Speech by Mr Lawrence Wong, Deputy Prime Minister and Minister for Finance at the ISCA 60th Anniversary Dinner, 25 Jul 202325 Jul 2023
My Parliamentary Colleagues,
ISCA President and CEO Mr Teo Ser Luck and Ms Fann Kor,
Ladies and Gentlemen,
1. I am happy to join all of you here tonight to celebrate the diamond jubilee of ISCA. From just eleven founding members, ISCA has grown to become Singapore’s largest accounting body, with around thirty-four thousand members. You not only have the largest membership; I think you probably also have the most diverse membership. Certainly, in terms of age, I understand that the oldest member of ISCA is not the oldest gentleman in this room as mentioned by Ser Luck just now, but someone who is one hundred and one years old. The youngest member is a student, just twelve years old! Not a full-fledge member, but someone who already aspires to be a Chartered Accountant. So, you are already starting to build your pipeline of talent.
2. Indeed, over the past 60 years, ISCA has played a key role in Singapore’s growth and development as a global financial and business centre. Accountancy is not something that people immediately think about when they think about our economic transformation. But in fact, ISCA, and all of you accountants, do so much to create the conditions for economic success in Singapore. A respected and capable accountancy sector provides investors assurance about the veracity of the financials, about corporate governance of our companies. And it also facilitates good business decisions and supports the vibrancy of our economy.
3. Indeed, over the decades, ISCA has been instrumental in upholding professional and ethical standards. You have uplifted the capabilities of the sector to meet the needs of our evolving economy, and as Ser Luck said just now, you have also done your part as a good corporate citizen, with many initiatives to give back and contribute to the community. Because of these efforts, the Institute has raised its global standing to become a member of the Chartered Accountants Worldwide. So tonight, let me congratulate everyone and ISCA on your 60th Anniversary and, also thank you, for your many contributions to Singapore! Thank you very much.
Upholding High Standards
4. Accounting is a unique profession, because your primary obligations are not just to your clients, but you also have a duty to uphold the public interest. Public accountants and auditors must ensure that financial statements are presented in conformity with accounting principles and the applicable rules. When the accounts of their clients fall short, accountants have an obligation to call this out, even if it means losing the client.
5. In Singapore we have long emphasised the importance of the accountancy profession. Back in 1966, the then-Minister for Finance Mr Lim Kim San called on accountants to be “guardians of business ethics”. That call remains more relevant and important today, perhaps even more so.
6. Because recent events around the world show that accounting lapses and fraud remain a very serious concern. Just take the recent case of the crypto-exchange FTX – the company’s accounts were given a clean bill of health by the US auditor, and then just a year later the company collapsed into bankruptcy. The auditor of course claims that they had done all they could, that they did nothing wrong, and they were not engaged to audit internal controls. But they are now being sued by FTX customers for being “reckless or wilfully blind”, and US regulators are of course looking into the matter.
7. In the UK, a major accounting firm was taken to task last year for providing false and misleading information to regulators over its audits of a major construction company, Carillion, which collapsed in 2018 after its accounts were found to be fraudulent. This was just the latest in a series of tough disciplinary actions by the British government, aimed at restoring confidence after successive accounting scandals.
8. Locally, we also have our fair share of accounting mishaps. You would remember commodities trader Noble Group went insolvent a few years ago, leaving many investors with losses. Investigations revealed it published misleading information in its financial statements. We have fined this company (~$13 million) and issued regulatory orders against the local auditors involved.
9. The point is, we cannot afford to allow our standards in Singapore slip. That is why I have asked ACRA to review our regulatory framework, benchmark against best practices overseas, and ensure audit quality, and provide confidence to the market on the continued reliability of financial information in Singapore. Of course, no system can be fool proof. From time to time, lapses or fraud can still occur, and if they do, we will act swiftly to take the necessary regulatory actions, including against the auditors if their work falls short. We will continue to uphold high standards, and safeguard our reputation as a trusted place of business.
Future of Accountancy Profession
10. Meanwhile, as our economy continues to evolve, so too will the role of accountants. We are already seeing some of these changes today. For example, accountants have gone from being just being “guardians” of business to “interpreters” of business too. You are expected to help decision makers make sense of the increasingly complex business operations and provide strategic advice on the direction of the company.
11. So, the demands and expectations on our accountants will only grow over time.
a. With rapid advances in technology, the regular preparation and auditing of financial accounts will be increasingly automated. This means that accountants will be expected to move into higher value-adding areas, like business analytics and advisory work, to support firms in achieving their business goals.
b. At the same time, with the move towards carbon neutrality and net zero, accountants will play a crucial role to help businesses incorporate sustainability into their corporate strategies in a meaningful and sensible way. And as sustainability reporting picks up, there will also be demand for auditors to provide assurance and verify these sustainability reports, to ensure their credibility.
12. To meet all of these changing demands, the accounting sector will need to transform – it must find ways to embrace new technology, and help accountants keep up with fast evolving regulations and standards, especially in new emerging areas.
a. To help the sector and to facilitate this, the Government has consolidated our regulation, standards setting, and sector development work, and placed them all under ACRA. We announced this recently. This will shorten the feedback loop between our regulatory and sector development work and allow us to better support the accountancy sector.
b. But transforming the sector will depend on more than just ACRA alone. It will require the collective effort of everyone, including ISCA. In particular, I commend ISCA on its efforts to make training more accessible and convenient, and to help accountants learn and remain up to date in your skillsets. If you saw the history wall when you came in, you would have seen the “ISCAccountify” platform, which I understand is a very popular platform amongst accountants. So, I think we should also give a very big shout out to the team at ISCA for the excellent work that they continue to do.
13. But more importantly, we must combine our efforts to work together to tackle some of the structural challenges in the accountancy profession today. What are some of these challenges?
14. Anecdotally at least, we hear that firms are continuing to report growing demand for accounting services, but you cannot find enough accountants to meet this growing demand. And indeed, we can see from the data that fewer students are enrolling in accounting degrees, and amongst those who do enrol, a reducing proportion, go on to pursue accounting-related careers after their graduation. In other words, there is a relatively high “leakage” of accountancy graduates to other sectors. In some ways, you say this is okay, because accountancy is a very versatile field, you can go on to do all sorts of fields, but one must start to worry. Why are people trained in accountancy not joining the accountancy sector?
15. Why is this happening?
16. Some say that the starting salaries are not attractive enough. This could well be one of the factors. Because today the starting salaries for accountancy graduates joining accounting firms range from $3,200 to $3,800. That is below the median starting salary of a university graduate, which is $4,200. It did not use to be so thirty years ago, I assure you. When I was a student, I know that my accountancy friends were earning well above the median. But now, accountancy graduates joining accounting firms are earning below median. So, you cannot blame them from joining other sectors.
17. But of course, salaries are determined by competitive market forces. I ask some of the accounting firms, and major accounting firms – why do you not pay more? They will then tell me, “Ask the clients to pay me more”. In fact, all corporate Boards and Audit Committees must appreciate and understand that value that audit brings to the business, value in terms of instilling discipline, deterring fraud, or upholding good corporate governance. In fact, all Board directors must be prepared to pay reasonable fees for quality audits, rather than try to keep fees as low as possible. But in the end, the market will determine how much accountants are to be paid, based on the value they bring, and the price that customers are prepared to pay for their services.
18. So, salaries may be an issue indeed, but I think we have to go beyond the issue of starting salaries. We have to think harder about the important roles that accountants play, both now and in the future, and come up with effective ways to develop and nurture a strong and healthy pipeline of accountancy professionals in Singapore.
19. To dive deeper into this matter, MOF has set up the Accountancy Workforce Review Committee (AWRC), which is co-chaired by former Singapore Accountancy Commission Chairman Chaly Mah and 2nd Permanent Secretary of the Ministry of Finance Lai Wei Lin. The Committee brings together key industry players and members of academia to look into the issues holistically.
20. The work of the Committee is ongoing. But let me share my own views on the matter. And I must preface, these are not official views, these are my own thinking.
21. I believe we need to take a more granular approach in looking at the different groups of accounting professionals.
22. At a broad level, we should encourage more people in business to have some basic accounting skills. Virtually everyone in business ought to be able to read and understand financial statements – everyone can benefit from it. Some may wish to go further and specialise in accountancy, and we should encourage that.
23. So, we should not assume that only accountancy graduates can join the profession. With the right training, there is no reason why this should be so. For example, students of Economics, Finance, Business Management and other degrees can all benefit from some exposure in accountancy during their studies – certainly I did, when I was in university doing accountancy classes, even though I majored in economics. And after they enter the workplace, some may eventually decide to take up the professional qualification to become full-fledged accountants.
24. This means that we should find ways to broaden the pathways to the profession. One way to do this is to make the Singapore Chartered Accountant Qualification (or SCAQ) more accessible and open to everyone, including people from different backgrounds. To be clear, I am not suggesting to lower standards. The standards must remain high and cannot be compromised. But we can certainly make training courses and learning resources more easily available for non-accounting graduates to study and prepare for the exams themselves. We can also recognise the relevant coursework they have taken in school, as well as their relevant work experience in meeting the SCAQ’s requirements.
25. Overall, I believe that having accountants with a wider variety of backgrounds and disciplines will enrich the profession and will better equip it to deal with the accelerating pace of change and transformation in our economy. I personally know of several people with non-accounting backgrounds, who later became Chartered Accountants and Public Accountants, and they do well in their careers, but that is the minority.
26. So, I think that is one way we can do to widen the base of accounting skillsets. But on top of this, we should pay extra attention to nurture the next generation of accountancy talent. So, beyond a broad base, we need to build talent, and we need to pay extra attention to this.
27. In the past, the major accounting firms would do this by recruiting accounting graduates to join as auditors first. Then after they have completed several years of foundational audit work. Then they could be rotated to other practice areas such as advisory and consultancy, to broaden their experience. But this linear approach of talent development is coming under greater pressure, and is becoming less attractive to young people, who themselves have many more exciting career options to consider.
28. So, the accountancy profession will have to develop new ways to identify high-calibre young people and engage them early while they are still in university. We could even work with the universities to redesign the curriculum, to develop differentiated curriculum and programmes for such students, for example, by giving them greater inter-disciplinary exposure, or high-quality work-study experiences. And when they graduate, the accounting firms could also recruit them as Management Associates, with a view towards helping them develop in their career as specialists or leaders in the profession, depending on their interests. And there are many areas we can develop specialist capabilities in, like forensic audits, tax audits, full range of areas where we do need a lot of talent.
29. So in essence, my suggestion is to widen the base of accounting skillsets, and to build up the peaks of accounting excellence. It is two things, not just widen the base, but to do both wide base and high peaks. These are as I said, my own perspectives formed after engaging various professionals in the field. I’ve shared them with the Accountancy Workforce Review Committee. In the end, the Committee will have to take in all the feedback, study the issues carefully, and put up their recommendations later this year. The Committee has been engaging various stakeholders, including employers, universities, young accountants and students, as well as many of you here in this room. If we put our collective minds together, I am confident we can keep the accounting profession strong, vibrant and ready for the future.
30. Now, more than ever, we will need accountants that can build new capabilities and help our companies grow and transform, while maintaining high ethical and professional standards.
a. Achieving this will require our collective effort, not just from Government, but also key industry partners such as ISCA, and outstanding members of the profession.
b. We have many fine examples here tonight. Many of you here have made significant contributions to the accountancy sector, and to Singapore. In particular, we are recognising some of you later this evening – Minister Indranee with an Honorary Mention Award, she oversees the accountancy sector in MOF. And she has been in close contact with ISCA over the years, deliberating over these issues. We have special appreciation awards to Mr Chaly Mah, who many of you know, continues to be a key figure in the profession. As does Ms Lim Hwee Hua, who was instrumental in driving changes in the accountancy sector when she was in the Ministry of Finance.
c. Of course, we have Distinguished Lifetime Membership Awards to a fine number of people, Minister Grace Fu, Mr Boon Swan Foo, Mr Willie Cheng, Mr Bobby Chin, Dr Gerard Ee, Ms Fang Ai Lian, Ms Euleen Goh and Mr Michael Lim. As you can see from their names, all are very distinguished accountants in their own right, but they have also all made their mark in a whole range of different fields and contributed to Singapore in many ways. So, a big thank you to all of you for your contributions to ISCA and the accountancy profession and to Singapore. Thank you very much.
d. Looking ahead, I think there are many exciting opportunities for the accountancy sector. There are challenges before us, but in life, there will always be many challenges, whether it is swimming 5.5km in open sea, or 55 laps of hundred metres. I think it is not the challenges that define us, but how we respond to the challenges that truly matter. So, let us continue to work together to breathe new life into the important work of accountants, and create more meaningful and fulfilling pathways for the next generation of young accounts, and nurture a sector that enables Singapore’s continued success as a business and financial hub. Thank you very much and congratulations everyone.