Second Reading Speech By Mr Lim Hng Kiang, The Second Minister For Finance, On The Accountants Bill 2004, at The Parliament, 6 Feb 2004

Mr. Speaker, Sir, I beg to move, "That the Bill be now read a second time".

Introduction

2 This Bill before the House seeks to repeal and re-enact with amendments the Accountants Act (Cap. 2), in conjunction with the establishment of the Accounting and Corporate Regulatory Authority, or ACRA.

Public Accountants Oversight Committee

3 ACRA will be responsible for administering the Accountants Act. This includes the registration of public accountants, accounting corporations and accounting firms, as well as the regulation of the auditing practice.

4 Part II of the Bill sets up a Board committee, to be called the Public Accountants Oversight Committee, or PAOC for short. The Committee will comprise representatives from the public and private sectors, including at least one public accountant. The PAOC will assist and advise the main ACRA Board on administrative matters, especially those pertaining to the regulation of public accountants. The main ACRA Board will focus on strategic and policy-related issues.

Regulatory Framework for Public Accountants, Accounting Corporations and Accounting Firms

5 Parts III to VII of the Bill strengthen the regulatory framework for the audit profession in Singapore.

Accounting firms

6 First, this Bill sets up a Register of Public Accounting Firms, in line with the regulatory framework already in place for individual public accountants and accounting corporations. It allows ACRA to take disciplinary action against errant accounting firms. This is consistent with the practices in leading jurisdictions such as the US and UK.

7 Second, the new Accountants Act will require only two-thirds, rather than all, of the partners of an accounting firm to be public accountants. This allows firms that engage in tax or corporate secretarial work, in addition to audit work, to register as accounting firms. As long as two-thirds of the partners in their firms are already registered as public accountants, partners who do not perform audit work no longer need to register as public accountants.

8 Third, this Bill deregulates the "Certified Public Accountant", or "CPA" title. All accountants, including public accountants, will be free to use titles indicating membership of professional organisations or accountancy degrees. As a safeguard against fraudulent representation, the Accountants Act will prohibit a person, body corporate or firm who is not registered by ACRA from practising as, or holding out to be, a public accountant, accounting corporation, or accounting firm.

Registration criteria for public accountants

9 The registration criteria for public accountants will continue to include qualifications, practical experience and membership in a professional association. With regard to membership in a professional association, the Institute of Certified Public Accountants of Singapore, or ICPAS, will be the only professional association recognised for this purpose, at least for the time being.

10 ICPAS will transit from a statutory body to a non-statutory society for the accounting profession in Singapore. This is consistent with the practices in other leading jurisdictions such as the UK, the US and Australia, and will be similar to the approach that we have adopted for other professionals, including the architects, doctors and engineers. The Bill transfers ICPAS's assets, liabilities, employees and members to its successor entity. To further facilitate the transition, the current ICPAS Council will serve as the interim governing committee of the successor entity until new elections are held.

Practice Monitoring Programme

11 Part V of the Bill formalises the Practice Monitoring Programme, or PMP. This is a key provision in strengthening the regulatory framework for public accountants. Through the PMP, the PAOC will monitor the professional standards and practice of public accountants.

12 Clause 34 provides for the establishment of a Practice Monitoring Sub-committee to assist the PAOC in designing and implementing the PMP. PAOC will have the powers to take action against public accountants who fail PMP reviews, including the recommendation of remedial steps to improve professional practice, restriction of practice, suspension and de-registration. The Bill also provides public accountants an avenue of appeal to the High Court against decisions of the PAOC.

Two-tier Disciplinary Process

13 Part VI of the Bill sets up a two-tier disciplinary process comprising the Complaints Committee and the Disciplinary Committee to process complaints against public accountants. The improved disciplinary process is modelled after the legal and medical professions in Singapore.

14 All complaints will first be evaluated to determine if a prima facie case has been established for the setting up of a Complaints Committee. The Complaints Committee will review the case to determine whether the case is to be dismissed or whether it necessitates a letter of advice or warning to the errant public accountant, accounting corporation or accounting firm. If the case requires further investigation, the Complaints Committee will recommend to the PAOC to constitute a Disciplinary Committee to hold a formal inquiry. The Disciplinary Committee will recommend to the PAOC the appropriate disciplinary action, including de-registration, suspension, restriction of practice, imposition of penalty and censure.

Penalties on Professional Misconduct

15 The Bill increases the maximum penalty that may be imposed on an errant public accountant, from S$5,000 to S$10,000. In addition, the Bill sets at S$100,000 the maximum penalty that may be imposed on an errant accounting firm. The higher penalties are necessary to serve as a deterrent against professional misconduct.

Conclusion

16 Sir, in closing, I would like to thank the Institute of Certified Public Accountants of Singapore for giving valuable feedback in the drafting of the Accountants Bill. ARCA will continue to work with all its stakeholders to ensure a smooth transition and to uphold a forward looking regulatory framework for the auditing profession.

17 Mr. Speaker, Sir, I beg to move.