Recent Developments In The Accountancy Banking Business Sectors Accounting Essay


Overview of the department/division

I am being attached to the audit department of Chio Lim Stone Forest (CLSF). The company adopts a risked based audit methodology to each of the audit engagement (Please see Appendix 1). The objective of a risked based audit methodology is to understand clients' business operations and identify key audit risks in relation to the nature of their business.

CLSF has an extensive network of clients, ranging from small medium enterprises (SMEs) all the way to public-listed companies such as Challenger Technologies Limited. CLSF offers a wide range of audit services such as statutory audits, special reviews, due diligence for mergers and acquisitions and other non-statutory audits. Under statutory audits, auditors would verify the true and fairness of the financial statements by examining accounting records and supporting documents before rendering an opinion in accordance with international and Singapore audit standards. In addition, CLSF provide value-added services by helping clients to draft financial statements and developing ways of improving their efficiency. Partners and managers are also actively involved in the planning and execution of the audit as they are more familiar with the clients' business operations.

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Auditors also provide non-statutory audits such as strike-off of accounts and certification. A special review is a comprehensive examination of the clients' business which enables management to focus on key issues and resolve them. Auditors also assist clients in giving them advice on due diligence for mergers and acquisition.

As for the audit performance in the last financial year (FY 2010), the charge out rate (calculated by billings to clients/auditors' remuneration) is 2.26. It is expected to drop to 2.12 in FY 2011 due to more experienced employees who expect to draw higher salaries. (Please see Appendix 2).

Structure and manpower of the department

Majority of the employees in CLSF are from the audit department, comprising of 166 employees and the number is expected to increase to 180 in FY 2011(Please see Appendix 3). The corporate rankings ranges from vacation trainees all the way to partners (Please see Appendix 4). In addition, employees are spilt into 9 groups, with a few sub groups (please see Appendix 5).

Systems & software used in carrying out the department functions

Microsoft office 2007 productivity suite i.e. Microsoft excel and Microsoft word is integral to every aspect of audit work where it is often used to prepare lead schedules and audit reports.

There are also in-house developed software to facilitate audit work, namely IBM lotus notes, client management system (CMS), timesheet management system (TMS), job management system (JMS) and job status system (JTS).

IBM lotus notes is a useful database where it allows sharing of information throughout the company. It maintains reference materials like training resources, manual audit programme sheets (MAPS) and necessary information such as emails, electronic leave application, enrolment of training courses, and even room booking.

CMS contains important information such as clients' contact details, audit fees and partners and managers who are in charge of the audit engagement. TMS keeps track on staff's attendance and enables auditors to key in their daily schedule. JMS enables the tracking of audit files, whether it is kept in the compactus or borrowed by an auditor whereas JTS helps to facilitate the preparation of job status reports ranging from the dates of the start of audit fieldwork to the release of audit reports.

Key challenges facing the industry (422 words)

The first challenge would be the ability to groom and retain experienced staff especially in small and medium sized firms like CLSF. Even though many graduates hold an accountancy degree and they join the profession upon graduation, they tend to jump ship to financial institutions and other companies after accumulating work experiences for a few years. Therefore, it is a challenge to retain experienced staff as they are in demand at financial institutions and other companies (Kaka Singh, 2010). Staffs with a few years of experience are most likely to jump ship as they are highly sought after and they can earn up to 30% more by changing sectors (Teo Cheow Tong, 2010).

In addition, low starting salary, long working hours, slow career progression and less reputable profile increase the temptation to jump ship. Work-life balance would also be the first priority, especially for females who want to start a family. Since the gender ratio is highly inclined towards females in accountancy sector, there might be a talent shortage when companies do not implement flexible work arrangements such as reduced work portfolio scheme or work-from-home scheme.

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As such, many companies paid out huge incentives and bonuses to retain these experienced staff. Some companies also seek temporary and contract staff that has the necessary knowledge and skills to cope with the talent shortage.

Another key challenge faced would be the audit's value to the society, especially with the recent cases of corporate fraud where the auditors' role was often queried. Many accused auditors for not doing their job. However, it was not exactly their job as auditors were never meant to spot those errors when the samples did not fall within the tested scope.

Furthermore, audit fee have generally been inelastic despite an increase in volume of work. Higher volume of work is caused by stringent rules and regulations and higher expectations from the stakeholders. Therefore, some companies may not allocate sufficient time to their audit engagements and as such, they may overlook critical matters and lose their professional scepticism occasionally.

In addition, stakeholders have higher expectations. They expect auditors not to just comment on the financial statements by issuing a two-page audit opinion but also focus on company's risks and current and future performance. In a way, there would be an increase in the job scope of auditors. However, the issue with increasing the scope of auditors is auditor liability as more things could go wrong since auditors have to perform more work.

Indeed, it is a challenge on re-defining the role of auditors because audit is highly valued by stakeholders and now, there are increased pressures to meet market expectations.

Recent developments in the accountancy/banking/business sectors (341 words)

A new accounting rule on Singapore Financial Reporting Standards (SFRS) for Small Entities was introduced recently on 1st January 2011. This new standard is implemented to simplify accounting for small medium enterprises (SMEs) where the number of detailed disclosure requirements would be decreased. This also helps to reduce regulatory compliance costs, improve companies' productivity as they have more time, capital and resources to focus on their business operations and enhance Singapore as a business hub.

Even though this seems to be beneficial to the smaller companies in the long run, it would mean higher audit and training costs initially. Audit firms have to invest capital and time in training their staff so that they are familiar with this new standard and they may have to revamp some of the audit procedures. Auditors would generally do more work because they have to do a restate of comparatives from full GAAP to a small GAAP in a transition year. (Michael Chin, 2010)

Another implication to this new standard is that some firms, especially creative firms, may be less profitable as research and development costs would have to be treated as expenses, instead of being capitalised under the full reporting standards (Yin Tong, 2010). However, this new accounting rule is not mandatory. Therefore, companies should consider both benefits and costs carefully before adopting this new rule.

I have learnt that for an audit profession, auditors should not just focus on performing an audit and to issue an opinion eventually. Instead, we should also be aware of revised/new accounting standards as this affects our work performed. It brings to my attention that it is important to keep myself consciously updated with this new accounting rule on Singapore Financial Reporting Standards (SFRS) for Small Entities because CLSF has a wide range of SMEs clients. In addition, interns like me are often assigned to small clients so the impact would be greater in terms of the volume of disclosure requirements. If there are training courses available, I would not hesitate to attend to have an enhanced understanding.


Company level (not enough words)

I would like to highlight an issue on the charging of time costs in the timesheet. I understand that audit fees are agreed upon first before commencing an audit engagement. Sometimes, the fees have to be increased based on more work done by the auditors since fees are charged according to the amount of work performed. Therefore, timesheet is being introduced to keep track of the time costs and incurred.

However, I feel that the hours that were charged to the client would be inaccurate since it is only an estimated figure. In addition, we were only allowed to charge the time costs to office administration for a maximum for one hour only. Sometimes we ended up charging more time costs to our client when we actually incur more office administration time.

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There are also instances where we could undercharge our client. We could work overtime for numerous days but we did not charge the time costs to our client. Another scenario would be the transport claims where we are not allowed to claim despite working overtime for the client. This is to minimise the time costs charged to the clients.

Therefore, I propose that there should not be a limit on the number of hours for office administration, especially for new joiners who joined the company where they incur more hours doing office administration for the first week. In addition, we should be more proactive by completing the audit based on the deadline but if there is more work to be performed, we should charge the time and transport costs to the clients accurately.

Another key issue that I would like to identify is regarding external confirmations i.e. debtors/creditors confirmations. External confirmations are valuable as they are information obtained from external parties, which is more reliable. The current situation is that we would only send the confirmations during our fieldwork and then perform alternative procedures concurrently as we do not receive any replies. When we did not receive any replies after 2 days, we would send a first reminder followed by a second reminder to chase them to reply. In a way, we are performing more work as we have to do alternative procedures and also obtain replies to confirm the amount stated in the confirmations.

As such, I feel that we could send the confirmations earlier, perhaps two weeks in advance since we already know our schedule on the clients we are in charge of. This would help to save time costs as we do not need to spend time doing alternative procedures when we would most likely receive confirmations from the major suppliers during the fieldwork. In this way, the suppliers would have more time to confirm the amounts as stated in the confirmations and we could also focus our time and effort on other sections of the working papers.

School level

Internship is an integral part of a tertiary education. Therefore, Ngee Ann polytechnic should continue to implement a compulsory local/overseas internship (either 2 months or 6 months) for final year students. It is effective as it enables students to gain learning experiences beyond the classroom, with professional mentors guiding them. For example, I could apply the audit knowledge which I have acquired in school to my audit work more efficiently. It helped to enhance my understanding of the audit procedures and assertions which I performed in my audit fieldwork.

Internship gives students a broader exposure of experiencing the real working environments where they are challenged to think critically to solve problems. It also enhanced their overall learning by developing useful skills such as interpersonal skills and knowledge throughout the internship. For me, I have learnt to manage my time well as I am often faced with time pressures and deadlines.

Internship is also a platform for students to secure permanent jobs since they have already undergone on-the-job training and understand more about the company policies and procedures.

What makes Ngee Ann Polytechnic unique from other tertiary institutions would be the internship period because it is the longest among all particularly for accounting students. This gives students a better insight of the career which they might be interested to pursue in the future as they are more familiar with the jobscope and working environment.

Ngee Ann polytechnic also offers a wide range of career options for internship. This was only implemented last year where students get an opportunity to try out what they are interested in by ranking their preferred career options and companies. In addition, for those who only intend to go for 2 months internship, there are a range of options such as finance, international business which they can choose to study. Overall, Ngee Ann polytechnic provides flexible options for students to pick and choose from, based on their own interests.

Another recommendation would pertain to the grading of internship module. Currently, it is made up of two components namely company's evaluations (40%) and individual assignments (60%).

For company's evaluations, students will be evaluated based on their performance such as attitude, competency etc. This is useful because it helps to keep track student's performance and give them feedback for improvement. It also gives students opportunities to prove their skills and some companies may base on their performance to retain them. Without evaluations, students might not treat internship seriously and they might make grave mistakes since they are not graded at all.

For the individual assignments, students have to complete 3 reports and participate in an online discussion. This enables students to reflect on their learning experiences and understand more about their company/industry.

I would like to propose a change in the components of the individual assignments by only having an interim and a final report, comprising 30% of the overall grading criteria each. I understand the importance of sharing experiences with each other and discussing work-related issues through an online discussion. However, I feel that it should not be graded since most students would share their experiences during lunch time and they would also voice out any work-related issues they faced during an interaction session when the liaison officer visits the office.

In addition, I think that periodic report could be excluded because it only contributes to 5% of the overall grading criteria and the questions are similar in the interim reports. In a way, students can have more time and information to write for their interim reports.

Not having an online discussion and periodic report helps to ease the students' workload because most students are exhausted after working long hours and some may have to stay back late to complete their assigned tasks.

Key takeaway & personal achievement (395 words)

For me, the ability to manage time well is a significant learning experience. I used to believe I can manage my time well as I am able to cope with both my studies and co-curriculum activities (CCA) since primary school. However, I was wrong until I performed an audit for a listed company.

As the company is public-listed, the company holds many subsidiaries. Therefore, every member in my team was in charge of a particular section and I was being assigned to complete the liabilities section within two weeks. As usual, I planned my time and read through last year's file to have a clearer idea about the audit assertions that I have to perform and any significant matters to be noted. Then, I continued with my liabilities section by following the audit procedures closely in the manual audit programme sheets (MAPS).

One difficulty which I encountered during the course of fieldwork would be the incomplete listings and management accounts which the client provides. I requested from them numerous times but it was only given to me after a few hours. This affected me as I could not complete the whole section on time due to some outstanding items which the client has yet to get back to me.

In addition, the management accounts which they provided us initially were not updated due to some adjustments passed at year end. As such, I had to request for the updated listings again when the figures did not tie to the management accounts. In the end, I spent a lot of time inquiring and requesting listings from them. Worse, most of them were on one week leave before Chinese New Year and I had a hard time getting the listings from them.

This is totally unexpected from what I had planned initially. As deadline has to be met, I had no choice but to submit my section for my manager's review first and leave those listings as outstanding items first. I would then need to do more follow up. This experience taught me that auditors can allocate and plan their time well. However, the ability to do so still depends greatly on the clients' effectiveness and efficiency. Therefore, it is important to establish a close relationship with them so that they are more willing to assist us by answering our queries and providing source documents which we require.


Overall, I feel that the experience in CLSF opens new doors for me as it gives me a clearer idea about what is audit all about, apart from what I have learnt in school. It also enabled me to judge myself in terms of skills, whether I am able to blend into the corporate world.

What I liked about CLSF is that they adopt a buddy and on-the-job training for new joiners including interns. This is useful as it enables me to learn and develop my audit skills quickly. For example, I was involved in an audit engagement after being introduced to the firm's standard operating procedures (SOPs) and audit methodology.

I enjoyed myself in this internship as I have gained much invaluable knowledge in the field of audit. I am also able to gain hands-on experiences to work with different clients and expose myself to the audit field. I had the opportunity to handle audit engagements of very small companies individually and understand the whole work flow sequence of an audit engagement. In addition, my seniors were always there to guide and help me whenever I faced any doubts. Their guidance has helped me to learn and gain a broader base of knowledge in both audit field and business world.

One of the most valuable experiences I gained during my internship is interacting and establishing a close relationship with the clients. It is important to forge a close relationship as they are more willing to cooperate in giving us source documents and sharing any information that we require. This would also ensure that we perform a quality audit.

This internship experience has made me realise that I may want to major in audit as I now know how an auditor's life is like. I valued this learning experience and the new friendship forged.

Appendix 2

Appendix 1

*Charge out rate= Billings to clients /remuneration

Appendix 3