention was focused on those who were required to undertake remedial action.
21 So, how should we interpret the findings of the PMP? Obviously there is always room for improvement. However, it would be premature or even unfair for us to draw conclusions from this first set of PMP results about the quality of the work of the entire profession. What is more important is that the publication of the PMP findings has helped to create greater awareness, within the profession and the business community, of the emphasis on audit quality. And I should add that ACRA does not take any pleasure from finding inadequacies, nor does ACRA have a quota to fulfil. In fact, the vision is one of reaching the day when every Public Accountant passes without any remedial action.
22 Moving forward, we should start to examine how we can help our accountants stay relevant and competent. Towards this end, I am heartened to note that ICPAS has in place Continuing Professional Education programmes such as seminars, workshops and conferences, to help professionals keep abreast of the latest standards and developments.
INCREASING THE SUPPLY OF ACCOUNTANTS
23 Our discussion will not be complete without an assessment of the supply of accounting professionals. Even as we strive to maintain the high audit standards, the Government is also looking at ways to increase the supply of accountants in Singapore. I am happy to note that the profession has responded to the challenge, with the local Big 4 accounting firms taking the lead to ensure that the starting pay for accounting graduates is competitive.
24 However talent management is not just about recruitment, but also about retention. And an attractive remuneration package may only be a hygiene factor. We need experienced managers and future partners in our accounting firms. There is hence a need to emphasize issues such as career prospects, personal development opportunities and work-life balance.
25 Specifically, ACRA has launched a public consultation on how we can address this challenge. For example, we would like to hear your views on whether more could be done to facilitate the entry of international auditors, former public accountants or mid-career from other professions into auditing. I would like to take this opportunity to encourage all of you to actively participate in this consultation.
26 In conclusion, while there are challenges facing the accounting profession, there are also plenty of opportunities. Our accountants have attained a certain brand premium and credibility. We must continue to build on the Singapore CPA brand, and leverage on the new prospects provided by an increasingly globalised world and inter-connected Asia. We undertake these not alone, but as a group. This brings to mind an African proverb which goes something like this, "If you want to travel fast, travel alone. If you want to travel far, travel in a group". Of course, in Singapore, we not only want to travel far, but also fast. So let's do so together.
27 With that, may I wish you a fruitful and stimulating session at today's Forum. Thank you.