| Dr Richard Hu, Singapore Minister for Finance kicked off the 12th ASEAN Federation of Accountants (AFA) Conference held in Singapore on October 18 and 19. The theme of the Conference was "Challenges facing ASEAN accountants in the New Economy".
Challenges in the New Economy
The Finance Minister said that there are many challenges facing accountants in the New Economy. However, he would like to speak on two of them, which were technology and globalisation. Technology is setting the pace of the financial reporting process. With technology, continuous reporting capability is achievable. Therefore, accountants must stay on top of the technology wave, so that they can continue to keep up with the technological advancements and add value to their clients.
The Institute of Certified Public Accountants of Singapore ("ICPAS") has taken a laudable initiative to lead the study on Internet reporting of financial information. The Internet standard based on "eXtensible Business Reporting Language" or "XBRL" is currently being explored by the Chair of the XBRL Liaison Committee, Mr Zachary Coffin.
Globalisation causes financial markets to be likened as inter-connected networks. Capital an flow at the touch of a button. The competition for international capital has placed greater demands on regulators and companies. The competition for international capital has placed a greater demands on regulators and companies. They need to adopt international standards and improve their corporate governance and disclosure practices to achieve greater transparency and investor confidence. As the gatekeepers of financial information, accountants play an important role in maintaining the integrity and soundness of the financial environment.
The Review on Corporate Governance and Regulation in Singapore
Three private-sector-led committees, namely the Corporate Governance
Committee ("CGC"), the Disclosure and Accounting Standards Committee ("DASC") and the Company Legislation and Regulatory Framework Committee ("CLRFC"), were set up to review the corporate governance and regulatory framework in Singapore. The CGC has completed its review and submitted its report and an accompanying Code of Corporate Governance in April 2001. Listed companies in Singapore are encouraged to adopt this Code. The CLRFC's work is still on-going. The DASC has completed its review and submitted its report containing 22 recommendations to the Government in September this year. The Minister announced that the Government has accepted all the DASC recommendations which seek to improve the process by which accounting standards are set, maintained and regulated in Singapore. They aim to align Singapore's standards in the areas of accounting and auditor independence with international standards, as well as promote good disclosure practices in Singapore.
The DASC Recommendations cover the following:
1) Quarterly Reporting - Listed companies should make financial announcements on a quarterly basis. The quarterly reports need not be audited. Such quarterly announcements should be made within 60 days oof the quarter end. Quarterly reporting would help bring about greater transparency and better corporate governance in Singapore and improve Singapore's standing as a world-class business financial centre.
2) Auditor Independence - A two-pronged approach has be proposed. First, it highlights the principles by which independence of public accountants could be determined. Next, it recommends prohibiting auditors of public companies from providing their audit clients with certain non-audit services, such as book-keeping, which would seriously impair auditor independence. These recommendations are in consistent with the approach taken by the IFAC and European Commission
and the practices in the US, UK, Australia and Hongkong. However, appropriate exceptions, which are consistent with international practices, will be provided by the Public Accountants Board through its rule on auditor independence. In the area of employment relationship, the DASC proposes that if a former partner is employed by an audit client in an accounting or financial reporting oversight role, there should not be financial ties between the individual and the audit firm. While this is a sensible safeguard, exceptions will be provided to allow predetermined, fixed arrangements, such as pensions, between the former partner and the audit firm. Arrangements where the payments are not influenced by any connections between the individual and the audit firm, and do not depend on the firm's revenues and profits, will be allowed.
3) Compliance With Accounting Standards - In consistent with the practices in the US, UK and Australia, compliance with prescribed accounting standards will be legislated. However, the DASC recommendation allows companies to deviate from the prescribed accounting standards if such deviations are required to present a "true and fair" set of financial statements provided that this "true and fair override"is confirmed and agreed upon by its auditor.
4) Harmonisation With International Standards - It is recommended that Singapore adopt the standards issued by the International Accounting Standards Board and would be the prescribed accounting standards, and would be termed "Financial Reporting Standards" or "FRS". It is also recommended that listed Singapore-incorporated companies be allowed to use certain alternative standards, if they are also listed on foreign exchanges that require these standards. These companies do not need to reconcile their accounts with Singapore accounting standards. Thus, a listed Singapore-incorporated company that is also listed in the US can prepare its accounts based on US GAAP. It does not need to prepare a parallel set of accounts based on the Singapore accounting standards.This would reduce business cost for such companies. All other Singapore-incorporated companies must use the prescribed accounting standards, unless they are exempted by the Registry of Companies and Businesses.
5) Council On Corporate Disclosure And Governance - It is recommended that once the accounting standards are made a legal requirement, it would not be appropriate for the accounting standards setting authority to reside with a professional organisation like ICPAS. It is recommended that the Government establish an independent panel comprising representatives from the various stakeholder groups like accountants, investors, bankers and businessmen, to be appointed by the Minister for Finance, and would undertake the prescription of accounting standards in Singapore. The panel would also assist the Government in the review and enhancement of corporate governance and disclosure practices on a continuous basis. Therefore, the panel, called the Council on Corporate Disclosure and Governance ("CCDG"), would be tasked first, to prescribe accounting standards in Singapore; second, to strengthen the existing framework on disclosure practices and reporting standards; and third, to review and enhance the existing framework on corporate governance and promote good corporate governance in Singapore.
The Finance Minister concluded with a remark that the drive for higher standards of disclosure and corporate governance can only be accomplished through close collaboration between the Government and the private sector, as well as working hand in hand with the ASEAN member colleagues to ensure that the region succeeds and prospers in the New Economy.