Accounting firms diversifying

Businesses and consumers are grappling with the prospect of slower growth. In the seventh part of a series looking at how the economy is coping, Rachael Boon examines the impact on the legal services and accounting sectors

The team from KYC Group - (from left) accounts supervisor Ang Swee Hoon, senior auditor Kam Mau Thai, auditor Zheng Xu Tao, founder Vivienne Chiang, assistant accounts manager Ashley Tan, associate consultant Nicholas Ngai and audit manager Fatima Di
The team from KYC Group - (from left) accounts supervisor Ang Swee Hoon, senior auditor Kam Mau Thai, auditor Zheng Xu Tao, founder Vivienne Chiang, assistant accounts manager Ashley Tan, associate consultant Nicholas Ngai and audit manager Fatima Diaz Maglipon. ST PHOTO: LIM YAOHUI

Many expanding their consultancy services as audit revenue shrinks

While other sectors in the economy are suffering, it is business as usual for accounting firms and those offering professional services.

Firms in the sector are diversifying their businesses to stay ahead amid economic volatility, becoming consultants for their clients and expanding their advisory and consultancy services.


The Big Four accounting firms still report healthy growth in revenues, and say traditional services of assurance and tax are still important.


  • Contribution to gross domestic product from accounting, book-keeping and auditing services in 2014: $1.4 billion (0.4%)

    Legal, accounting and management services in 2014: 114,200

    Composition of sector: More than 700 firms, Big Four firms account for 67 per cent of the market share


    • Note: Data compiled from the Annual Survey of Services, which covers business entities registered with the Accounting and Corporate Regulatory Authority (Acra) but excludes own account workers, for example, freelancers.

    More than 99 per cent of the enterprises were SMEs - defined by Spring Singapore as enterprises with operating receipts of not more than $100 million or employment of not more than 200 workers - in 2014.

EY, for instance, reported an increase of 11 per cent in global revenue to a record US$28.7 billion (S$39 billion) for the 2015 financial year. The Asean practice grew 12.9 per cent.

Small and medium-sized practices note the volume of work has remained the same; the slowing economy has affected their clients more than it has affected the industry.

Mr Robert Yam, founder of Robert Yam & Co, said: "We have the usual recurring work like auditing and tax compliance work, and I don't anticipate the slowdown having a material effect on our business as most companies and small and medium-sized enterprises (SMEs) in Singapore are quite compliant with their statutory filing requirements."

The Singapore Accountancy Commission (SAC) said the sector has been experiencing growth over the past few years, although it shows signs of slowing, mainly owing to reduced expansion in the workforce.


Mrs Vivienne Chiang, KYC Group's founder, said the economic downturn will affect the sector in terms of more downward pressure on fees, rather than demand.

Mr Paul Tan, CA Trust PAC's founder, added: "Many of our clients' businesses were adversely affected by the global downturn in 2015. This, in turn, has impacted us, where we cannot increase our fees and even had to give discounts compared to previous years despite having to spend equal or more time to complete the work."

A revised audit exemption threshold has been hurting smaller firms, whose clients are mainly SMEs.

The change, which took effect from July 1 last year, means that private firms that fulfil certain criteria - such as having an annual revenue of $10 million, up from $5 million - are exempt from statutory audit.

Mrs Chiang said audit revenue used to make up about 50 per cent of the group's total turnover. "With the audit exemption and other factors, the audit revenue now contributes around 30 per cent, while the consultancy is contributing close to 10 per cent of the total revenue."

Mr Lee Fook Chiew, chief executive of Institute of Singapore Chartered Accountants (ISCA), noted that the sector may see more consolidation of companies "as the total size of the audit market may shrink once the impact of the revised audit exemption threshold kicks in".

An SAC census found that the accounting market is dominated by the Big Four firms, which have 67 per cent of the market share, and the remaining 33 per cent of the market is shared between more than 690 smaller companies.

Big firms are cautious about the future as well, as Mr Yeoh Oon Jin, PwC Singapore's executive chairman, said: "We foresee immediate business or investment activities to be more subdued across most industries and this will impact demand for our traditional services of audit and tax."

However, an ISCA poll last October found that 60 per cent of respondents from accounting firms had "plans to diversify their service offerings beyond auditing in order to cushion the impact of the increase in audit exemption threshold".


Deloitte Singapore chief executive Philip Yuen said there has been greater demand from clients for advisory services such as audit advice, financial advisory for mergers and acquisitions, and restructuring and risk management, such as managing cyber risk.

Mr Max Loh, EY's Asean and Singapore managing partner, said EY has had an increase in overall demand for transaction advisory services - including corporate restructuring - which grew 15.5 per cent globally in the 2015 financial year.

SAC chief executive Uantchern Loh added: "While many smaller accounting entities are considering liquidating or selling off their businesses, a number of them have also embraced changes in technology and market conditions to diversify into new services, such as becoming a reseller of cloud-based accounting solutions and providing cloud-based accounting services."

PwC, for instance, invested in new skill sets to respond to client issues in the cyber and analytics areas. Mr Yeoh added: "Our investment and focus on innovation in the past few years have yielded fruit and have allowed our firm to stay ahead, particularly in the areas of strategy and risk consulting, as well as for deals and restructuring services."

Mid-tier accounting firm Nexia TS started forensic technology services between 2012 and 2013, and scaled it up in the past two years.

Nexia TS managing director Henry Tan said: "With the slowdown, there is also additional request for litigation support and this forensic technology is well used in this period."

Join ST's Telegram channel and get the latest breaking news delivered to you.

A version of this article appeared in the print edition of The Straits Times on March 15, 2016, with the headline Accounting firms diversifying. Subscribe