Date: October 11, 2012
Mr John Cahill, President, CPA Australia
Mrs Deborah Ong, Divisional President – Singapore, CPA Australia
Mr Low Weng Keong, Immediate Past President, CPA Australia
Ladies and gentlemen
Good morning. I am pleased to join all of you at CPA Congress Singapore 2012.
Staying Globally Competitive – Maintaining Market Confidence
2 The theme for this Congress “Your Guide through Uncharted Territory” is most apt, considering the recent downward revision in global growth forecast by the IMF. While the economic outlook still remains relatively positive in South East Asia, we note that the World Bank has also recently lowered its growth forecast for East Asia and the Pacific. A highly integrated global financial system coupled with the economic woes of Europe and US will definitely impact Asia. We all know what this means for an open economy like Singapore. We have been through economic downturns but each one is always different – whether in duration or in complexity. Given that no one can predict accurately how the future will pan out, we can only do what is necessary and that is, continue to remain highly competitive globally. In every cloud, there must be a silver lining. We must therefore be ready to adapt and seize on growth opportunities.
3 We are fortunate that despite increasing global competition, Singapore continues to remain competitive. This year, for example, the World Economic Forum in its Global Competitiveness Report has once again ranked Singapore as the second most competitive economy in the world and first in Asia. A key aspect of Singapore’s strong competiveness is a business climate that promotes international investment and growth. Central to this is the reputation Singapore has earned as a trusted business hub. Investors’ and shareholders’ confidence are bolstered when the business environment is friendly and transparent with high standards of corporate governance, timely disclosures and strong regulatory frameworks in place.
4 The recent review of the Companies Act by the government exemplifies the balanced and pragmatic approach Singapore has taken to maintain our competiveness as a business hub whilst at the same time, enhance our corporate governance landscape. As you are aware, the Bill on the proposed changes to the Act will be tabled in Parliament some time next year. The relevant changes to enhance our corporate governance landscape will impact four parties in the financial reporting ecosystem namely the shareholders, directors, auditors and regulators. These changes include encouraging broader shareholder activism and improving transparency in respect of disclosure by directors and auditors. Details on these proposed changes have been well covered by the media, so I will not dwell at length on them. Instead, what I would like to highlight is that revisions to corporate legislation alone cannot ensure that Singapore will continue to be a leading business and financial hub. Stakeholders within the business community play an equal if not even more important role in ensuring Singapore continues to be globally recognised as an attractive and trusted place to do business.
5 This morning I would like to focus on a key pillar in the corporate governance framework that is very much dependent on the collective efforts and support of the financial and business community. This is the reliability and integrity of corporate and financial information.
Making Singapore A Trusted and Best Place for Business – A Collective Responsibility
6 The business leaders present here today will agree with me when I say that the trust of investors and shareholders is hard to win yet so very easy to lose. It is therefore essential that we keep assuring investors of the reliability and accuracy of the business and financial information they receive. To do this, good quality corporate financial reporting and high quality audit must be the hallmarks of our financial and corporate sectors. And this can only be achieved through the collective efforts of all stakeholders in the financial reporting value chain.
7 Many of you here today are business leaders who have a very important role to play in upholding Singapore as a trusted business hub. The tone set by you will shape how your organisation is run which in turn will determine whether your employees, your shareholders, your investors, your partners and even your competitors will deem you as trustworthy. You can help everyone in the company understand that high quality financial reporting and high quality audit are not only crucial in upholding shareholder’s confidence, but can also be essential in creating sustainable value for your business. Good quality financial reporting improves the decision-making process by directors and management. The more accurate and transparent reports on a firm’s financial performance are, the easier it is for decision makers to pinpoint problems and root causes, set financial performance goals, measure results against them and create action plans accordingly. Directors, being responsible for the financial statements, should therefore take the lead and ensure that processes and systems to derive high quality financial reporting and quality audits are firmly in place.
8 Another key stakeholder group is the shareholders. For business leaders and indeed the accounting profession, shareholder engagement is increasingly important. Investors are becoming more sophisticated and their expectations are increasing. They want to know more about the quality of financial statements. They are also asking for more to be included in audit reports.
9 The government is also helping to further strengthen the quality of corporate financial reporting in Singapore. The Accounting and Corporate Regulatory Authority otherwise known as ACRA, has since July 2011, rolled out initiatives to raise the quality of financial reporting and ensure compliance with the Singapore Financial Reporting Standards (or SFRS).
10 Specifically, ACRA launched a financial reporting surveillance programme whereby selected financial statements are reviewed to determine if they comply with SFRS. Directors have also been queried and regulatory action such as warning letters issued. Companies have also been required to restate their accounts to ensure compliance with SFRS. Penalties or prosecution can be imposed if their financial statements are found not to comply with the SFRS.
11 In January this year, ACRA issued an inaugural Financial Reporting Practice Guidance (“FRPG”) for directors. This was aimed at ensuring that directors understand their financial reporting duties under the Companies Act, and to help them in preparing the financial statements. Later in the year, ACRA will be publishing the common financial reporting deficiencies which they have found in their reviews of financial statements, so that preparers can be alerted and will avoid making the same errors or omissions.
12 More attention is also being paid to the importance of the CFO. The Pro-Tem Singapore Accountancy Council has rolled out initiatives such as the launch of the CFO Institute which will look into developing the skills sets and professional standards of existing and potential CFOs. CFO Connect, a symposium for CFOs, has been set up to serve as a networking platform for CFOs to share their knowledge and experience.
Strengthening Audit Quality
13 In addition to good corporate financial reporting, another equally important aspect of the financial reporting value chain is audit quality. This is also another area where expectations from investors and businesses are rising.
14 Earlier this year, a number of roundtable discussions were held with directors on the value of audit. It is heartening to note that the general consensus amongst directors is that they do recognise the value 6 of external auditors in providing them with professional insight and a rigorous independent view point.
15 This is why ACRA ensures it has a rigorous regulatory oversight of public accountants through its Practice Monitoring Programme. In the 2012 Asian Corporate Governance Association Market Rankings, out of countries ranked, Singapore was placed first ahead of Hong Kong – our independent regulation of auditors is seen as the benchmark for other Asian markets. Ultimately though, the onus is still on the accounting profession itself and not the regulator to keep the bar high. The accounting profession must continue to earn the market’s trust, keep confidence levels high and demonstrate the value that a high quality audit can offer.
16 In this regard, I want to commend CPA Australia for helping to keep accounting standards high by actively supporting its members in public practice through a range of practical help and quality assurance services. It has an active community of people involved in a Public Practice Development Programme and a new Quality Assurance Review service in which fellow members review their fellow member’s audit work on voluntarily basis. This collaborative spirit amongst CPA Australia members is highly commendable and I am sure this engagement is also a rewarding experience for those who get involved.
17 The reliability and integrity of corporate and financial information is key to a friendly and transparent business environment; this is even more so in uncertain economic times. I wish you a fruitful and invigorating discussion at this Congress. Thank you.