STRATEGISING FOR A RESILIENT TOMORROW
“In the midst of chaos, there is also opportunity.” This oft-quoted proclamation by the great Chinese general Sun Tzu provides a fitting thought for a world wreaked by the Covid-19 pandemic; it was also the theme of the ISCA Practitioners Conference 2020. With the focus on “Strategising for a Resilient Tomorrow”, the final instalment of ISCA’s signature Singapore Accountancy and Audit Convention Series, which took place on 22 October 2020, assembled over 800 practitioners and audit professionals. The virtual event was supported by ISCA’s strategic partners, namely, Accounting and Corporate Regulatory Authority (ACRA), ASEAN Federation of Accountants and Singapore Accountancy Commission.
ISCA President Kon Yin Tong kicked off the Conference with a sneak peek into the event proceedings and an overview of the effects of the pandemic on the audit profession. He acknowledged that the road ahead would be challenging but asserted that it also held untapped opportunities. He encouraged firms to seize new opportunities and draw lessons from the pandemic to improve the value of the profession and transform the industry. This would place the profession in good stead for recovery and growth, especially post-pandemic, as firms capitalise on agile processes or frugal innovations.
We must rebuild and grow by responding to the changing environment with adaptability and agility. The alternative is to do nothing, change nothing and be nothing.” KON YIN TONG, President, ISCA
BUILDING UP OURSELVES, MASTERING THE FUTURE
Delivering the keynote address was Permanent Secretary for Finance Tan Ching Yee. Mrs Tan highlighted two specific trends that would have an impact on the accountancy profession and industry – the premium placed on resilience, and the constraint posed by declining growth in the local labour force. She suggested that local firms could plug into the wider regional network as businesses build resilience across borders, with Singapore as a key node. Firms could also master technology so they can do more, even with fewer people.
STRATEGISING FOR A RESILIENT TOMORROW
The first panel discussion carried the Conference theme, “Strategising for a Resilient Tomorrow”. Participants heard different perspectives from the panel session moderated by Michael Heng, Managing Partner, Heng Lee Seng LLP, and featured panellists Philip Yuen, Chief Executive Officer, Deloitte SEA and Chairman, Deloitte Singapore; Kuldip Gill, Divisional Director, Public Accountancy Division, ACRA; Tan Kuang Hui, CEO and Managing Partner, Crowe Horwath First Trust LLP, and Kevin Fitzgerald, Managing Director, Asia, Xero. They discussed the megatrends that have been accentuated due to the pandemic and also shared insights into the three-pronged approach in responding, recovering, and thriving through the crisis.
There was strong emphasis on digitalisation as the panel advised firms to leave the laborious paperwork behind and acclimatise to the new norm. Responses to the poll question, “Has Covid-19 accelerated your firm’s digitalisation agenda?” was encouraging, with 97% of the respondents saying, “Yes”.
Donning the ISCA Council hat, Mr Tan shared the ISCA Quality Assurance Framework that guides the Institute in conceptualising initiatives to support firms, especially the small and medium-sized audit practices, in building digital and business capabilities, to thrive in a post-pandemic world. He also urged the audit practitioners to tap on the various schemes available, especially the offerings from the virtual SMP Centre.
ACRA’s Ms Gill presented on the key observations from ACRA’s Practice Monitoring Programme and shared best practices in raising audit quality.
THE FUTURE OF STANDARD-SETTING
Hans Koopmans, Chairman of ISCA Auditing and Assurance Standards Committee, shared with participants the strategic objectives and drivers behind standard-setting initiatives on the international and local fronts, to respond to stakeholder needs and challenges faced by the auditing profession.In light of changing stakeholder expectations and recent high-profile corporate failures, Mr Koopmans drew the participants’ attention to the importance of public confidence in audits. In this regard, he shared that the International Auditing and Assurance Standards Board (IAASB) has recently issued a discussion paper titled “Fraud and Going Concern in an Audit of Financial Statements – Exploring the Differences between Public Perceptions about the Role of the Auditor and the Auditor’s Responsibilities in a Financial Statement Audit”. To support this important initiative, ISCA will be conducting stakeholder engagement activities to obtain the perspectives of stakeholders in Singapore about the expectation gap, and how the auditing standards can meaningfully narrow the gap.
He then highlighted some of ISCA’s ongoing efforts in helping to narrow the expectation gap. They include the issuance of published materials to dispel misconceptions on the role of auditors, outreach activities, education programmes and advocating the views of the audit community in Singapore through the submission of views to IAASB and other relevant bodies.
PREPARING YOUR FIRM FOR NEW QUALITY MANAGEMENT STANDARDS
Gajendran Vyapuri, Assurance Partner of Ernst & Young LLP, updated participants on the upcoming quality management standards which are expected to be adopted locally in the first quarter of 2021, and effective from 15 December 2022. The revised standards, which will replace the current SSQC 1, would bring important changes to the way professional accountancy firms manage quality. This includes a new proactive risk-based approach to an effective system of quality management that underpins consistent engagement quality.
Recognising that the complexity and formality of firms’ systems of quality management will vary according to the nature and circumstances of the firm and the engagements performed, the quality management standards promote scalability in their application, to cater to firms of varying size, complexity and circumstances. Firms are reminded not to underestimate the implementation efforts, and to set aside resources to perform the necessary risk assessments and document the process flows to demonstrate that requirements have been met.
Acknowledging that leadership is responsible and accountable for quality, managing partners are encouraged to drive such implementation by providing a strong tone from the top. Firms are also encouraged to participate in the focus groups and public consultation of the exposure drafts to provide their feedback on implementation challenges.
TRANSITION FROM SWAP OFFER RATE (SOR) TO SINGAPORE OVERNIGHT RATE AVERAGE (SORA) – ARE YOU ON TRACK?
In line with the global shift away from Interbank Offered Rate and towards alternative risk-free rates, Singapore will transition from the Sing-dollar Swap Offer Rate (SOR) to a new interest rate benchmark – Singapore Overnight Rate Average (SORA) by the end of 2021. This change will likely impact most entities, not just financial institutions. However, smaller entities may not be aware of the implications arising from the transition and the need to commence preparations for it.
Against this backdrop, a panel discussion was convened, moderated by Reinhard Klemmer, Chairman of ISCA Financial Reporting Committee, with featured panellists Chen Voon Hoe, Partner, PricewaterhouseCoopers Risk Services Pte Ltd; Chua Kim Chiu, Chairman of Audit Committee, OCBC Bank, and Mikkel Larsen, Deputy Chair, Accounting and Tax Sub-Group, Steering Committee for SOR Transition to SORA (SC-STS).
As the change to SORA could bring about multiple operational and financial impacts to an entity, the panellists emphasised the need to understand what SORA transition entails, take stock of one’s SOR-based financial instruments and perform a self-assessment of the potential impacts. Guidance on this can be taken from various SC-STS publications. The spotlight was also cast on the important role played by auditors – reaching out and creating awareness of the transition among the smaller entities, and also urging them to start preparatory work soonest possible.
DEVELOPMENTS IN ETHICS AND PROFESSIONAL INDEPENDENCE – ENHANCING PUBLIC CONFIDENCE POST-COVID-19
Amid the Covid-19 pandemic, Tan Seng Choon, Chairman of ISCA Ethics Committee, reminded auditors of the importance of ethical behaviour, including compliance with Ethics Pronouncement (EP) 100 Code of Professional Conduct and Ethics.
Mr Tan illustrated the application of the enhanced three-step conceptual framework approach for an auditor to address threats to compliance with the fundamental principles under the latest EP 100 (revised 14 August 2020).
Singapore has adopted the final pronouncement on Responding to Non-Compliance with Laws and Regulations (NOCLAR) on 1 April 2020. Mr Tan provided an overview of NOCLAR, which guides auditors in dealing with situations involving NOCLAR, in deciding on how best to act in the public interest.
INAUGURAL SURVEY ON NON-ASSURANCE SERVICES
The highlight of Mr Tan’s presentation was the launch of ISCA’s inaugural survey findings report on non-assurance services (NAS) at the Practitioners Conference. The NAS survey was conducted to obtain views from audit committee members on matters concerning auditor independence when providing NAS to audit clients, and on certain recommendations to address NAS independence concerns. The survey findings showed that audit committee members of Singapore companies are supportive of the following ISCA recommendations to strengthen auditor independence in relation to the provision of NAS:
i) To mitigate any perceived or real independence threat, we recommend that the audit firm obtains confirmation from each network firm that the NAS fees earned by the network firm from the upstream and sister entities of the audit client do not exceed 1% of the network firm’s revenue;
ii) Developing a concept of “audit-related services” and to exclude “audit-related services” from the computation of the proportion of fees for services other than audit to audit fee;
iii) Audit firm to obtain pre-approval from those charged with governance on provision of NAS.
Given the unprecedented climate due to the pandemic, there might arise ambiguity for the upcoming audit peak. Ng Kian Hui, Audit Partner, Head of Audit & Assurance, BDO LLP, wrapped up the Conference by sharing key audit challenges arising from Covid-19 and prepared practitioners in navigating the potential complexity from audit planning to audit completion. The salient points were published in the IS Chartered Accountant Journal in December 2020.
The Conference, which highlighted the changing audit and business landscape, and the challenges brought about by the pandemic, also discussed the strategies that practitioners could adopt to build up their resilience for tomorrow. In the brighter future when historians write about the Covid-19 crisis, it will hopefully be, for the audit profession, a tale of human ingenuity and adaptability.