Accounting and Corporate Regulatory Authority chief executive Juthika Ramanathan has a busy job on her hands – to position Singapore as a regional accounting hub. The Accountant caught up with the nation’s top accounting regulator to find more about this vision and other domestic issues on the radar.
Singapore’s accounting profession is determined to stamp its mark as a leader of the pack in the region. The government, in partnership with bodies such as the Accounting and Corporate Regulator Authority (ACRA), is currently planning strategies on how the nation can achieve this goal. In this exclusive interview, ACRA chief executive Juthika Ramanathan explains more. TA: Can you please explain why Singapore would like to become a regional accounting centre and what is being done to achieve this goal?
JR: We see strong growth potential for the accounting sector in the region as the sector will grow in tandem with the economic growth of the area. We think that Singapore is well-placed to contribute to the growth of the sector in the region given our economic foundation as an international financial and business centre.
Singapore can value add to the regional growth of the accountancy sector in providing a sound accounting education infrastructure, in attracting the presence of many international organisations, professional bodies and practice leaders from the global firms.
In so doing, we hope to facilitate the growth of Singapore as well as that of the region, as an accounting hub for the profession and for corporations that do business with the region.
The Singapore government has set up a high-level committee led mainly by private sector leaders called the Committee to Develop the Accountancy Sector (CDAS) to put together a strategic blueprint on the way forward for the profession and Singapore to serve as a regional accounting hub. CDAS will be making its recommendations in the early part of 2010. TA: What sort of role would Singapore like to play in global standard-setting and influencing other accounting issues?
JR: The Singapore Accounting Standards Council (ASC) has been active in the global accounting standard-setting process through participation in the International Accounting Standards Board’s (IASB) various consultation processes. We are also active in regional forums like the Asian-Oceanian Standard Setters Group (AOSSG) where we are a “co-lead” with Japan on the revenue recognition project and are a member of the financial instruments recognition and measurement project.
Singapore also has a representative on the IASB Standards Advisory Council as well as the IASB Tax Advisory Panel.
There are many more areas in which Singapore could contribute to global standard-setting, be it in terms of providing high level research and development capabilities or providing thought leadership and technical expertise for initiating discussions and dialogues in the region. TA: How does ACRA plan to grow the accounting sector, what initiatives have been launched or are in the pipeline?
JR: We are committed to the efforts to encourage the profession and sector to look for regional growth opportunities and work collectively to build its strengths and stay relevant to business needs locally and regionally as they develop.
In fact, the initial measures we have taken included a few immediate steps:
• Build on the strengths of the key value propositions of the Singapore profession, which comprises integrity, quality and trust, through the cornerstone event of the ACRA Public Accountants Conference to raise awareness of emerging issues and which serve as a platform to discuss current trends and future developments of the profession and sector;
• On ACRA’s role, we work to promote greater transparency of our regulation of the profession to enhance public confidence in the work of the profession;
• To raise the professional competence of the profession, we engage a collaborative partnership approach with the professional bodies and other stakeholders to jointly develop courses and talks. For instance, the development and skills upgrading programmes for the profession, round table discussion on the new Code of Ethics and eXtensible Business Reporting Language (XBRL) taxonomy development; and
• In policy formulation, we actively pursue public consultation exercises and documents which provided information on the state of play; these public consultations had in fact proven to be a useful foundation in the subsequent work undertaken by the CDAS. TA: What are some of the major capital markets and auditing issues that have come out of the global economic downturn and how is Singapore dealing with these?
JR: One positive development that we can take away from the economic downturn is the recognition of the value and the importance corporate governance has in ensuring the effective functioning of the capital and financial markets.
The accounting profession is a key stakeholder in the equation and should leverage on this positive development to play an even greater role to help strengthen the foundation of the capital markets.
The other immediate impact of the economic downturn is that it has been accompanied with increased public and regulatory scrutiny on the risks in the corporate financial reporting and auditing environment.
Issues which have attracted the attention of corporate regulators like ACRA include going concern; valuation of financial instruments held at fair value; impairment of assets; deferred tax asset recognition; provision for onerous contracts and restructuring; disclosure in the financial statements and off-balance sheet items; and communication with those charged with governance.
In Singapore, we took a proactive step with ACRA’s issuance of an Audit Practice Bulletin to put these issues on the radar screen of the profession. We believe that early engagements with the profession on emerging threats and concerns in the audit and business environments will help to prepare stakeholders in the market to be in a better position to manage and handle the challenges brought about by the economic conditions. TA: Do you believe that the role and the scope of the auditor are sufficient in light of the economic downturn? Should the auditor’s role or scope be broadened to include, for example, more investigative functions?
JR: While we recognise that auditors play a key role in good corporate governance, it would be unfeasible to expect the auditors to take over the roles which the management and the board of directors play in corporate stewardship.
The way things are, the state of the interplay between the different agents in the corporate governance of each company is unique and varies according to many different factors. I believe that an alternative perspective could be that the auditor should be ready, in season and out of season, to exercise professional scepticism and to perform his work according to the best of his professional standards and competence in the audit of each company.
TA: Singapore recently announced it will adopt all IFRS in full, which is already very similar to Singaporean standards. How will this benefit Singapore’s capital markets and the accounting profession?
JR: One of the desired outcomes in aligning Singapore Financial Reporting Standards fully with IFRS is it will further strengthen the attractiveness and competitiveness of Singapore as an international business and financial hub. This will also provide the assurance of comparability of the company’s financial reports for both domestic and foreign investors in the international capital market, and help lower compliance burdens of Singapore’s companies when carrying out multiple jurisdictional financial reporting. TA: Recently, a new ethics code was launched in Singapore based on the IFAC model. What are the major differences to the previous code and what do you believe will be the benefits?
JR: We have adopted the IFAC code as part of our commitment to an internationally reputed framework.
Having said that, we should point out that our previous code was also benchmarked to the IFAC code and other international benchmarks.
We have always been committed to the same principles of independence. One key difference and benefit of the IFAC-based code is the fuller guidance it gives to practitioners, such as the fuller articulation of the threats to independence and the appropriate safeguards to eliminate these threats.
Another difference is that our previous code had some ‘bright line’ rules which we have decided not to retain where we feel that applying the principle can work better to meet the spirit of the code.
For example, we had a 5 percent limit on the economic interests that could be held in audit clients by audit partners or staff not directly involved in an audit.
This bright line is not carried over to our IFAC-based code because we feel the principle and guidance in the code is rigorous enough without the bright line mark.
Sometimes 5 percent might be too much and in other instances it is inconsequential.
I would say the advantage of this approach is that it makes the auditor actively think through ethical issues, rather than just applying a checklist which might not meet the concern at hand.
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