EXPECTING the future to be challenging was one thing, but accountant Lim Siew Yong could not have imagined a more formidable scenario.
When the former audit manager with a sizeable accounting firm in Kuala Lumpur left to set up her own last year, Lim was following the well-trodden footsteps of many successful accountants who started out in the same small, idealistically hopeful way.
“I remember sitting on the bare floor of my empty office because there was no furniture but it was satisfying and it felt so good,” she said of the time in September last year when she finally moved into her rented office after months of “working from my car boot.”
Young, intelligent, entrepreneurial female, Lim certainly fits the profile of what the Malaysian accountant would increasingly resemble in the future.
The Malaysian Institute of Accountants (MIA) said women were forming a growing proportion of its over 18,000 members with 41% of the total, up from 39% just a year ago.
Woman accountants like Lim in the early 30s are also increasingly seen taking audit licence interviews at the Finance Ministry, the passing of which is a prerequisite to public practice, where one candidate in five is now female. And the accounting profession, which has traditionally suffered from a decidedly unhip reputation for being a club of grey men in dark suits, could be changing at last.
But, as Lim found out in the one year since she became the sole proprietor of SY Lim & Co, there were other far less favourable changes afoot that could threaten the survival of firms like hers.
She brushed aside as “my own naivety and good learning experience” an incident when a “client” cheated her out of thousands of ringgit, but instead pointed to the main source of her livelihood, audit, as her greatest nightmare.
I earn 70% to 75% of my revenue from audits and that’s what I know best. But it cannot go on like this. It will end one day,” said Lim, who admitted that her early enthusiasm and hard work in building a client base had been clouded by some “self doubt.”
Unfortunately for Lim, her fears are not unfounded and the audit business could end, sooner rather than later.
Malaysia is the only country left in Asean where all companies, irrespective of size, are required by law to be audited. The model increasingly being adopted by many countries is for only public and large companies, or those with public interest, to be audited.
Small private companies are essentially exempt from the requirement. And pressure has been mounting from the local industry, with an eye towards global cost competitiveness, for the government to change the Companies Act to allow this.
MIA council member Raymond Liew said although he did not think the removal of the statutory requirement for audits of small companies would be an immediate threat, he believed it would be abolished within the next five years.
“This will be very significant because so many accountants, especially small firms, rely on audit as their main source of income,” he said.
Of the over 1,500 accounting firms in Malaysia about 92% or close to 1,400 of them are small sole proprietorships or two-partner outfits that will be hardest hit by the changes because of their reliance on a few major income sources, one of which, will be audit fees. Other major sources include tax compliance, outsourced accounting work and company secretarial services.
Fellow council member Lam Kee Soon said the argument on the lifting of audit requirements depended on whether the activity was seen as adding value or merely as a cost.
“If businesses and the regulators see it as just adding cost, audit is no longer an important function,” he said.
And it’s precisely because audits are being seen by too many companies as just a cost with little value added, that they demand the cheapest fees which then results in shoddy work, some accountants admitted privately. It was a vicious circle, they said.
Starting this year, an MIA practice review committee headed by Lam has been sending out review teams to accounting firms to try to arrest the quality issue. Although largely seen as a good thing, some accountants are quietly wondering if many firms can stand up to the scrutiny.
The writing, it seems, is already on the wall: change and upgrade. But are Malaysian accounting firms seeing it?
Lam shook his head. He said the new skill sets required to transform general audit practices into specialist ones such as a tax consultancy were not present. Worse, he is concerned that, even now, there is no impetus among many local accountants to change.
“The practitioners are not specialising, probably because they’re too comfortable, and it would be very painful when they are forced to later,” he said.
Liew, who heads MIA’s mergers and acquisitions working group, said merger among smaller firms was a way of widening their scope of services and created branding opportunities. But he admitted the merger process “could be quite difficult for some very entrenched accountants.”
MIA council member Nik Mohd Hasyudeen Yusoff said he was surprised how few accountants, who styled themselves as business advisors, actually strategised their own business plans.
He said failing to have a business plan could be one reason why so many firms were focused on low value-added statutorily-driven, compliance services, with little specialisation and differentiation from others. This would not augur well in the coming liberalisation of accountancy services and the age of global competition, he said.
Hasyudeen added that firms needed to choose the best way of reacting to the coming developments, which was why the MIA had formed various taskforces to help members discover new options and hopefully make the transition less arduous.
“Change cannot be imposed on anyone who doesn’t want to change. But like any business, if we do not innovate, we’ll be wiped out for sure,” he said