TAKEAWAYS
• In the next three to five years, the talent crunch, ESG (environmental, social, governance) and automation will have the greatest impact on audit.
• In the area of cryptocurrencies, the profession should learn from good use cases and keep pace with developments in order to help build trust in the ecosystem.
• EP 100 Implementation Guidance 5 provides guidance on applying the requirements of SG410.27A, which came into effect on December 15.
Megatrends are powerful and transformative forces, shifting the business landscape and driving the business world. In line with the emerging trends and forces that continue to impact and take shape in the profession, ISCA’s Practitioners Conference was centred around the theme of Connecting The Trends Of Tomorrow. The flagship conference for the audit profession, held on October 28, featured eight esteemed industry leaders and subject matter experts who took close to 400 delegates through an afternoon of thought-provoking presentations and panel discussions, as they defined the latest buzzwords, discussed implications brought about by trends, and reimagined shifts to the future of audit.
ISCA President Teo Ser Luck, in his opening address, encouraged practitioners to proactively keep abreast of the latest trends shaping the dynamic business world. To ensure the profession is well placed to scale new heights, ISCA empowers practitioners through initiatives to deepen outreach with key stakeholders, strengthen the talent pipeline, and uplift the quality of the profession. Noting a critical role that ISCA plays in the accountancy ecosystem, Mr Teo hopes that “ISCA can be the conduit between the government, businesses and the profession to facilitate mutual understanding and collaboration to grow as one community”.
In her keynote speech, Guest-of-Honour Lai Wei Lin, Second Permanent Secretary for Finance, encouraged the profession to stay nimble, and equip themselves with the relevant knowledge and skill sets to seize the new opportunities ahead. As accountancy job roles evolve, particularly in times of macroeconomic uncertainty and turbulence, her message resonated deeply with the delegates.
As a nod to the increasingly multidisciplinary nature of new growth areas, Ms Lai also emphasised the need to continuously upskill accountants and auditors to ensure a sustainable pipeline of talent to the profession. She urged key industry players to work together to review talent development strategies to enhance the attractiveness of the profession.
AUDIT MEGATRENDS OF TOMORROW
The Practitioners Conference kicked off with a panel discussion on audit megatrends. It was moderated by Lee Eng Kian, Deputy Chairperson of ISCA’s Public Accounting Practice Committee and Managing Partner, PKF-CAP LLP, and featured panellists Shariq Barmaky, Audit & Assurance Leader, Deloitte & Touche LLP (Singapore) and Regional Managing Partner, Audit & Assurance, Deloitte SEA, and Kuldip Gill, Assistant Chief Executive (Accounting and Compliance Group), Accounting and Corporate Regulatory Authority (ACRA).
As a prelude to the panel discussion, a poll was launched where the panellists agreed with the consensus that the talent crunch, ESG (environmental, social and governance) and automation are the top trends that will have the greatest impact on the profession in the next three to five years. Sharing his perspectives on the megatrends that are dictated by the demands of the next generation, Mr Barmaky discussed the technological breakthroughs as well as transition to greater transparency on sustainability reporting disclosures which are redefining the future of audit and the role of assurance.
Mr Lee encouraged the profession, grappling with the perennial manpower crunch that is becoming more acute and pronounced, to leverage on technology as an opportunity to automate; this will free up talent to focus on areas that matter, to provide richer services to add value to businesses. With the new quality management standards coming through this year, Ms Gill encouraged firms to look beyond the standards as a matter of compliance and instead, embrace them as a foundation to execute highquality audits for continuous improvement.
SUSTAINABILITY: IMPLICATIONS ON FINANCIAL REPORTING AND AUDITING
Ghamazy Rashid, a member of ISCA’s AASC-FRC ESG Working Group1, shared the launch of ISCA’s Technical Bulletin on Addressing Climate-Related Risks in Financial Statements and Audits of such Financial Statements. Through an illustrative example of a hypothetical transportation company, the bulletin demonstrates how climate-related risks can impact the application of financial reporting and auditing standards in Singapore. Mr Rashid was joined by Rishi Kalra, Executive Director and Group CFO, Olam Food Ingredients, in a fireside chat to delve further into the topic.
Mr Kalra shared his organisation’s experience on how business decisions have been affected by the shift in value proposition to focus on sustainability, arising from strong consumer demand amid a rapidly changing regulatory landscape. He reiterated the importance of the role of accountants in capturing the impact of such developments in the financial statements.
Mr Ghamazy highlighted observations of inconsistencies in companies’ reporting of climate-related risks in sustainability reports vis-à-vis the effects of those risks on the financial statements. He emphasised the need for finance teams to work closely with other departments to understand such risks. He also reminded auditors in the audience of the importance of incorporating ESG-related risks in their audit risk assessment process.
DRIVING SUSTAINABLE AUDIT QUALITY
Ms Gill spoke on the importance of high-quality audits in driving trust in the financial reporting ecosystem, the various trends that are impacting the audit profession, as well as what the audit profession can do to better prepare for the future.
She reiterated the importance of an effective system of quality control, which forms the bedrock of consistent delivery of quality audits, and also shared common observations from ACRA’s firm-level inspections, along with key reminders and good practices.
Given the wide range of implications arising from ESG considerations, Ms Gill urged the profession to build capacity and capabilities in this space, as the audit profession is well poised to seize this opportunity to prepare clients on the sustainability journey and to provide assurance on sustainability reporting. There is also a need to build a digital-ready workforce by adopting technology in audits.
BUILDING TRUST IN THE CRYPTOCURRENCY WORLD WITH ASSURANCE
While cryptocurrencies have been making the headlines, not many have interacted with digital assets in a professional or personal capacity. Wong Wanyi, Partner, PwC Singapore, gave delegates a flavour of the different forms and functionalities of digital assets, namely cryptocurrencies that are native to a blockchain, and tokens which are built on top of a blockchain. As financial reporting standards “do not cater for digital assets”, Ms Wong’s word of advice is to understand the use of the token and apply the principles behind the financial reporting standards.
Ms Wong discussed the needs of the industry as two-fold: firstly, they are industry-driven by a rise in hacking, protocol breaches and money laundering and secondly, regulations-driven. While she observed that many crypto-native companies are in fact thirsty for assurance, she cautioned on the many challenges in providing that assurance. In particular, she pointed out the potential issues in the decentralised ownership verification process, regulations that are still catching up, and the short time that this space has been innovating. Ms Wong reinforced the importance for the profession to learn from good use cases and to keep pace with developments in order to help build trust in the ecosystem.
ADOPTION OF IESBA’S NON-ASSURANCE SERVICES AND FEE-RELATED PROVISIONS IN SINGAPORE
Eng Chin Chin, Chairperson of ISCA’s Ethics Committee, explained the key revisions to the nonassurance services (NAS) and fee-related provisions in EP 100 (revised on 7 September 2022) Code Of Professional Conduct And Ethics, which came into effect on 15 December 2022. EP 100 (revised on 7 September 2022) has also replaced extant paragraph SG410.4A with revised paragraph SG410.27A which introduces a new term, “audit-related services” (ARS), applicable to firms with audit clients that are listed entities.
Ms Eng noted that revised paragraph SG410.27A relates to the communication with those charged with governance of listed entities about the proportion of non-audit services fees to the audit fees and the related safeguards, when this proportion exceeds 50%. She emphasised that SG410.27A now scopes out both (i) non-audit services fees earned by the firm or its network firms from the audit client’s parent and sister entities, and (ii) ARS fees from the fee proportion computation in assessing whether the 50% threshold has been exceeded.
Ms Eng announced the issuance of EP 100 Implementation Guidance 5 (IG 5) Frequently Asked Questions On Provision Of Non-Audit Services To Listed Entities to provide guidance to assist professional accountants in public practice in applying the requirements of SG410.27A. Among others, Ms Eng shared that IG 5 contains an illustrative example of the fee proportion computation and a nonexhaustive list of common examples of ARS along with the rationale behind each example.
PROLIFERATION FINANCING: UNDERSTANDING PROLIFERATION FINANCING & SANCTION RISKS
The final presentation of the conference was delivered by Martin Lim, Founder and Director, Ingenique Solutions. Mr Lim provided an overview of the landscape surrounding sanctions, including the two main types of sanctions imposed as well as the varied purposes of sanctions as tools to further political or diplomatic causes, restore international peace, counter terrorism, or protest violations of treaties and human rights.
Elaborating on the differences between the three broad stages of proliferation financing, Mr Lim highlighted that this was a crucial area that the profession “needs to understand to help us in our risk assessment”. He wrapped up the conference by discussing the red-flag indicators for proliferation financing, and how professional accountants can adopt good practices to manage such risks. These include reviewing AML/CFT internal policies, procedures and controls with additional counterproliferation financing risk assessment, and performing customer due diligence to cover beneficial owners and counter-parties.
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Source: https://journal.isca.org.sg/2022/12/18/megatrends-shaping-the-future-of-audit/pugpig_index.html