Singapore firms recruit more offshore accountants amid talent crunch

SINGAPORE’S accounting firms have been heavily recruiting offshore staff in lower-cost countries. But as clients grow used to being served remotely, this could mean fewer opportunities for the Republic’s own auditors in the future, warned industry players.

In such offshoring, accounting firms hire staff based overseas to serve Singapore clients. This was necessitated by an acute shortage of accountants when the Covid-19 pandemic hit in 2020, industry players told The Business Times (BT).

Many foreign accountants in Singapore – most of whom are Malaysians – left in the early days of the pandemic, and could not return when borders closed.

From mid-2020, firms scrambled to plug the gap in manpower for conducting local audit engagements, said Lim Yeong Seng, managing partner of KLP.

The subsequent normalisation of remote working opened up a new possibility, said Lim. “What we realised was, can’t we just do (audits) from wherever the staff are in the world? We send them a laptop, run them through our system, and by the end of the day they can be servicing Singapore clients from wherever they live.”

Even after the pandemic waned, offshoring has endured.

KLP has since built a team of five accountants in Malaysia who support its Singapore audit team’s engagements, accounting for about a fifth of the combined team’s output, Lim said.

At PwC, some 200 overseas staff – based primarily in the Philippines – work on the firm’s audit engagements in Singapore.

“In the pre-Covid era, the number of (offshore) staff working with us was not significant,” said Choo Eng Beng, assurance leader at PwC Singapore.

In 2023, Deloitte will have more than 300 offshore employees – mostly based in Malaysia – working on audit engagements across South-east Asia, said Yang Chi Chih, audit and assurance talent leader at Deloitte South-east Asia.

This is up from about 100 in 2019, under an offshore model that predated Covid-19, Yang added. “The pandemic accelerated its growth, and increased its acceptance by both our people and our clients that this is an effective and productive model that does not compromise on quality.”

The other Big Four firms, EY and KPMG, have also started offshoring operations for audit engagements in Singapore.

Substantial cost savings

Beyond making up for talent shortages, offshoring can bring significant cost savings, especially when based in lower-cost countries, industry players said.

“Salaries may be lower in certain overseas countries, and the accountancy profession and joining an accounting firm, especially a Big Four, is still seen as a very good career choice in some of these countries,” said National University of Singapore professor of accounting Mak Yuen Teen, in his personal capacity.

For instance, the monthly salary of an accountant in Pakistan is about a fifth of what a fresh accounting graduate in Singapore earns, noted Bernard Lee, founder and senior partner at Audit Alliance.

In other words, “one Singaporean is worth four to five Pakistanis” in wage costs, Lee said. His firm has 35 employees in Pakistan who support audit engagements in Singapore.

Audit quality has remained the same, industry players said, as most offshore accountants hold recognised accounting qualifications that make for an easy transition to Singapore’s financial reporting standards.

As long as firms maintain high standards in hiring, training and supervision, the integrity of audits should be the same, added Prof Mak.

Risk of relying more on foreign talent

There are, of course, limitations to what an offshore team can achieve.

“In the short term, offshoring may offer access to a larger pool of resources and cost savings,” noted Teo Ser Luck, president of the Institute of Singapore Chartered Accountants.

“But over time, with more firms doing the same, these advantages would likely be reduced. There are other potential issues such as quality, data security, regulation and the economic landscape, which are uncertain and subject to changes,” Teo added.

The comparative productivity of offshore employees is typically lower than that of their Singapore peers, due to cultural norms and differing time zones, said Audit Alliance’s Lee.

Additionally, some tasks in a typical audit engagement require a physical presence. Stock-taking in a client’s warehouse in Kallang to verify inventory levels, for example, cannot yet be performed remotely by a team in Karachi.

But firms are learning to “live with” the constraints and continue offshoring, as the cost savings still far outpace any differences in productivity, KLP’s Lim said.

It helps that there is a ready supply of qualified foreign accountants with full working proficiency in English.

Most have undergraduate degrees, years of relevant work experience, and recognised accounting qualifications – all at a fraction of the cost of a Singaporean accountant.

But industry players worry that with an increased reliance on offshore accountants, local talent could be displaced – and, as clients grow used to remote service, local firms themselves could lose out.

Said Prof Mak: “The possible negative implications are that over time, we may not have sufficient talent and expertise in audit and other accounting services here, and we may have to rely more on foreign talent even in more value-added activities.”

Concurring, Lim said: “If you look at construction, a lot of the construction firms (winning contracts) are not local. Why? Because they have a price advantage, and because of that, they can squeeze out the local firms.

“(Similarly), you could have the danger of overseas audit firms squeezing out local firms in terms of price.”