Opening Address By Mrs. Josephine Teo, Minister Of State For Finance And Transport, At The Public Accountants Conference

Ms Lim Soo Hoon, Chairman, ACRA,
Ms Juthika Ramanathan, Chief Executive, ACRA,
Distinguished Guests,
Ladies and Gentlemen

Good morning. I am happy to join you at this year’s Public Accountants Conference.

Challenges for the accountancy sector

Step up partner involvement to keep audit quality high

1. When I joined you for the conference last year, we had discussed the increasing emphasis on audit quality. One year on, this matter remains relevant.

2. Audit, along with financial reporting, corporate governance and regulation each play an important role in upholding confidence in the integrity of our business sector. Whenever capital markets are rocked by news of corporate failings, calls for stronger corporate governance and higher quality of audits grow louder. There is thus great value in maintaining high standards of audit quality as it helps Singapore to upkeep our standing as an international financial and business hub.

3. To keep an eye on the quality of audit in Singapore, ACRA has a Practice Monitoring Programme (PMP) which many of you are familiar with. For the first time this year, the PMP Report captures useful information on partner time-involvement in the audits of listed companies. As partners are usually the most senior and experienced persons in the firm, their involvement gives an indication on the extent of supervision and as well as the quality of audit. Through the PMP, ACRA found in a majority of the engagements, partner-involvement of less than 5% of total engagement time. This is a cause for concern.

4. I urge members of the profession to take note of ACRA’s finding. There is a need to ensure audits comply with auditing standards and demonstrate a healthy level of professional scepticism. To achieve this, audits must be conducted by properly trained audit professionals with substantive involvement of engagement partners.

5. When the quality of audits is in question, the real and perceived value of audit is diminished. It leads to audit being thought of as merely a statutory obligation, an expense to be kept as low as possible. Such as attitude would be inconsistent with the goal of developing Singapore as a global accountancy hub.

Profession still attractive to undergraduates but retention a challenge

6. Audit quality is also dependent on a firm’s ability to attract and retain talents. The good news is that the pipeline of talents for the profession remains healthy. Accountancy is still one of the top degree choices in Singapore as shown in a recent survey. The not-so-good news is that a rising number of accountancy graduates choose to work in other finance-related jobs immediately after graduation or after a few years in the audit line, as their degree and experience are highly valued by other industries.

7. To better understand the underlying causes of such trends, ACRA commissioned a Talent Survey of 1,200 audit staff in firms that serve the public interest entity audit market. This is about 25% of the total audit staff from the participating firms.

8. One encouraging finding is that the audit staff strongly affirmed their passion and dedication for their work. They are highly motivated and driven to do a good job. But the survey also indicated that they feel frustrated because of high work load, poor work-life balance and low quality of management accounts prepared by clients. Some of the survey participants also indicated that if the engagement partners were more involved in their work, and helped in the execution of the audit plans, it would certainly uplift their morale and improve productivity of the whole audit process. Some of these factors are causes for these young audit professionals to seek alternative career options outside the profession.

9. While not unique to the accountancy profession, the challenge of talent retention poses serious challenges for accounting firms. It goes to the heart of long-held audit processes, organisation structures within firms, as well as promotion and remuneration schemes.

10. Firms that find new ways to engage the new generation workforce, who have different outlooks and aspirations, will be better positioned to maintain their talent edge. Equally important, the profession must be able to retain a fair share of talents to help it grow in capability and stature, in Singapore and globally

Collaborative action key to tackling challenges

11. As Singapore seeks to transform itself into a global accountancy hub, there is much scope for collaborative action between the key stakeholders including ACRA, large and small firms, as well as professional bodies such as ICPAS.

Merger of smaller firms a way to build breadth and depth

12. Some smaller firms are joining hands to capture expansion opportunities and build resilience. A good example is the merger of HT Khoo & Associates with PKF-CAP. Both firms recognised the importance of growing in breadth and depth to continue serving their SME clients whose needs have also expanded, for example, to require audits of overseas subsidiaries. A merger is not without risks but the partners decided that it was the best way to enlarge their practice and achieve economies of scale. The last year has seen five similar mergers of small and medium-sized public accounting practices (SMPs).

Regulator and Professional Bodies boost quality efforts

13. The professional bodies are also making their contribution. For example, to boost Singapore’s productivity efforts, CPA Australia and the SMU School of Accountancy collaborated on a book entitled “Accounting & Productivity”. This book shares practical and workable solutions on productivity challenges in accounting firms.

14. ACRA, as the regulator of public accountants, is also fully behind the profession. A key thrust has been to encourage firms to build up firm-wide quality controls to sustain audit quality, rather than to depend on individuals alone. To further support firms in this effort, ACRA will be publishing a series of Audit Practice Bulletins that discusses the practical implementation challenges and best practices in each of the six elements of quality controls set out in the Singapore Standard on Quality Control 1 (SSQC 1).

Singapore Accountancy Commission to be established

15. On a broader level, the government is also committed to implement the 10 recommendations put forth by the Committee to Develop the Accountancy Sector (CDAS). One exciting development is the establishment of the Singapore Accountancy Commission (SAC), which will soon be formed via legislation to champion the development of the accountancy sector. Doing so will be significant, as it will put the accountancy profession on the same footing as the legal, medical, architectural and engineering professions, all of which are overseen by statutory bodies. The SAC will largely be led by industry representatives whose knowledge of the industry needs and wants puts them in a strong position to drive the developments of the profession.

Good progress in the development of the SQP; first students to be registered in June 2013

16. One of the SAC’s key tasks is to design and develop a new professional accountancy qualification, the Singapore Qualification Programme (SQP). As spelt out in the CDAS recommendations, our ambition is to grow SQP into a globally-recognised mark of excellence of Singapore’s accountancy profession.

17. The SQP is designed to complement existing university training of accountants. It will build on the knowledge gained at university and help strengthen the capabilities of accounting professionals through mandatory practical experience. SQP will enhance individual employment mobility and at the same time enable firms to broaden their recruitment options to include non-accountancy graduates. Doing so will add diversity and deepen skills of the talent pool available to the industry.

18. An important partner in the design and implementation of the SQP has been the Institute of Certified Public Accountants of Singapore (ICPAS). I am greatly encouraged that ICPAS, as the national body representing over 25,000 accounting professionals, has come forward to lend its full support and commitment to the success of the SQP. It has provided valuable inputs and technical knowledge as members of the SQP working groups.

19. Let me also take the opportunity to acknowledge the many moves taken by ICPAS, through its leadership, to prepare the Institute for its continued contributions to the development of the accountancy profession in Singapore. ICPAS will certainly have an important role in operationalising the SQP.

20. The SAC targets to launch the SQP for student registration by June of 2013 . It is an ambitious but realistic timeline. The finalised syllabi for the four technical modules of the SQP were released last month. SAC is currently working towards the appointment of a publisher to develop the syllabi. The SAC has also started engagements with employers to facilitate career opportunities for the SQP-qualified professionals.

Conclusion

21. Let me wrap up my comments.

22. The global accountancy market is expected to reach a value of $487.6 billion by 2015, an increase of 34% since 2010. In spite of the uncertainties in the global economy, there are still opportunities for Singapore and for our accounting firms. We enjoy a sound reputation with integrity as a hallmark. It is an advantage that has been carefully built up and which puts us in a good position to grow further.

23. The profession will be stronger if we are steadfast in our efforts to address concerns such as audit quality and talent retention. We are taking steps such as the setting up of the SAC and the development of the SQP to further strengthen the profession. I hope today’s Conference provides the impetus for each firm and individual to also take the next step in your own growth.

24. I wish you all a fruitful day ahead. Thank you.