Mid-career folks as Public Accountant?

my coffee at 11.37pm

In Joe’s humble opinion – it is difficult for a middle-aged person (at least under current framework to qualify) to switch career and work his way to be registered as a Public Accountant.

Why is Joe so pessimistic?

Joe said the biggest stumbling bloke is the Practical Experience requirement.

Joe is a living example of someone who has acquired 4 of the 5 requirements but could not take the final step to be a public accountant.

How to get the Practical Experience?

For him to fulfill this requirement, he got to work in an audit firm as an audit professional for 3 years.

While the opportunities to seek such positions may be plenty at this point in time, the economics of transition has to be considered. Can Joe maintain his current income level to sustain the current costs of living with family bla bla bla while pursuing the trophy of public accountancy?

Define mid-career folks?

ACRA has defined “mid-career entrants” to include:

(a) people who have worked in other professional settings (such as bankers and financial analysts), but decided to make a career switch to the audit industry; and

(b) people equipped with the basic accountancy qualifications, but had chosen not to engage in any accountancy work in the early stages of their career.

Why is ACRA eager to look for ways to bring the mid-career folks into the audit profession?

One view is that professionals from alternative specialised industries often are experts in their own fields. These “experts” could make significant contributions to the audit profession by bringing in valuable knowledge and strengthen the audit team by adding to the team’s range of expertise.

Where the mid-career entrant aspires to become a public accountant, he could acquire the necessary audit experience under a public accountant before seeking to be registered. BUT HOW given Joe’s position?

Any idea?
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What are the qualifications needed to be a good Public Accountant?

flowers for me. thanks irene.

Can help me to answer the above question by classifying the existing 5 requirements (described below) either as

  • “Essential”,
  • “Good to have” or
  • “Thoroughly irrelevant”.

The current 5 requirements for registration as a Public Accountant:-

  1. Academic qualifications;
  2. Practical experience;
  3. Continuing professional education;
  4. Completing the course on ethics and professional practice subjects as determined by the Public Accountants Oversight Committee; and
  5. Membership with the Institute of Certified Public Accountants of Singapore.

Your view, please?

Public Accountant – How to be one?

Currently, the registration framework for public accountants comprises five elements:-

  1. Academic qualifications;
  2. Practical experience;
  3. Completing the course on ethics and professional practice subjects as determined by the Public Accountants Oversight Committee; and
  4. membership with the Institute of Certified Public Accountants of Singapore.
  5. Continuing professional education.

The above first 4 are the various doors that a person aspiring to be a public accountant would have to go through before you gain your official registration and recognition as a Public Accountant. The 5th door is a maintenance factor.

What is a Public Accountant?

Public accountants are persons who are registered with ACRA in accordance with the Accountants Act (the “Act”) to provide public accountancy services of audit and reporting on financial statements or any other professional services that are required by any written law to be done by a public accountant.

What is the problem?

We have a shortage of them now and in future to promote high quality audit and corporate financial reporting to build confidence in Singapore’s corporate financial reports.

Any idea?

ACRA has proposed the following alternative pathways:-

  • entry of international auditors (with specialist expertise);
  • entry of mid-career professionals with specialist expertise which are relevant to audit; and
  • re-entry of former public accountants who had left the profession.

Any other way?

Bong says…

Hi Edgar,

Just want to drop a mail to thank you for helping me to pass my 1.1 paper.

I got 90%.

I know you have been putting in a lot of effort on student. So far you are the one that spend most of the time with student. Giving enough time for student to think and try in the class.

That really help in building up confident of student rather than just quickly come out with the answer. especially for account dummy like me (have my study in mechanical engineering before).

Once again, THANK YOU and keep it up with your hardwork!

Your student,
Bong (Class of Jan 2007)

P/S – Bong, you have put in a lot of effort too. Well done.

Majority in CPA survey favour simplified treatment of SME accounting

A difficult bak kut teh lunch

The following are the results of a survey done by CPA Australia and the Corporate Governance & Financial Reporting Centre (CGFRC) at the National University of Singapore (NUS). It is reported in BT today.

  1. 42% agreed with the definition of an SME in the proposed IFRS as ‘entities that do not have public accountability and publish general purpose financial statements for external users’.
  2. More than 60% felt that we should also include large unlisted companies which do not have public accountability into the new standard.
  3. 72% said the new standard would better meet the needs of users of SMEs’ financial statements.
  4. 69% said they feel it would reduce the financial reporting burden for SMEs that want to use global reporting standards.
  5. 59% said they believe it would reduce the audit burden of SMEs in general.
  6. Banks who lend monies to SMEs are expected to be the main users of the financial statements.

What are some of the suggestions to simplify certain accounting treatments for SMEs?

SMEs are generally not in favour of complex accounting standards – for example:-

  • share-based payments,
  • accounting for impairment,
  • fair value accounting.

What are the respondents’ concerns?

  1. Adopting SME-specific accounting standards today would lead to difficulties in aligning financial statements to full IFRS in future, when needed.
  2. SMEs today may dread the work of converting from current full FRS to the new SME standards.
  3. Many believe the guidance to implement the proposed IFRS for SMEs is inadequate.

P/S – On Wed, I will attend the Mr Kon’s presentation at ASME.

Responses to ACRA Review

Mr Simon Ng Yap Peng and Mr Mickey Chiang, both representing their self and Ms Janet Tan, the executive director of ICPAS sent in their respective suggestions to BT / ST on Aug 2, 2007.

Firstly, Mr Simon Ng suggested:-

  1. Let minority shareholders elect their independent representatives to sit in the audit committee of listed companies.
  2. External auditors should set up a feedback box in their client’s premises for their employees to “whistle blow” any irregularities.
  3. External auditors should do surprise check on their clients.
  4. Our accounting students should do case studies on recent scandals such as NKF, China Aviation Oil, Citiraya etc etc. [Edgar is doing it now thru’ his blogs as he tries to inject realism into classroom learning.]
  5. Encourage availability of post graduate courses for grads of other disciplines to learn about accounting matters.

Mickey Chiang questioned the following:-

  • He understands that the ACRA review programmes were devised accountants from the Big 4. So are these programmes relevant to smaller/small audit firms?
  • How many of those auditors who “failed” the review were from the Big 4?

Ms Janet Tan of ICPAS suggested the following:-

  • To make available more training opportunities to upgrade knowledge and skills. [Yes, if the ACRA Review has highlighted that its members are caught in a time warp and self-contentment that they are good enough to keep making the monies without the need to keep up with time. But I don’t think this is the main issue. Our members are failing at basic stuff ie. things like not doing stock checks and insufficient/no documentation.]
  • Provision of a panel of “hot reviewers” for members whose work are now required to be reviewed by another suitably qualified person ie. “hot reviewer”. [Yes, this will help an important concern raised by ACRA in the interim.]

Edgar says,

  • I agree with Ms Tan that the review should be taken as a wake-up call to practitioners who think they can get away with shoddy work.
  • But I am sure ICPAS will look for root causes that have contributed to the poor state. With the information procured during ICPAS’s own check on its members over the years plus ACRA report, it should be able to present a more comprehensive remedial measures.

FRS40 and FRS12 equals more problem for companies

FRS40 on Investment Property

From 2007, annual changes in the fair value of investment properties are carried to P&L account.

So increased valuation of such properties would increase profit and consequent tax burden, vice versa. Recently, Overseas Union Enterprises (OUE) recorded fair value gains of $105.9 million in Q207 (nil in Q206) on its investment properties, due to the escalation in property values in line with the present exciting real estate market.

Such property firms would have already a cashflow issue in complying with FRS40 ie. cash to pay income tax on unrealised revaluation gains.

In addition to the above, property firms has another angle to consider ie. the impact of FRS12 on Income Tax on FRS40.

Companies have to account for the FUTURE tax consequence of a CURRENT event. This element of deferred income tax for any upward revaluation would have to be accounted for as an expense in the P&L.

What is “future tax consequence of a current event”?
An upward revaluation of an investment property

==> an increase in future stream of rental income OR increase in proceeds from disposal

==> make provision for the future tax liability today ie. deferred tax

While there is no actual cashflow for the provision, it is accounted for as an expense to create that provision.

Consequently, higher tax expense and higher effective tax rate.

Reference – “Property companies could be hit by deferred tax provision issues”, Aug 2, 2007 Busines Times, Michelle Quah