By tradition, the months of May and June are the times when most Philippine corporations hold their annual stockholders’ meeting (ASM). It is a mandatory ritual that can be excused only by unavoidable circumstances
For listed and public companies, the ASM is often the only occasion in the year when their management meets with the stockholders to inform them of the results of the preceding year’s operations and their plans for the future.When that well-choreographed chore is completed, the election of the directors and external auditor comes next.
Another significant feature of the ASM is the presentation (and approval) of the company’s audited financial statements (AFS) prepared by its external auditor.
Corollary to the submission of the AFS, the chair of the board of directors, chief executive officer and chief financial officer (or their equivalent positions) are required to sign a “Statement of Management Responsibility” (SMR) that, in substance, states that they performed their duties and responsibilities in the preparation and fair presentation of the financial statements.
The SMR puts pressure on the auditor to make sure the AFS that he or she (or the audit firm) has prepared and signed on can withstand scrutiny for thoroughness and accuracy. Failing to do so may adversely affect the parties’ professional relationship.
If the auditor and management think the AFS would not be available for presentation at the scheduled ASM, or the latter did not have the opportunity to review them thoroughly, it is prudent for the ASM to be canceled and rescheduled.
A badly-prepared or questionable AFS could cause serious reputational damage to the company, more if it is listed on the stock market or has significant debt obligations to banks or other credit institutions.
Of late, the preparation of the AFS in time for the ASM has become a pain in the neck for some companies due to the delay in their preparation brought about by the shortage of certified public accountants (CPAs).
In recent years, the country’s accounting community has been beset with the problem of migration of many Filipino CPAs to the United States, the United Kingdom, Australia and other countries that offer higher pay, compared to what they receive here in the Philippines.Since the rules on accounting practice are globalized and the Philippine accounting industry is closely attuned to those rules, the transition of those CPAs to their new work areas is quite easy.
On the other hand, the CPAs who opt to stay in the Philippines have a choice between engaging in freelance work for select clients or tying up with business process outsourcing companies that provide accounting and related services to companies based in the US and elsewhere in the world.
Either way it goes, these CPAs are assured of higher salaries and, most importantly, have more control over their work schedule which therefore enables them to achieve their desired work-life balance, an issue that Millennial and Gen Z members are very particular about.
Although joining audit firms is considered prestigious and often pay well, their tradeoffs, e.g., longer (or insane) working hours, pressure to produce impeccable audit reports and intra-office politics, do not appeal to CPAs who believe in the statement “you work to live” and not “you live to work.”
The scarcity of CPAs has reached a point that in some audit firms, the traditional audit team composition of a junior associate, senior associate and partner handling a client’s account has been reduced to a junior associate and the partner.Under these circumstances, many audit firms face the challenge of piling up more work on their already severely stressed staff and at the same time making sure the quality of their audit would be worth the bills they will send to their clients for their services.
Although modern technology and artificial intelligence may help lessen the burden of audit work, the human element remains an indispensable element of the intended end product. INQ
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