Audit majors swoop in on legal eagles to lift one-stop services

Singapore

ACCOUNTING firms in Singapore are beefing up their legal services to evolve into one-stop shops for businesses, with EY Singapore being the latest to partner a senior lawyer to add to its growing legal network.

Industry watchers have also pointed out that the expansion into legal work by accountancy firms may bring about challenges in managing conflicts of interest across audit, legal and advisory functions.

Evelyn Ang, previously a senior partner at Dentons Rodyk & Davidson, has set up Atlas Asia Law Corporation, which will join EY's global network as an independent member firm, EY confirmed to The Business Times on Monday.

Her LinkedIn profile states that she was with Dentons Rodyk & Davidson for more than seven years, and that she set up Atlas Asia Law this month. Prior to her role at Dentons Rodyk & Davidson, she had spent 11 years as partner at Shook Lin & Bok.

She has advised on corporate commercial, mergers and acquisitions and corporate finance transactions.

EY told BT that EY Law continues to grow rapidly. There are more than 2,100 legal professionals in 80 countries around the world in the global EY network.

Max Loh, EY Asean and Singapore managing partner, said the addition of legal services capabilities that are "adjacent" to the firm's assurance, tax, transactions and advisory services enables EY, as a network, to offer greater "commercially focused and more comprehensive advice" to clients.

"With this, we can help to minimise the gap between business advisors and legal counsel for companies as they navigate the opportunities and complexities across different markets," he told BT.

BT understands that Deloitte Singapore may soon add a senior lawyer from Allen & Overy to its legal network as well.

Deloitte declined to confirm this.

These developments follow a coup announced by PwC Singapore this month, as it tied up with partner and deputy chairman of WongPartnership Rachel Eng. The legal veteran, who has spent more than 23 years with WongPartnership, will take on a new role with a Singapore law firm that is part of PwC's global legal network. PwC's global legal network is made up of 3,500 legal professionals in more than 100 countries.

The last of the Big Four, KPMG Singapore, declined comment.

Stefanie Yuen-Thio, joint managing partner of TSMP Law Corporation, told BT: "The advent of the multi-disciplinary practice appears to be upon us. ... Big law firms and specialised restructuring legal practices may be worried about their practices being cannibalised by accountants who can master the law as well as the numbers."

Accounting firms here may have also taken cues from strategies outlined in the report by the Committee on the Future Economy (CFE) to boost Singapore's legal and accounting services. In 2016, the CFE working group was set up to review the two sectors, and among other things, to look at the "synergies and strong linkages" between the two.

As Ms Yuen-Thio noted, the latest model means that accounting firms have two law firm structures, both of which could co-exist in that accounting firm's network structure.

"There's the legal team that is housed inside the accounting firm that would typically do international work. The rules for resolving conflicts of interest in these divisions are very strict.

"But accounting firms are also establishing alliances with standalone Singapore firms - what some in my industry cheekily refer to as the 'captive Singapore firm' - that practise Singapore law. It's possible that the conflict clearance for work done by these captive Singapore firms is less rigorous as they are not owned by the accounting firm," she said.

"That said, I know of at least one law firm which turned down a tie-up opportunity with an accounting firm because the latter was insisting that the law firm dump all its clients who would pose a conflict. Managing conflicts is going to be the largest challenge for a multi-disciplinary practice's sustained success."

This development comes amid ongoing debate over the independence of audit reports. There are calls in the UK for the Big Four accountancy firms to be split up, after a spate of corporate accounting scandals left fresh questions over the level of independence behind audit reports.

This comes especially as audit firms ramp up their consulting businesses, and prompts worries among critics that audit work is increasingly becoming a commoditised product that reflects a race to the bottom.

In a commentary published by BT on Tuesday, David Mason, a former partner at a Big Four audit firm in Singapore, wrote: "The need to build relationships with big businesses generally...places downward pressure on the audit fee, leading to cost cutting and depreciation in value of the statutory audit to an accounting firm's overall business model.

"When the regulatory body in the UK states that the standard of audit generally within the Big Four accounting firms for the FTSE 350 requires significant improvement in 27 per cent of cases (50 per cent in one firm), there has to be cause for concern; investors are being short-changed."

READ MORE: The importance of keeping audits truly independent