SINGAPORE : As companies rein in growth amid the ongoing crisis, accounting firms here are also seeing their auditing business slow down. However, they are confident that other segments of their services will pick up the slack.

Ernst and Young’s Singapore country managing partner Steven Phan said: “Certain parts of our client base, in line with the rest of the market sentiments, have put their expansion plans on hold. Clearly we are a reflection of our clients’ activity, so there is some slowing down in some parts of the business.”

However, there is demand for other types of services in the current volatile market, said auditing firms. Issues arising from the financial crisis like restructuring, mergers and acquisitions (M&A), and forensic reporting are now in demand.

“Our M&A side is more active because some companies need additional funding, and banks, which are their normal avenue, may be more limited now. So, they need to use our network to go to other sources for funding,” added Mr Phan. “That keeps our pipeline going.”

Ernst and Young is also building up its expertise in the telecommunications industry in Singapore, by hiring and relocating industry specialists here.

Mr Gautam Banerjee, executive chairman of PricewaterhouseCoopers Singapore, said: “Valuation of complicated financial instruments, recovery and sale of distressed assets, assisting companies to obtain financing and restructuring businesses that are no longer viable in their present form should keep us busy over the next few months.”

Mr Danny Teoh, managing partner of KPMG in Singapore, said: “Clearly, some of our clients have been affected by the economic events happening in the United States. However, we also have clients who have found opportunities offered by the depressed valuations stemming from the current uncertainty in the financial markets.”

There had been some speculation that the major accounting firms would be badly hit by the financial crisis because they had big US financial institutions and banks as clients.

Ernst and Young is the auditor for Lehman Brothers, Deloitte and Touche had contracts with Bear Sterns and Merrill Lynch, PricewaterhouseCoopers (PwC) audited AIG, and KPMG was the auditor for Countrywide, once the largest mortgage lender in US.

Audit firms are appointed on a global basis, which means that Singapore auditing firms would have to serve their US clients wherever they have operations.

The troubles at prominent US banks also raised questions about the performance of the banks’ auditors.

The Association of Chartered Certified Accountants (ACCA) accepts that the accountancy profession must come under scrutiny.

ACCA Singapore country head Penelope Phoon said: “Accounts preparers, standard-setters and auditors must all learn from the last year. It is clearly unacceptable that poor quality loans can be sliced, diced and parcelled up with an AAA sticker and overvalued on banks’ balance sheets as a consequence.”

Ms Phoon added: “Fair value accounting has an important part to play in modern global financial reporting but we must make sure the model is as robust as we can make it.”

While Singapore’s employment outlook is gloomy, especially for the financial industry, the Big Four auditing firms in Singapore maintain that no layoffs are planned. None of the companies are freezing hiring, and they are maintaining their recruitment plans. KPMG recruits about 200 fresh graduates every year, with the bulk of them joining in July.

Mr Teoh said: “Our human resource policies look beyond short-term fluctuations in the economy and we believe in recruiting and retaining talented individuals for the long run.”

In fact, the current slowdown is also helping Ernst and Young’s retention rate.

Mr Phan said: “It is natural in our profession that there will always be people leaving us, but because of the current market slowdown, fewer people are leaving us - 50 per cent less than one year ago.”

Both Ernst and Young and PwC said that being more closely connected to their accounting firms in neighbouring countries also gives them a stronger foothold.

“Our strategy in Singapore has always been to not only diversify our local practice but be better connected to a larger hinterland,” said Mr Banerjee.

The PwC staff in Hong Kong, China and Singapore operate on a combined basis. “We are therefore in a much better position to weather the financial storm,” he added. - TODAY/ar