Published January 29, 2009

Downturn demand makes Big 4 hire more

Accountants gear up to manage risk and restructuring, keep an eye on fraud

By LYNETTE KHOO

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(SINGAPORE) Bad times in the corporate world translate to even busier times for accountants. No wonder the big boys are hiring.

Audit firms are hoping to tap the new pool of senior talent from the once-sizzling financial industry that is now downsizing. During the boom years, financial institutions are often a more attractive choice for job seekers.

As the downturn throws up more distressed companies, there is now greater demand for restructuring and risk management advisory. Incidents of possible fraud will call for more forensic investigations.

The Big Four audit firms say they are still recruiting at both the entry-level and for senior positions.

Ernst & Young says it expects to hire over 250 new staffers in Singapore this year. Over the past six months, it has recruited over 20 partners in the Far East Area, of which some are in Singapore.

'Certain parts of our business - for example, restructuring and advisory in helping our clients manage the financial volatility - are more active and we will deploy resources to meet such increased activity,' said Steven Phan, country managing partner at Ernst & Young Solutions LLP.

The recent pay cuts thrust upon KPMG's middle to top management had stoked speculation that its peers could follow suit. The other three audit firms said, however, that they had not cut salaries.

Ernst & Young and PricewaterhouseCoopers LLP (Singapore) said they would manage their staff costs through a flexible wage system.

PwC's human capital partner Deborah Ong told BT that the firm has no plans to slow down recruitment or retrench staff, and is on the lookout for senior talent.

As demand for its transactions advisory eases, PwC is deploying staff to areas of growing demand such as distress M&A deals, business recovery work, risk and governance compliance, she added. PwC is the appointed receiver for the Lehman Minibonds series that have defaulted.

Audit firms say they are also hoping to tap the new pool of senior talent from the once-sizzling financial industry that is now downsizing. During the boom years, financial institutions are often a more attractive choice for job seekers.

Chaly Mah, CEO of Deloitte Asia Pacific, told BT his firm has not been able to hire enough, and is now taking the opportunity to consolidate resources and make strategic hires. The audit firm is scaling back its recruitment of new graduates from 200 to 160 this year but is looking to step up its recruitment of more experienced hires.

'The past few years have been a difficult market for employers, especially the accounting profession. This is why many companies are likely to take this opportunity to take stock,' Mr Mah said.

Meanwhile, as fraud cases creep into view, there are growing murmurs that they should be detected by external auditors. Audit firms could find themselves busier than ever if they are to fulfil these expectations.

A recent scandal involving Indian IT giant Satyam Computers faking accounts has led the public to question why its auditor PwC did not discover the false inflation of profits for years.

But the Big Four stressed that the key objective of external auditing is not to sniff out fraud, but to present 'a true and fair view' of the financial statements.

While external auditors need to assess internal controls to make sure financial statements prepared by management are fairly presented, it is not the same thing as sniffing out and nailing fraud from the outset, said Danny Teoh, managing partner at KPMG LLP.

'Uncovering fraud is the purview of forensic specialists,' Mr Teoh said. 'The objectives are very specific and different from that of an auditor reporting on financial statements.'

To integrate the two roles would be an overkill, he added. 'The best approach therefore is to prevent fraud in the first place, by implementing a robust risk management programme within an organisation.'

KPMG is the special auditor for Advance Modules, and its stunning report last November showed the company faking sales records to meet an internal profit target for fiscal 2005 and undertaking a series of complex actions to cover up. This saga implicated another listed firm, NEL Group.

Mr Mah, who is also president of CPA Australia (Singapore division), noted that since the Enron days and the collapse of Arthur Andersen, the audit profession has stepped up to pay attention to potential fraud in the course of its work.

'In an economic downturn, there is probably going to be an increased possibility of fraud,' he said. 'We have to do the right thing to satisfy ourselves that this is not happening by probing further, not believing in some of the things that we are told but to independently verify the matter.'