2015 - November
Keynote Address by Ms Lim Soo Hoon, Permanent Secretary (Finance) (Performance), Ministry of Finance at the Singapore Accountancy Convention on 12 November 2015 at the Marina Bay Sands at 8.45am
12 Nov 2015 Category: Speeches
Ladies and Gentlemen
1. I am heartened to see many members of the profession here for ISCA's flagship event - the Singapore Accountancy Convention 2015. We have foreign guests with us today and it gives me great joy to welcome you to Singapore and to this Convention.
2. In line with the Government's goal for Singapore to be a global accountancy hub, ISCA has been making good progress in its efforts to transform the Institute into a globally-recognised professional accountancy body. Earlier this year, ISCA joined Chartered Accountants Worldwide as an Associate member. This bodes well for ISCA as it aims to deepen relations and explore partnerships with other membership bodies in the world.
3. A strong and vibrant accountancy sector is integral to Singapore's role as a global financial centre. High quality audit, tax and advisory services by the accounting entities and good corporate financial reporting by businesses are essential elements in building a trusted business environment.
Developments in the Accountancy Sector
4. In October this year, Singapore's Accounting and Corporate Regulatory Authority (ACRA) introduced the Audit Quality Indicators Disclosure Framework to help audit committees of listed firms better evaluate and select the right auditors. This framework is the first of its kind in the region and comprises eight quality markers that are closely correlated with audit quality. These indicators include time spent on engagement by senior audit team members and relevant experience of the senior audit team members. The Big-Four accounting firms have confirmed their support for the framework and will communicate their quality indicators directly to audit committees each year. In time, I hope to see other accounting firms adopting the framework as well so that we can further raise the quality of audits on financial statements in Singapore.
5. The 2015 Practice Monitoring Programme report by ACRA revealed that there was a year-on-year improvement in the audits of listed companies. This is a good sign as it shows that auditors of listed companies generally have adequate and appropriate audit procedures.
6. So what are the potential areas of improvement? While ACRA's Financial Reporting Surveillance Programme revealed that financial reporting of listed companies with market capitalisation above $1 billion, was generally of good quality, there was a higher proportion of non-compliance from the listed firms with market capitalisation of below S$500 million.
7. This is a bit disconcerting since we are talking of listed companies. The non-compliance could be due to the increased complexity in accounting when companies scale up and expand operations overseas. It could also be due to their audit committees not spending sufficient time on financial reporting. Whatever it is, there is a need for these firms to increase the competence of their accounting and finance functions. Directors and audit committees need to pay closer attention and adequately challenge any deviation from generally accepted accounting practices. We can improve the quality of financial statements in Singapore if companies and directors make a concerted effort to do so.
Future of the Profession
8. Nonetheless, I am hopeful about the future of the accountancy profession if it evolves fast enough, to keep up with the changes in the global environment and the Singapore economy, be it due to advances in technology, or in business needs of the market.
9. I am pleased to note that several audit firms are taking steps to embrace and lead the change with the support of ISCA. They formed an alliance called the OneSMP to raise their practice excellence, training and development as well as productivity. These small- and medium-sized practices (SMPs) have participated in several ISCA initiatives.
10. For instance, when ISCA, in collaboration with the Workforce Development Agency, appointed a vendor to develop different on-the-job training blueprints covering the most common audit tasks, ISCA tapped on some OneSMP members for their inputs to refine the feasibility of these blueprints.
11. But we need more accounting firms to come on board and work together to strengthen the sector. Beyond sharing ideas, there is also potential for the smaller accounting firms to come together, for example, to share common corporate support and IT services.
12. I see this Convention as a platform to excite and prepare you for the future. The accountancy sector must not only anticipate and embrace change but endeavour to lead the change where possible and be at the forefront of the developments.
13. Please allow me to suggest how you can lead change on three fronts: (i) technology; (ii) advisory services; and (iii) talent management.
Harness technology to increase productivity
14. Technology has disrupted many sectors and the accountancy sector is no exception. A report released by Oxford University in 2013 entitled "The Future of Employment" revealed that the jobs of accountants and auditors have a high probability of being susceptible to computerisation. Despite the risks, however, I believe there are opportunities for us to create and capture greater value through the use of technology.
15. In this spirit, accountants in businesses can endeavour to provide higher value business insights by harnessing technology. The third ISCA Productivity Scorecard and Benchmarking Survey report conducted earlier this year revealed that only 50% of Singapore companies have some form of financial cockpit and dashboard. This suggests there is room for Singapore companies to tap on computerised tracking or monitoring tools to ensure better visibility and control of their financials to ultimately, increase business efficiency.
16. SPRING and other public agencies have provided many grants and initiatives to help SMEs, including SMPs, automate and increase productivity. I believe there is no lack of funding support or technological tool available. But the problem is the slow take up of the help offered. This morning I read that the latest annual SME Development Survey conducted by the Singapore Business Federation (SBF) showed that the proportion of SMEs that have invested in technology has increased from 64% to 68%. I do not know how the SMPs fare in this regard but I strongly encourage SMPs that have not done so to tap onto the various grants available and embrace technology to improve your business models and processes. You can in turn help transform our SMEs and improve their productivity.
Advisory work as next frontier for growth
17. Technology alone, however, cannot take the accountancy sector into a new era. The sector needs to provide new market-relevant services. The Singapore Accountancy Commission's (SAC) recent census of accounting entities in Singapore revealed that while 67% of the accounting entities are anticipating a growth in revenue from audit services in the next 12 months, 80% are expecting to bring in more revenue through growth in non-audit services.
18. The census also revealed that while the Big-4 firms derive most of their revenues from non-audit-related services, most of the other accounting entities still derive the bulk of their revenue from providing audit services. Audit is important and remains the bedrock of the accountancy business. However, with the new audit exemption threshold which came into force in July 2015, smaller audit firms need to come up with new business models and pursue new and more sustainable revenue streams apart from audit.
19. Developing stronger competencies in areas like advisory will not only open new markets for our SMPs as the next frontier of growth, it will also help boost Singapore's position as a global accountancy hub. The ASEAN Mutual Recognition Arrangement Framework on Accountancy Services will increase market access for our accounting professionals to other ASEAN markets. While audit remains regulated and requires domestic licensing, there are opportunities for the expansion of our accounting entities through the export of the broader array of accountancy-related services.
20. For smaller firms that have been relying on manual audit services and are concerned about introducing major changes to your business model, I encourage you to start now and take that first step. As the saying goes, the journey of a thousand miles begins with one step.
21. To be able to provide a wider array of accountancy services, especially advisory, firms need the most critical element - talent.
22. The Singapore Qualification Programme (SQP) that was launched in June 2013 is envisaged to add diversity and depth to the accountancy talent pool. The first batch of students would have completed the SQP and will qualify as Chartered Accountants of Singapore next year. It is not easy for the students to juggle between work and studies as it requires, discipline, tenacity and sacrifice. So kudos to those who will be graduating from the SQP next year. I am also encouraged that more graduates from other disciplines are also taking up the Singapore QP foundation programme. I applaud them for moving beyond their comfort zone to explore a new career path.
23. As Singapore evolves to its future economy, we must tap on the diverse skills, passion and contributions of every individual. The national SkillsFuture movement recognises this and provides Singaporeans with opportunities to develop their fullest potential throughout life, regardless of their starting points.
24. Within the accountancy sector, SAC, ISCA and other professional bodies are keen to attract interested individuals from various educational backgrounds to join the sector. There are various initiatives catering to individuals from accountancy courses in polytechnics and Institutes of Technical Education. For example, SAC is exploring enhancements to the SQP to allow non-graduates to be eligible for the Programme, in line with our national SkillsFuture movement.
25. You have a rich agenda ahead of you today. It is very heartening to see many accountancy professionals here to share their experiences, push the frontiers of knowledge and network with the community. I wish you all a fruitful day and a successful Convention!
The document has footnotes. They can be viewed at (http://www.mof.gov.sg/news-reader/articleid/1552/parentId/59/year/2015?category=Speeches).
Source: Ministry of Finance, Government of Singapore