17 Jun 2016   

Businesses in Singapore today face challenges on several fronts. Compliance with escalating levels of regulatory governance, mounting shareholder expectations and adapting  to rapid technological advancements  are some of the crucial areas that they have to surmount. 

To help them with these business challenges, companies engage the assistance of accountants, whose role has evolved from one of accounting and compliance, to offering expert advice pivotal to the survival and growth of the organisation.

With the variety of options for accounting services available in the market, it is imperative for a company to understand its specific needs and go through a rigorous process to select the right accountant for any engagement.

The different players in the market

There are around 701¹ accounting firms, referred to as Accounting Entities (AE), in Singapore offering a wide range of accounting services (primarily auditing, book keeping and other assurance services), taxation (compliance and tax advisory) as well as advisory services (including corporate finance, internal audit and risk management etc).

The AEs vary significantly in  size and business structure. Globally, there are the Big Four with network firms located all around the world, the mid-tiers which are also large firms with an international network, and the small- and medium-sized practices (SMPs) which could be helmed by a sole proprietor or a few partners. International networks allow the firms to deploy a standardised global methodology, facilitate cross border engagements, and share resources and infrastructure.

As at 2015, the Big Four entities collectively employ more than 9,000¹ staff members, or 53%¹ of the total workforce working in AE segment.  67%¹ of the AE segment’s total market revenue were contributed by the Big Four entities in 2015.  The other AEs formed the remaining 33%¹ of the total market revenue, employing 47%¹ of the AE workforce.

 Profile of Accounting Entities (AE) in Singapore ¹

*Estimated

¹Extracted from the Accounting Entities Census 2015 conducted by the Singapore Accountancy Commission

https://www.sac.gov.sg/sites/default/files/%23AECensus%20Report.pdf

Due to the large headcount and diversity of talents, the Big Four entities supply a well established array of services to an extensive range of industries. They  take up the majority share of listed companies and public interest entities (PIEs) clientele. As such, they have a wealth of experience in PIEs and specialised industries, such as banks and insurance companies. 

That being said, the non Big Four firms also play an integral role in supporting and shaping the financial environment of Singapore today. Though serving a smaller piece of the market, they also audit a number of listed companies and PIEs. Due to their considerable size of talent pool,  the mid-tier firms are also well placed to offer clients sophisticated and specialised professional services. Possibly, the thin line separating the Big Four and mid-tiers, apart from absolute size, is that Big Four  is globally branded as a group. The mid-tier firms have been rapidly expanding and improving and many at present offer services and expertise rivalling that of Big Four firms.

Traditionally, SMEs (Small and Medium Enterprises) rely heavily on SMPs for their services, often due to their competitive fee pricing and cordial working style with the practitioners fostered over time. SMEs may prefer a more personable relationship by working with a smaller firm and the SMP may  understand the unique challenges faced by a SME better. The SME sector should not be neglected as SMEs constitute the bulk of enterprises in Singapore and contribute significantly to the GDP of our country.

The setup of the mid-tier firms  and SMPs is diverse. They range from micro firms with less than 10¹ staff members to larger set ups of up to 1,000¹ staff members. Typically, a firm with limited resources may provide  assurance, accounting, compilation and tax services, which constitute almost their entire revenue. Increasingly, more AEs, regardless of their size, are evolving to provide higher valued-added services, such as consultancy and advisory services. According to the AE census 2015 conducted by the Singapore Accountancy Commission,  80%¹ of the 265¹ AEs that responded are expecting to see more revenue growth in non-audit services in the next 12 months.

Given their number and distribution across the accountancy sector, the mid-tier firms and SMPs have a wealth of experience in numerous industries – giving them a sound reputation of being able contributors supporting the accounting needs of businesses in Singapore.

The choice of accountant

Companies are free to appoint their choice of accountant after analysing the scope and complexity of the engagement. For example, in the case of an expanding company, there may be an increasing need for more sophisticated services as it develops.

Commensurate with the change in size and structure of the business, services may include cross border tax advisory for overseas ventures, Initial Public Offerings (IPOs), financial modelling, mergers and acquisitions. Not all AEs would have the capabilities to offer these services. Consequently, companies may end up approaching different AEs for different services; the merits of this would be upholding independence and avoiding conflicts of interests. Sound corporate governance practices would indicate rigorous internal approval process prior to this appointment.

However, if the engagement is for a statutory audit that requires the issuance of an audit report then the individual assigned must be a Chartered Accountant  of Singapore, and also a Public Accountant (PA) registered with Accounting and Corporate Regulatory Authority (ACRA).  To be a public accountant, it is mandatory to be a member of the Institute of Singapore Chartered Accountants (ISCA).

As the national accountancy body, ISCA plays a vital role in developing the profession and ensuring our members stay abreast of current developments.   All ISCA members must satisfy annual continuing professional education (CPE) requirements to maintain their ISCA membership. CPE is essential to ensure accounting professionals are equipped with the latest technical knowledge and  are aware of changes in standards and regulations.

Furthermore, the PA is subject to the Practice Monitoring Programme (PMP) inspections performed by ACRA and ISCA, to ensure compliance with the Singapore Standards of Auditing (SSA) and other professional requirements to ensure  the work is carried out with due diligence.

PMP is an important regulatory instrument in promoting audit quality and enhancing users’ confidence in the audit process. If the outcome of the PMP is not satisfactory, sanctions could be imposed on the PA, such as revisits, hot review (having a concurring reviewer), restrictions on audit of certain entities, suspension of practice and the most severe being cancellation of registration. Partners who are not involved in audit engagements will not be subject to a PMP review. However, this does not diminish the knowledge and expertise of such individuals.

Factors to consider

For businesses and organisations, a thorough understanding of  their requirements and exact scope of services is essential before other variables can be assessed meaningfully. 

For many clients, price can be an important consideration. Competitive prices matched with value for the services rendered will always be a vital factor. The price quoted will be based on the estimated time taken to perform the engagement and the complexity of the work.

Availability of staff with the required technical competence matching the demands of the engagement should always be taken into evaluation. The AE needs to have a thorough understanding of their client’s business and financial reporting requirements. This is achieved via clear agreement of the scope of service between the company and the accountant, thereafter allowing the assignment of both sufficient and appropriate personnel for high quality delivery of the job within the stipulated timelines.

The AE should have a robust infrastructure already in place to execute its duties, with ready access to technical resources.  It is crucial that processes are streamlined and procedures are well established in the AE for it to deliver the tasks with confidence and efficiency.

 The right fit

Finding the right accountant should always be about selecting the one that matches the needs of the company and the engagement requirements. It is not uncommon for a company to engage different accounting firms for different services. It is rarely a case of one size fits all. The key factor is to identify a firm, regardless of the size, with the capabilities to deliver high quality service.

The commentary is written by Titus Kuan Director, Technical Advisory and Professional Standards, and Learning and Development, and Sharon Tan Chiu Ping, Senior Manager of Quality Assurance, at the Institute of Singapore Chartered Accountants.

A version of this commentary was published in The Business Times on 17 June 2016.