ACCOUNTANTS BILL

Order for Second Reading read.

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Deputy Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

This Bill seeks to establish the Public Accountants Board to provide for the registration and control of public accountants and to repeal and re-enact, with amendments, the Accountants Act. It was drafted in consultation with the Singapore Society of Accountants (SSA).

The registration and control of accountants currently comes under the SSA. The SSA performs a dual role of safeguarding professional competence as well as the social organization for its members. It would be better if the role of safeguarding or ensuring professional competence is discharged by a separate body, as in other professions such as engineering and architecture.

Under the Bill, the main responsibilities of the Public Accountants Board will be to register and control public accountants. The SSA will continue to exist and be known as the Institute of Certified Public Accountants of Singapore. The role of the Institute will henceforth be confined to professional matters such as setting and maintaining standards; providing continuing professional education and training; conducting examinations and keeping in touch with developments overseas in the accountancy profession. All public accountants registered by the Board are required to be members of the Institute.

The Board of 10 members will comprise:

(a) the Accountant-General;

(b) the Auditor-General;

(c) a member from the Nanyang Technological Institute or from the National University of Singapore to be appointed by the Minister; and

(d) seven other members to be appointed by the Minister, of whom three shall be appointed by the Minister on the nomination of the Council of the Institute. The Chairman of the Board will be appointed by the Minister from among its members.

The Board will have powers to appoint inquiry committees to hear and determine any complaint of professional misconduct made against any public accountant. Each inquiry committee will comprise four certified public accountants and a lay person. The findings of the inquiry committee will be reported to the Board which will decide on the penalty to be imposed. If found guilty, an errant public accountant will face a penalty ranging from censure by the Chairman of the Board, a fine not exceeding $5,000, suspension for a period not exceeding two years, to deregistration.

The Institute will have a Council comprising:

(a) eight practising members elected by practising members;

(b) eight non-practising members elected by non-practising members;

(c) three members nominated by the Government; and

(d) not more than two co-opted members.

All members of the Institute, regardless of whether they are in public practice or not, will be allowed to use the common designation of Certified Public Accountant and the initials "CPA". The objective of a common designation is to enhance the standing of the local accountancy profession.

To maintain high standards of ethics, members will be disqualified from election or appointment to the Council if:

(a) a practising member has been suspended from practice for a period of six months or more, or whose registration with the Board has been cancelled, or who has been convicted of an offence involving fraud or dishonesty; and

(b) a non-practising member ceases to be a member of the Institute or has been convicted of an offence involving fraud or dishonesty.

Before members are elected or appointed to the Council, they have to file a declaration with the Institute stating that they are not disqualified from holding office. Anyone who fails to make such a declaration is committing an offence and can be fined up to $1,000. A member of the Council is also required to vacate his office when he is convicted of an offence involving fraud or dishonesty, or is found guilty of professonal misconduct by the Council.

The Bill also provides for penalties against any person or body corporate fraudulently posing as a public accountant or certified public accountant. The existing range of fines which is from $200 to $2,000 will be increased from $1,000 to $10,000. The Bill also restricts employment of disqualified persons by public accountants to put a stop to the current undesirable practice of some public accounting firms employing suspended or deregistered public accountants.

Sir, I beg to move.

Question proposed.

Mr S. Chandra Das (Chong Boon): Mr Deputy Speaker, Sir, last year when we debated the Legal Profession (Amendment) Bill, I touched on two points which are pertinent to other professions as well. These are, first, a professional society must be led by professionals of impeccable integrity and character and not by men who have been convicted of fraud or dishonesty. And, secondly, there should be lay representation in the disciplinary committee.

Mr Deputy Speaker, Sir, I am pleased to note that these important principles are included in the Accountants Bill before this House. The Ministry of Finance and the accounting profession ought to be commended for this responsive action in coming out with such a thorough overhaul of the old Accountants Act which was drawn up as far back as 1963.

Sir, as an emerging regional financial and manufacturing centre, Singapore needs all its professionals to be relevant and responsive to our national goals and objectives. They must also strive to maintain and uphold the highest standards of professional conduct and technical competence. As auditors and increasingly as business advisers, the accountants must not only be independent but must also be seen to be so.

Sir, the Public Accounts Committee in 1979 recommended to Parliament that commercial auditors of statutory boards should be rotated every five years. I believe this recommendation has been adopted by most statutory boards and this has proved to be a good move in several ways. I am told cases of inefficiencies and wastages have been discovered and corrected. Sir, familiarity and long-term relationships can lead to laxity. I would urge through the Minister for Finance that the Securities Industry Council and the Stock Exchange of Singapore seriously consider rotation of auditors in public listed companies. With increasing business complexity and the introduction of off-balance sheet financial instruments - you have your NIFs, RUFs and what have you - rotation of auditors of public companies will provide the public with additional safeguards. Such a measure, which may be unpalatable to most auditors I believe, would spur them on to higher levels of professionalism.

Mr Deputy Speaker, Sir, Singapore's future as a financial centre hinges on investors' and public confidence in the financial statements of companies operating here. Right now, with the vigilance of MAS, CAD, SSA and other regulatory bodies, we have not had serious mishaps apart from the Pan-El saga. The question for us now is: how do we ensure that there would not be another Pan Electric? The Singapore Society of Accountants has promulgated the establishment of audit committees for publicly listed companies. Sir, I submit that the rotation of auditors will provide us with another check and balance.

Sir, I support the Bill.

Mr Philip Tan Tee Yong (Paya Lebar): Mr Deputy Speaker, Sir, I rise to support the Bill. But I have one or two clarifications to ask of the Minister.

First of all, it is stated in clause 5(c) that one of the functions of the Board is:

'to determine the qualifications of persons for registration as public accountants under this Act;'

But over in clause 27 (b), one of the functions of the Council of the Institute is:

'to determine the qualifications of persons for admission to membership in the Institute;'

I would assume that this qualification also covers public accountants because in the earlier clause 26(4), it states:

'The members of the Institute shall be classified as -

(a) practising members;

(b) non-practising members;

(c) honorary members; and

(d) provisional members.'

Between these two, the Board and the Council, I would like to ask who actually is the one who determines the qualifications of accountants.

The second point of clarification is this. It follows that the acceptance by the Council of practising members into the Institute will automatically be registered as public accountants by the Board.

The third point of clarification is on clause 16(a) which states "change of name". Do these words "change of name" mean actually change of business name?

Dr Richard Hu Tsu Tau: Mr Deputy Speaker, Sir, I thank the Member for Chong Boon for his support of the Bill and for his proposal that public listed companies should have their auditors rotated every five years as in the case of statutory boards. I will certainly commend his proposal or recommendation to the Securities Industry Council and the Stock Exchange Committee for their consideration. The issue concerned is, of course, relatively complex but I think it is something definitely worth their consideration.

The Member for Paya Lebar asked who should be setting the standards for the qualifications of accountants. I think it is undoubtedly the responsibility of the Public Accountants Board to set the primary qualifications.

I did not quite follow his second question.

Mr Philip Tan Tee Yong: The second question is: if the Council accepts the member's institute, is it an automatic acceptance by the Board?

Dr Richard Hu Tsu Tau: I think it is the Board which sets the qualifications. The Council's responsibility under the new proposed changes will be to confine to professional matters such as setting the standards but not approval of the final qualifications. They can recommend to the Board.

The third question was on clause 16 on the question of "change of name". Clause l6 states:

'Every public accountant shall notify the Registrar in writing within one month of any of the following changes bearing on the particulars entered in the Register of Public Accountants:'

It would be the change of name of the accountant's firm, I am assuming, under which he is operating his business. It might be the individual's name himself if he is operating under his personal name.

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. - [Dr Richard Hu Tsu Tau].

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