Speech by Mrs Lim Hwee Hua, Minister of State for Finance and Transport, at "Essentials For Public Accountants" Seminar, 16 March 2006, 9.15 am at Raffles City Convention Centre16 Mar 2006
Good morning Guests, Ladies and Gentlemen,
1. I am very happy to be here this morning to deliver the keynote address at this inaugural seminar for public accountants, jointly organised by the Accounting and Corporate Regulatory Authority (ACRA) and the Institute of Certified Public Accountants of Singapore (ICPAS).
Changing Corporate Landscape
2. Given the corporate scandals of recent years, countries all over the world have introduced a series of regulatory and professional reforms to improve financial reporting and better protect investors from audit failures and other forms of corporate malfeasance. For instance, the Sarbanes-Oxley Act in the US and the European Commission's Eighth Directive on Company Law have imposed greater responsibility on directors, especially those serving on audit committees, by requiring them to have oversight of the internal audit function and internal controls in companies.
3. The corporate failures have also had the effect of putting the audit profession in the spotlight given that having reliable and high quality financial information is the necessary bedrock for any credible international commercial system. Credible and reliable financial information raises investors' confidence, which in turn facilitates business development, contributes to job growth and leads to financial prosperity. Auditors hence play a critical role in ensuring a thriving and growing economy.
4. In Singapore, the important role auditors place in raising trust in the financial system is reflected in the fact that auditors are legally required to report to the Minister for Finance when they come across a possible fraud or act of dishonesty by officers or employees against a public company in the course of their duties.
Role of ACRA
5. As the regulatory body overseeing both businesses and public accountants, ACRA actively seeks to put in place a holistic framework to ensure sound reporting standards and the high quality of public accountants in Singapore.
6. In Singapore, the regulation of the accountancy profession covers the following areas:
a) Admission standards;
b) Continuing professional education;
c) Audit standards;
d) Ethical standards;
e) Monitoring of audit quality, example, audit inspections; and
f) Disciplinary action.
In this regard, ACRA is assisted by the Public Accountants Oversight Committee or PAOC in short. The PAOC, which comprises members from the accountancy profession, legal profession and the academia deals not only with all operational matters pertaining to the registration of public accountants, but also oversees the monitoring of audit quality and the disciplinary process governing public accountants.
New Practice Monitoring Programme
7. A key function of the PAOC is its administration of the Practice Monitoring Programme, or PMP. Under the PMP, practice reviews are regularly conducted to monitor and audit the professional standards and practices of public accountants. Such reviews of the work done by auditors in Singapore are a valuable means to raise the confidence of businesses and investors in financial systems in Singapore.
8. In 2005, ACRA and the PAOC undertook a review and formulated a new approach to the PMP. The revised PMP has two key differences from the previous PMP. First, the new PMP approach places greater emphasis on collaborating with both international regulators and ICPAS. ACRA, being part of the Heads of Auditors Oversight Roundtable network, will leverage on its network of peers amongst the international regulators by learning from the common findings from their respective audit inspections. Under the new approach, ICPAS will also play a role in performing certain audit inspections.
9. Second, unlike the previous PMP approach, where all public accountants were reviewed over a four-year cycle, the new PMP will focus its efforts on reviewing audits conducted on public interest entities, which have a greater impact on the economy. Such entities would include listed companies and charities. The revised PMP mirrors the practices in major jurisdictions like the United States, Canada and United Kingdom. Details of this new programme will be publicly released today by the staff from ACRA and ICPAS.
10. Although the focus of the revised PMP will now be on the public accountants who audit public interest entities, this does not mean that auditors of smaller entities will be neglected. ACRA will collaborate with ICPAS in the audit inspections of public accountants who audit entities which are of lesser public interest. This collaborative effort will help to ensure that while more focus is placed on reviewing the audits of public interest entities, other entities will also not be neglected.
Launch of XBRL
11. An important feature of a well-functioning capital market is that relevant information about companies should be properly disclosed in a timely and accurate manner and such information is readily accessible by investors and analysts. In a knowledge economy, timely and accessible information is an extremely valuable commodity as it forms the necessary basis by which businesses and investors make their investment decisions.
12. With its increasing popularity, the Internet has become a quick and cost-effective medium for companies to disseminate corporate and financial information to their stakeholders. Regulators, especially those from major capital markets, are also moving towards systems that require the filing of accounts and statutory forms to be done via the Internet.
13. There is currently no common standard for companies when they publish or submit their financial statements online. This makes data retrieval and processing tedious given that a user is required to manually extract and re-enter the relevant financial data into his database before doing any analysis. This is time consuming, costly and error-prone.
14. To improve the accessibility of financial information, ACRA has launched a project to establish XBRL, or eXtensible Business Reporting Language, as the standard for online financial reporting to ACRA. This online standard will enable financial information to be easily retrieved from the online records of individual companies and transferred directly to financial analysts, regulators, auditors and other users of accounting reports.
15. As part of this effort, ACRA will be setting up a joint ACRA-ICPAS team to review the taxonomy to be adopted for identifying and filing financial information electronically. This joint effort with ICPAS will help ensure that key obstacles and issues facing practitioners are identified early and resolved in a manner that best meets the needs and concerns of the regulator and practitioners. ACRA will ensure that the reporting mode is user-friendly to ensure ease of reporting via XBRL. I believe that this effort will be highly useful for the business and financial community as XBRL is supported by the big four accounting firms, the International Accounting Standards Board, and major industry players such as Bank of America, Microsoft, Morgan Stanley, Reuters and NASDAQ. Some regulators in Australia, Japan, US and UK have also adopted XBRL for their regulatory filings. These include the US Federal Deposit Insurance Corporation ("FDIC"), the UK Inland Revenue Authority and the Tokyo Stock Exchange.
16. In conclusion, as public accountants, you have an overriding responsibility to the community in which you live in, not just to yourself or to your clients. Public accountants play an important role in protecting the public good, encouraging transparency and achieving economic growth and stabi lity.
17. It is a win-win strategy for public accountants to serve the interest of the public. A decline in the quality of auditing would not only erode public trust and investor confidence but also tarnish the reputation of accountants.
18. Just as Rome was not built in one day, building Singapore as a trusted environment requires time and commitment to truth and fairness. I trust you will continually reinforce public confidence in the public accountancy profession by being vigilant and by always pursuing the highest standards of integrity and practice.
19. I wish you a fruitful and stimulating session at today's seminar. Thank you.