Singapore accountants look for opportunity in economic adversity

By Heather Tan, in Singapore The wealthy city state of Singapore seems to have glided through the global financial crisis, but the country only narrowly avoided recession and this slowdown has affected its important accounting sector. GDP growth in Singapore grew in 2012 was projected to be 1.2%, down from 4.9% the previous year. Lee Kin Wai, assistant professor of accounting at Singapore’s Nanyang Technological University business school explained to Accounting & Business magazine that economic uncertainty makes companies reluctant to share as much data as they might in more stable times.

And this can make Singaporean accountants lives particularly difficult, especially in a country not known for robust transparency.

Lee said economic uncertainty creates “significant challenges” for firms regarding their ability and willingness to disclose information about “future-oriented assumptions” and undermines the reliability of commercial projections made in annual results. This creates a “significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year”, he said. A particular problem is predicting the future value of assets and liabilities, given the impact of “uncertain future events on those assets and liabilities…”

Hence, Singapore accountants have had to work harder to value recoverable property, plant and equipment; assess the impact of technological obsolescence on inventories; and estimate cost provisions such as accruals of product warranty and pending lawsuits, Lee explained.

He added that during times of economic uncertainty, external auditors have found it harder to assess the going concern risk of companies: “If a firm has a history of volatile net profit and limited financial resources, the auditors have to carefully assess the appropriateness of the going concern basis of accounting,” he said. Thus, audit effort (and hence expected audit cost) is likely to be higher as the auditor needs to consider numerous quantitative and qualitative factors such as expected profitability, cash generation capacity, debt repayment schedules and alternative sources of financing. But this causes friction as anecdotal evidence suggests in tough times, “companies exert more pressure on external auditors to reduce audit fees”.

As Singapore recovers (unevenly) from the slowdown, its accounting industry is looking ahead: “At the end of the day, no industry is sheltered from global economic uncertainties,” said Max Loh, managing partner of Ernst and Young in Singapore.

However, Loh stressed that Singapore’s strong regulations have instilled investor confidence, even during the global financial crisis. And the city state is in a relatively robust regional neighbourhood. There has continued to be “a level of activity – not the ideal level of activity but there’s still activity in terms of investments in this part of the world,” he said.

And with a slower economy, “if you’re talking about IPOs for example, capital market transactions will be fewer…the fact there are fewer transactions means accountants are less used….”

But of course, businesses will still need and use accountants: “Companies still need to get their accounts audited, they still need to file their tax returns so for the statutory and compliance part of the work, it would be stable even though of course people would be more cost conscious and there’ll be some pressure.”

Dominic Tan, the owner of Singapore’s Haising Hotel, is one such business owner who will keep paying accounting bills. He engages external accountants to handle and submit company accounts and compile tax computation, even though he himself holds an accounting degree. Whether the economy is good or bad, “one still has to engage accountants in Singapore as the submission of company annual reports by a certified public accountant is required by law.”

One key issue for Singapore accounting firms is their staffing costs and being able to pay enough to keep their staff in place – with clients looking to reduce bills – that can be a problem.

Tan’s accounting firm, Chan Leng Leng & Co, currently employs eleven staff accountants and hopes to hire more this year to cope with more clients while maintaining service standards. But in an industry where many prefer to “hop over” to better paying jobs at international companies, many local firms struggle to convince staff to stay: “We hope to be able to engage in more staff training so as to improve our service standards and reduce staff turnover,” Chan told Accounting & Business. She claimed her practice has weathered the recession well, and ironically, for practices such as his that often work with smaller firms “we may handle more accounts during a recession as some of our clients try to expand at this time where it is cheaper to do so. We get additional jobs such as due diligence studies and also get to handle acquired companies,” she added.

And it is true that accountants offering life-line to struggling companies can prosper. Kon Yin Tong, managing partner of Foo Kon Tan-Grant Thornton LLP whose advisory services saw a growth of 18% in 2012, agrees: “What we are saying is advisory services such recovery and reorganisation, restructuring of loans, business risk services, and related advisory services can make a difference to…a business during troubled times.”

He added that there was also more demand for litigation support assignments, “as stakeholders scrutinise even minute details of potential corporate and other transgressions.”

Equally interesting to note is the relatively new phenomenon of alliances and mergers between local and international firms in Singapore. These are designed to help parties deal with manpower shortages and overcome the pressures posed by a tougher business climate and the introduction of new financial regulations. Industry experts, such as business strategy advisors Foulger Underwood, have estimated there were 15 such mergers last year among Singapore’s roughly 600 smaller accounting firms, a steep increase from around five such mergers in 2011.

For example, HT Khoo & Associates’partners became partners of a larger firm, PKF-CAP, and the combined businesses now operate under the PKF-CAP umbrella.

Foo Kon Tan Grant Thornton LLP has been a long-standing example of a link-up with an international firm, joining the Grant Thornton network in 1973. One of the largest accounting organisations outside the Big Four auditors in Singapore, its Kon Yin Tong said that “Grant Thornton was an ideal fit”. With “strong leadership” and providing support in all areas of practice, Foo Kon Tan secured a partner that shares similar values while “making working relationships more effective, and client service more seamless, he said: “This is important with Singapore being a major financial and business hub with many international clients setting up businesses here” Indeed, “Acquiring or merging with an existing business is one of the quickest ways to strengthen your market position and achieve rapid growth”, the firm’s global network said in communiqué.

And size does matter. The Big Four are the best placed to deal with economic uncertainty – because of their huge resources and ability to change gear. Ong Pang Thye, head of audit at KPMG Singapore explained: “Business prospects may decline in times of an economic downturn, risks such as impairment on receivables, investments, property and intangibles, are actually on the rise”. This generates demand for more rigorous testing, said Ong: “If companies want to meet their compliance obligations and reporting deadlines”. Indeed, “the reality is that accountants have to be sensitive to the economic conditions that their clients find themselves operating under,” stressed Ong. Advisory services are also a key growth area helping clients struggling in an economic downturn. And he agreed that “there will be others which still find themselves in a strong financial position” and able to reap the rewards of available labour and lower costs: “Such companies should see a business downturn as an opportune time to beef-up their back-office operations, processes and various business frameworks”.

Also, a recently-introduced free trade agreement between the European Union and Singapore could boost transactions and accounting, making it easier for European companies and financial institutions to do business with and in the southeast Asian city state. It includes tariff-free goods, greater access to services markets, competition policy reforms and reduced technical barriers to trade. “Whenever you have free trade agreements, the broad brush of it is to facilitate trade and economic activities so for accountants, if one looks at the broad definition of the word, accounting is to support the recording of transactions then it has to benefit us,” said Loh.


With more than 25,000 registered professionals in the accounting industry and the launch of a new accountancy qualification scheme the ‘Singapore Qualification Programme’, Singapore’s accounting sector continues to flourish. It has been growing in tandem with the economy as it burnishes its reputation as a trusted international business and financial centre. Singapore’s government wants to transform its accountancy sector into a leading global accountancy hub in the Asia-Pacific region by 2020.

Accountants in Singapore, such as Sean Lee, a senior associate at PricewaterhouseCoopers in Singapore, say they experience a dynamic working environment whilst adhering to international accounting standards. Lee, who joined the firm upon graduation in 2010, has not looked back since. To him, work as an accountant in Singapore is “enriching” and he “enjoys being immersed within the different sectors and industries” that he has been exposed to for the past few years. “Given the strategic location of Singapore, the opportunities of coming into contact with international brands and renowned corporations is far greater than in other countries,” said Lee: “The exposure, the overseas opportunities, the support services such as our methodology and consultancy services teams, have all revolutionalised the audit approach in Singapore as compared to a decade ago.”

*This article was commissioned by Accounting & Business magazine, an international title covering the global financial reporting sector –