Accountancy Functions (Consolidation) Bill

Order for Second Reading read.

4.08 pm

The Second Minister for Finance (Ms Indranee Rajah): Mr Deputy Speaker, I beg to move, "That the Bill be now read a Second time."

The Accountancy Functions (Consolidation) Bill merges the Accounting and Corporate Regulatory Authority (ACRA), the Accounting Standards Council (ASC) and the Singapore Accountancy Commission (SAC) under one entity. The merger was first announced in July last year and the merged entity will take on the name of ACRA. Upon the passing of the Bill, we intend for the merger to take effect on 1 April 2023.

The Government's accountancy-related functions have evolved over the years.

ACRA was created in 2004, following the merger of the Registry of Companies and Businesses and the Public Accountants Board to consolidate complementary functions in financial statement regulation and audit regulation. ACRA, currently, registers and regulates public accountants, business entities and corporate service providers.

ASC was formed in 2007 to set accounting standards that would apply to companies and non-corporate entities, such as charities, societies and co-operative societies.

SAC was set up in 2013 following a recommendation made by the Committee to Develop the Accountancy Sector (CDAS). SAC's key function is to grow the accountancy sector and related fields in Singapore, including the development of the Singapore Chartered Accountant Qualification (SCAQ), which leads to the conferment of the "Chartered Accountant of Singapore" designation.

The Government has reviewed the structure of these entities and assessed that there is value in consolidating these accounting-related functions within one entity. The merger seeks to achieve the two key objectives while preserving the existing strengths of the constituent parts.

One, it will strengthen the effectiveness of regulation, standard setting and sector development by harnessing synergies across complementary functions.

Sustainability reporting is an example. ACRA has set up a sustainability reporting office and is taking the lead to monitor global reporting developments on this front. ACRA is also working with industry stakeholders to develop an implementation roadmap.

For the roadmap to be feasible, our accounting firms and professionals need to be equipped with the necessary knowledge. Such capability building and sector development initiatives are, currently, overseen by SAC.

The merger of these entities will allow for closer partnership and forge a stronger feedback loop between regulatory and sector development matters, enabling us to respond more nimbly.

We expect more of such cross-cutting issues in the future, for example, on the valuation of intangible assets and implications on financial reporting standards. Thus, the merger of these entities is timely.

Two, it will strengthen the merged entity's ability to develop and manage talent in a sustained manner as well as provide better career development opportunities to officers. Today, SAC and ASC secretariats are both small organisations with a staff strength of less than 30 officers. By merging them with ACRA, which has a wider range of responsibilities and larger staff strength of about 200 officers, there will be more opportunities for existing SAC and ASC secretariat officers to be cross-deployed, cross-trained and move forward in their careers.

The Bill seeks to give effect to the merger through two key sets of amendments. Let me elaborate on them.

The first set of amendments relates to amendments to the ACRA Act and the repeal of the SAC Act.

Currently, the SAC Act provides for the SAC to perform the functions and powers relating to the growth and development of the accountancy sector and its related fields, such as business valuation. The SAC Act also provides for SAC to register persons as Chartered Accountants of Singapore and handle issues relating to the suspension or termination of such membership.

Part 1 of the Bill amends the ACRA Act to allow ACRA to take on the functions and powers that currently reside with SAC. The Bill also provides for SAC's assets, liabilities, records and employees to be transferred to ACRA with no change to the employment terms of SAC's employees. SAC's current employment terms are the same as those of ACRA.

Consequentially, the SAC Act will be repealed and the SAC dissolved accordingly. Savings and transitional provisions have been provided under Part 5 of the Bill to ensure that the handover from SAC to ACRA can be smoothly effected, for example, where there are pending applications relating to Chartered Accountants of Singapore.

The second set of amendments pertains to amendments to the Accounting Standards Act.

Currently, ASC sets accounting standards that apply to companies, charities, societies and co-operative societies in Singapore.

Following the merger, the Bill provides for an Accounting Standards Committee to be established within ACRA. The appointment of members to the Committee will have to be approved by the Minister for Finance, as is the case with the appointment of members to ASC today.

The Bill confers the accounting standards setting function for companies, charities, societies and co-operative societies in Singapore on ACRA. This would allow the Accounting Standards Committee, which will now be reconstituted under ACRA, to continue performing its function of setting accounting standards in the same way as the Accounting Standards Council does today.

The Bill also provides that the accounting standards made or formulated by ASC that are currently in force will remain valid, until otherwise superseded by the Accounting Standards Committee.

Part 3 of the Bill provides for the amendments to the Accounting Standards Act.

Finally, Part 2 and Part 4 of the Bill provide for consequential and related amendments to other Acts. These are to allow non-ACRA Board members to be appointed to the Public Accountants Oversight Committee, and to replace existing references to “Singapore Accountancy Commission” with “Accounting and Corporate Regulatory Authority” and existing references to the “Accounting Standards Council” with “Accounting Standards Committee”.

In conclusion, Sir, the amendments in this Bill is to effect the merger of ACRA, SAC and ASC into a strengthened accountancy function under one entity. Over the past decade, the accountancy sector has evolved from bookkeeping and auditing to include a myriad of other roles, such as corporate governance, insolvency and business advisory services. With emerging trends, such as sustainability, the accountancy sector will continue to evolve further.

We are committed to supporting the industry on this transformation journey and the merger will better serve the accountancy sector. This will, in turn, enhance Singapore’s pro-business and trusted regulatory environment. Mr Deputy Speaker, I beg to move.

Question proposed.

Mr Deputy Speaker: Mr Don Wee.

4.17 pm

Mr Don Wee (Chua Chu Kang): Mr Deputy Speaker, Sir, I declare that I am an elected Council Member of the Institute of Singapore Chartered Accountants (ISCA) and a member of the Accountancy Workforce Review Committee, but I do not have any commercial interest in any accounting entity.

Accountancy has continued to thrive because of the key role it plays in supporting capital markets and businesses, and it continues to evolve and remain relevant to industry needs. As reflected in the Accountancy Jobs Transformation Maps for In-house Finance and Accounting Functions and Accounting Practices, job roles in accountancy continue to evolve and new roles are emerging, in tandem with the rapidly changing business landscape. I commend the Government for the Jobs Transformation Maps and various other initiatives to upskill and reskill the profession.

All professions have to constantly adapt to changes arising from technological advancement and climate change, and the accountancy profession, in particular, is adapting well. These developments reflect the need for the Government to prepare accountants for emerging roles. Therefore, the merger of the accountancy-related units in ACRA, SAC and ASC secretariats into a strengthened accountancy function under one entity is a step in the right direction.

This merger will strengthen the effectiveness of regulation, standard-setting and sector development by harnessing synergies across complementary functions. The merged entity will also be better able to support the needs of the accountancy profession as Singapore transitions to a green economy.

Looking ahead, there are pertinent areas that need to be enhanced to further grow the accountancy sector and profession.

For instance, there is a misperception that the accountancy sector is no longer an attractive career. The Business Times reported that students are choosing courses that will lead to hot jobs in fields, such as data science and environmental sustainability, over accountancy. The accountancy talent pool has also shrunk. According to data published by MOE, the total intake of accountancy students at the Autonomous Universities has fallen from 1,508 in 2017 to 1,368 in 2020.

This seems to contradict with my observations, as there is now a severe shortage of accountants in the jobs marketplace, with demand outstripping supply. Demand for accountants will continue to grow. Singapore's accountancy sector is expected to add 6,000 to 7,000 jobs by 2025, from a workforce of about 100,000 now. The talent shortage in the accountancy sector is an urgent issue and we need to develop the accountancy talent pipeline to meet the projected demand to support the growth of Singapore’s businesses and the economy.

More needs to be done to increase the supply of professional accountants. I would like to suggest the merged entity to look into these three key areas.

The first area is on the enhancements to the Singapore Chartered Accountant Qualification (SCAQ). SCAQ is the gateway to the future of the accountancy sector. It is the main qualification pathway for one to qualify as a Chartered Accountant of Singapore. As the national Chartered Accountant (CA) qualification, SCAQ is an important product of Singapore and a brand with the potential to be marketed regionally and internationally, just like the renowned ACCA, which is a key export of the UK.

SCAQ was launched in 2013. It should be reviewed and enhanced holistically to be more in line with market expectations.

Given the diverse roles professional accountants can play in an increasingly complex business environment, SCAQ should be designed to cater to a wider range of career pathways. I note that SCAQ, currently, contains a module on valuation but does not delve deeper into the topics of sustainability and forensics.

For the existing valuation module, a review should be undertaken to consider if the curriculum should be broadened to provide appreciation of pertinent valuation issues driving the businesses currently, for example, changes and impact to businesses caused by climate change and/or other ESG factors. The review can be conducted jointly with the Institute of Valuers and Appraisers Singapore, which is supported by the Singapore Accountancy Commission currently.

To further enhance the programme’s value proposition, it should focus on attracting a wider audience to inject talent diversity through the review of the programme entry requirements and structure enhancements, increasing flexibility on how practical experience is recognised and exploring regionalisation opportunities.

For greater inclusivity and to widen the talent pool beyond those who have pursued accountancy tertiary studies, having multiple entry pathways and recognition of relevant competencies would improve the profession’s accessibility.

The second area is the need to tighten policy and enhance regulation of preparers of financial statements.

While we build the talent pool, it is important to also look at upholding financial reporting quality, which is crucial to maintaining Singapore’s reputation as a global financial centre and business hub. To do this, there should be regulation whereby preparers of financial statements, especially those working in public interest entities, must be Chartered Accountants.

Accountants in Singapore are, primarily, unregulated as long as they are not public accountants. Under the Accountants Act, only those who provide public accountancy services must register with the Accounting and Corporate Regulatory Authority. There are no regulations governing those who provide non-audit services like accounting, taxation or consultancy, financial services and those who are employed in business, commerce and industry.

Furthermore, the title "accountant" is used loosely, as any individual can practise and declare themselves an accountant. This has grave implications. There is no incentive for unregulated accountants to continuously upskill or adhere to ethical requirements as they are not required to comply with continuous professional development requirements and are not answerable for misconduct or any forms of discredit to the accountancy profession. For instance, unregulated accountants who are not kept abreast of the anti-money laundering regulations and sanctions may be susceptible to being used by money launderers as they may not be aware of the latest money laundering methods and trends.

Another concern is the impact of poor quality financial reporting on audits and the effective functioning of capital markets. Relevant and reliable financial information is core to the functioning and integrity of our capital markets and it supports the reputation of Singapore as an attractive place of business with strong financial systems and credible finance as well as accounting professionals and advisors.

Furthermore, unregulated accountants and accountancy services can lead to a negative perception of the accountancy profession and its competencies. This will undermine public confidence and trust in both our accountancy profession, the regulatory system and Singapore’s credibility as a global financial centre.

I propose, for a start, to make it compulsory for financial statements of public-listed companies to be signed by the preparer who must be a Chartered Accountant. I would also suggest making it mandatory for the Audit Committee chairperson of a public-listed company to be a Chartered Accountant. This will help ensure that the entire financial reporting value chain is subject to proper and adequate quality control.

The third area is the need to boost sustainability skillsets. As I mentioned in my Parliamentary speech last month, the accountancy profession plays a critical role in supporting Singapore’s transition towards a green economy. Accountants are required to meet the demands arising from these trends, which include decarbonisation, sustainability reporting and green finance.

CFOs and finance managers will need to manage carbon trading. They need to understand carbon markets, credits and measurement of emissions, as well as sustainability reporting frameworks, guidelines and principles. They also need to navigate different and difficult regulatory and sustainability frameworks, both regionally and internationally. Those in corporate finance will need the skillsets in green finance and sustainability risk management. This is timely, as this House has just passed the Carbon Pricing Bill yesterday.

Audit and assurance professionals will require upskilling in sustainability reporting and assurance requirements. They will also be called upon to enhance internal processes. Audit professionals and tax advisors, CFOs and finance teams must understand and apply carbon tax regulations and guidelines, both regionally and globally.

With the sustainability movement being at a nascent stage, there is insufficient skilled talent in this area. More must be done to equip the accountancy profession with certifiable skills in sustainability. In this regard, the Government can partner professional bodies, like ISCA, in preparing the accountancy profession for the transition to a green economy.

To conclude, I commend the Government again on its efforts to ensure greater alignment among the Government agencies. I support the Bill.

Mr Deputy Speaker: Minister Indranee Rajah. Oh, my apologies. Mr Louis Ng.

Mr Louis Ng Kok Kwang (Nee Soon): Whatever I have done, I am sorry. [Laughter.]

Mr Deputy Speaker: Nothing! It was just a presumption that you would not be speaking.

4.27 pm

Mr Louis Ng Kok Kwang: Accountancy is a key sub-sector of the Professional Services Industry Transformation Map that was launched in January 2018. In June 2018, the Accountancy Sector Roadmap was launched, charting an ambitious plan for the accountancy sector over the next five to 10 years to develop Singapore into a global accountancy hub.

This Bill is an important step in that direction. It will streamline the regulation of accountancy in Singapore and put ACRA in a stronger position to shape the development of the accountancy sector.

I have four points to make.

My first point is on the process for revoking or suspending a Chartered Accountant’s (CA) registration. The new section 35F provides the procedures for revoking or suspending a CA’s registration, which must be done in line with the designated entity’s rules. Can the Minister clarify whether designated entities will be required to provide in their rules a right for the CAs to be heard before any revocation or suspension?

Section 35G allows ACRA to review steps taken by a designated entity for any contravention by a CA where the entity did not take any action against the CA or, having taken such action, suspends the member’s registration or imposes any lesser penalty. Can the Minister clarify whether ACRA has the power to conduct a review in two further situations? First, where the entity took action and, ultimately, decided not to make any order against the CA. Second, where the entity took action and decided to revoke the CA’s registration.

I ask these because section 35G(2)(b) on the situations where ACRA may conduct a review refers specifically to suspension but not revocation by an entity.

On conducting a review, section 35G(3) and (4) give ACRA the power to revoke registration, extend suspension, or suspend registration. It appears that ACRA has the powers to impose heavier, but not lighter sanctions than those initially imposed by the designated entity. Can the Minister clarify if ACRA has the powers, on a review, to impose lighter sanctions, or overrule the designated entity’s decision and not impose any sanction?

Under section 35G(5), before revoking, suspending or extending the suspension of a CA’s registration, ACRA must give the person written notice of its intention to do so and an opportunity to submit reasons against ACRA’s decision. Can the Minister share why the opportunity for the CA to submit reasons appears to come only after ACRA has come to an initial view on whether the CA’s registration should be revoked or suspended? Will the CA be provided an opportunity to submit reasons before ACRA makes an initial determination at all?

My second point is on ACRA’s powers to delete designated entities. Under section 35L, before deleting a designated entity, ACRA must give the entity written notice of its intention to do so and the opportunity to submit reasons. Can the Minister share why the opportunity to submit reasons comes only after ACRA has come to a view whether the entity should be deleted? Will ACRA inform the designated entity that its designation is currently under review and provide the entity a chance to respond even before it takes a position on the deletion?

Can the Minister share what considerations ACRA will take into account in deciding whether a designated entity should be deleted? This will provide guidance to entities in providing reasons why they should not be deleted.

My third point is on retaining talent in accountancy. In January this year, the Singapore Accountancy Commission (SAC) worked on and unveiled a new Job Transformation Map (JTM) for the accounting industry intended to chart a path forward for the sector in a post-COVID-19 world and introduce support initiatives to upskill and redesign jobs in this field. This is a welcome step forward for the industry, which is currently being transformed extensively by digitalisation and technology, and even newer drivers, such as climate change. It will help safeguard jobs and create new ones.

However, while JTM will address concerns on the supply side, more work can be done on the demand side. In June this year, The Straits Times reported that the sector was experiencing an acute labour shortage, with the Big Four accounting companies raising salaries to retain talent. With ACRA's broadened scope to develop the accountancy sector and oversee qualifications and programmes relating to the sector with the dissolution of SAC, what measures will be explored as part of JTM, or otherwise, to attract and retain accountancy talent?

My final point is on climate and sustainability-related accounting standards. Part 3 of the Bill introduces a new Accounting Standards Committee, which will take over the functions of the Accounting Standards Council (ASC). ASC is responsible for making and prescribing accounting standards for use by various entities.

ASC takes reference from the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), while taking into account local business and economic needs and circumstances. IASB is currently working on a set of global, climate and sustainability-related disclosures designed to meet the information needs of investors in assessing enterprise value. Has the Council, or will the Committee, evaluate its stance on these new green standards?

Sir, notwithstanding my clarifications, I stand in support of the Bill.

Mr Deputy Speaker: Minister Indranee Rajah.

4.32 pm

Ms Indranee Rajah: Thank you, Mr Deputy Speaker. I was so hopeful there for a moment, but always happy to have Mr Louis Ng's speeches and to respond to them. [Laughter.]

Mr Deputy Speaker, I would like to thank Mr Don Wee and Mr Louis Ng, for their support of the Bill and for their comments and suggestions. Members raised questions around three themes: one, the processes to revoke or suspend Chartered Accountants and delete designated entities (DEs); two, regulating those who prepare financial statements; and three, talent-related challenges and emerging trends in the accountancy sector. I will address them in turn.

Mr Louis Ng sought a few clarifications on the process of revocation or suspension of a CA's registration and deletion of DEs from the Act. I would like to, first, highlight that the processes to revoke or suspend CAs and to delete DEs are currently provided for in the Singapore Accountancy Commission Act. There are no changes to these provisions arising from the merger. Today, ISCA is the only designated entity, appointed by SAC, to confer the Chartered Accountants' designation.

I will now address Mr Louis Ng's questions, in turn.

First, Mr Louis Ng asked whether DE's will be required to provide, in their membership rules, a right for CAs to be heard before they revoke or suspend a CA's registration. This is not provided for under the Act because the rules of natural justice would apply to accord affected CAs with the right to be heard before any adverse action can be taken against the CA.

Second, Mr Ng asked about two aspects of ACRA's powers with respect to DEs and CAs: one, whether ACRA has the power to conduct a review, if DE did not take any action against the CA in respect of an alleged contravention by a CA, or if DE has revoked the CA's registration; two, whether ACRA has the power to impose lighter sanctions than what DE meted out or to overrule the DE's decision upon review.

I will take these questions together. Generally, ACRA has the right to conduct a review of the actions taken by DE against the CA, under section 35G of the Act, upon being informed by DE of its investigation undertaken. ACRA's review power is limited to revocation, suspension or extending a suspension on a CA. Such review power is intended to deal with cases where more punishment than what DE has meted out may be warranted.

If such a CA is aggrieved by the decision of DE, including the DE's revocation or suspension, of his or her registration, and feels that his or her case is deserving of a lighter punishment, there is a separate channel for the CA to appeal to ACRA, under section 35 of the Act. In an appeal, ACRA has the power to then take various actions as necessary, including quashing the revocation or suspension of the CA.

Third, Mr Louis Ng asked why the opportunity for the CA and DE to submit reasons arises only after ACRA has reached an initial view on whether the CA's registration should be revoked or suspended, or the DE's designation deleted respectively. In practice, ACRA will review the relevant materials in the proceedings that the DE has previously undertaken, which will, typically, include the explanation given by the CA before arriving at the preliminary view of an intended revocation or suspension. The Member should rest assured that the final decision will only be made after allowing the CA an opportunity to be heard.

Lastly, Mr Louis Ng asked for the factors that ACRA will take into account in deciding whether a DE should be deleted from the Act. When we appointed a DE, which is ISCA today, it is because we see a role for DE in ensuring professional competence, standards and ethics of CAs.

As part of the appointment, the roles and responsibilities of DE are specified and agreed between DE and SA currently, or, in future, ACRA. The arrangement enables the Government to work with partners to build and nurture a strong accountancy sector. In assessing whether to continue with or delete a DE from the third schedule of the Act, ACRA would take into account the effectiveness of the arrangement with the DE, in ensuring that the desired outcomes for the sector are met, as well as the ability of the DE to fulfil the roles and responsibilities.

Next, I move on to Mr Don Wee's suggestion to regulate those who prepare financial statements. Specifically, Mr Don Wee suggested to mandate the chairpersons of Audit Committees of publicly-listed companies to be a CA and all financial statements of publicly-listed companies to be signed off by a preparer who is a CA.

Today, the code of corporate governance already requires at least two members, including the Chairperson of the Audit Committee, to have recent and relevant accounting or financial management expertise and/or experience. This takes into account the need for the Audit Committee members to have diverse finance and accounting skillsets, and experience in business contexts beyond a professional designation.

Under the Singapore exchange listing rules, listed companies must comply with the Code of Corporate Governance or provide justifications for non-compliance in the Annual Report. On the suggestion to require all financial statements of listed companies to be signed off by a preparer who is a CA, we will have to study the proposal further as it would require careful consideration on areas, such as impact on business costs and the talent pool.

Today, we hold directors responsible for the preparation of financial statements, given their fiduciary duties to shareholders over the company's finances.

Mr Don Wee and Mr Louis Ng raised concerns on the talent shortage in the accountancy sector and highlighted the need to do more to expand the talent pool. Ensuring a healthy pipeline of talent is, indeed, important. MOF and SAC have convened an Accountancy Workforce Review Committee, or AWRC, to recommend strategies to better attract, develop and retain talent.

This Committee comprises key industry players, including our national professional body for accountancy, the Institute of Chartered Accountants (ISCA) and academia. We will share more details about the recommendations in due time.

Mr Don Wee asked for a review of SCAQ, in particular, areas, such as entry pathways and curriculum coverage, as well as to include emerging areas, such as forensics, valuation and sustainability, in the SCAQ curriculum.

I would like to assure Mr Don Wee that SAC has a professional education council and two learning and assessment committees, one each at foundational and professional programme level, that review the SCAQ curriculum, and ensure its continued relevance as the industry evolves. The council and committees draw representatives from the industry and academia, some are also ISCA members. I agree with Mr Don Wee that a more comprehensive and holistic review of SCAQ from time to time is useful. In this regard, work is currently underway to review the SCAQ programme to ensure that the qualification and syllabus stay future-ready and industry-relevant. This is one of the areas that AWRC will look into.

ISCA has also, separately, convened an SCAQ advisory panel to assess and provide recommendations to the Government on possible enhancements to SCAQ. I look forward to the recommendations of the panel.

Next, I will touch on sustainability, a trend that both Mr Louis Ng and Mr Don Wee highlighted in their speeches. Mr Don Wee suggested that the Government partner professional bodies to help accountancy professionals build capabilities in sustainability-related areas, such as sustainability reporting and assurance requirements. On this front, SAC will be providing funding support to ISCA to develop sustainability reporting and assurance certifications targeted to be launched in the next two years. We will continue to monitor these trends and see how the Government can do more to enable the green agenda.

Beyond building capabilities, there have been calls for more consistent sustainability reporting standards to facilitate comparison. Mr Ng asked if the Accounting Standards Committee would be developing a position on the future sustainability-related standards set by the International Sustainability Standards Board, or ISSB.

Currently, ACRA and the Singapore Exchange RegCo have set up the Sustainability Reporting Advisory Committee, comprising relevant industry stakeholders, to develop a sustainability reporting implementation roadmap. Part of the committee's work is to study various reporting standards, bearing in mind the need for international convergence. The Committee's work is well under way and recommendations will likely be issued for public consultation sometime next year.

In conclusion, Mr Deputy Speaker, the proposed amendments in this Bill seek to effect the merger of ACRA, SAC and ASC into a strengthened accountancy function under one entity to harness greater synergies across complementary functions. Just like how things are evolving around the world, the Government will continue to respond with agility and transform ourselves to better serve the industry.

The merged entity will build on the good work done by ACRA, SAC and ASC and continue to work closely with industry players to grow the accountancy profession and sector. Mr Deputy Speaker, I beg to move.

4.43 pm

Mr Deputy Speaker: There being no clarifications, I will put the question.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Ms Indranee Rajah].

Bill considered in Committee; reported without amendment; read a Third time and passed.