By Mark Louis F. FerrolinoSpecial Features Writer

The local finance and accounting industry continues to thrive on the back of the country’s growing economy and the rapidly evolving advances in technology. While these open opportunities for growth, such factors also bring challenges to industry players to remain relevant and competitive.

In 2018, the Philippine economy grew by 6.2%, down from 6.7% in 2017, and the slowest in the past three years. Despite this, it is still among the fastest economies compared with many of its Asian peers.

For this year, analysts project the economy to grow faster as the government ramps up its “Build, Build, Build” program, and as slowing inflation spurs consumer spending, among others.

Considering the positive long-term outlook for the country’s economy, Maria Victoria C. Españo, chairperson and chief executive officer of P&A Grant Thornton, a Philippine member firm of Grant Thornton International, believes that the local finance and accounting industry is truly in an “exciting time.”

“As we continue to see a vibrant investment climate, businesses are looking for ways to introduce new products and services and to enter new markets, whether within the country or beyond Philippine shores. These dynamic organizations look at professional services firms to assist and support them as they navigate through the opportunities and challenges that they face in this ever-growing economy,” Ms. Españo told BusinessWorld in an e-mail.

“Thus, we see the players in the finance and accounting industry activity participating in capital-raising activities, restructuring, mergers and acquisition, as well as projects involving business transformation,” she added.

Reyes Tacandong & Co., a member firm of RSM network, echoed the same sentiment. The firm shared in an e-mail to BusinessWorld that the growth of the country’s economy, together with the challenges being faced by businesses in this age of disruption, has increased the need for more strategic and innovative but responsible finance executives, auditors and professional services consultants with integrity.

In addition to the country’s evolving economic landscape, the industry is significantly being shaped by technological advances that create possibilities for industry players to be more innovative in delivering their services.

Digital transformation and the innovations associated with it, including artificial intelligence (AI), big data, cloud computing, machine learning and robotic process automation, among others, have been much talked about in recent years.

Ms. Españo said that AI and automation are now changing how work and businesses are done. “We want to apply these technologies to the profession, so that we can redirect our time to providing ideas and industry insights,” she said.

On big data, she believes that the world’s most valuable resource is no longer oil, but data. However, the vast amount of information between professional services firms and their clients, according to her, is not yet well utilized, much less maximized.

To stay ahead of the game, professional services firms today are digitizing, virtualizing and automating their processes from inside and out, she said.

Isla Lipana & Co., the Philippine member firm of the PwC global network, observed the same trend. In an e-mail to BusinessWorld, it noted that audit and advisory technologies are constantly being improved to keep up with the intensely competitive nature of the industry.

“We now see Big Four firms and the like developing their own technologies or leveraging the resources of their networks,” said Atty. Alexander Cabrera, chairman and senior partner of Isla Lipana & Co./PwC Philippines.

On the other hand, Atty. Cabrera noted that the clients’ implementation of their own digital transformation programs have resulted in more challenging business models.

To deal with complex areas like audit of blockchain and AI-enabled applications, Atty. Cabrera said that some cutting-edge software and technologies have also been developed. These new technologies are expected to drive more insights — financial and non-financial — from traditional audit work, he added.

“These changes have prompted both industry players and their clients to upskill their people and do internal process re-engineering to achieve efficiency. And as clients fast-track the implementation of technology initiatives (both for internal and external uses), industry players respond likewise and are increasingly looking for engineers and data scientists. They will complement the accountants and lawyers, making for a multidisciplinary work force,” Atty. Cabrera continued.

As RT&Co. noted, accountants that are not up to date on international standards, local regulatory requirements and technological advancements will not be able to provide the services needed, unless they are able to catch up with the pace of developments in these areas.

“Accountants connected with the bigger firms are more likely to be more informed and updated with the changes brought about by technology and the disruption it brings. However, the traditional accountants belonging to the small firms and individual practitioners are at risk of eventually being displaced, especially as our regulators implement initiatives in the desire to catch up at least with the ASEAN region and with international standards,” Roman Felipe S. Reyes, chairman of RT&Co., said.

In light of all the changes, industry regulators, such as the Public Company Accounting Oversight Board, the Securities and Exchange Commission (SEC) Oversight Assurance Review, the Bureau of Internal Revenue, the Bankers Association of the Philippines, the Insurance Commission, and the National Privacy Commission, just to name a few, remain strict. Compliance rules have also have become more stringent.

As Atty. Cabrera described, the industry has been facing “increased pressure from regulators.” He said that regulators have implemented a quality review process that is aimed at improving the quality of audits performed by Philippine accounting firms.

P&A Grant Thornton’s Ms. Españo also noted that regulators have become more vigorous with accreditations and reviews and are more firm in looking into the way auditing firms are providing services.

“As financial reporting become global and more complex, there is a greater focus on audit quality and compliance,” she said.

To address the increasing call for quality work, P&A Grant Thornton, for instance, has been taking the following major steps: engaging in proactive discussions with government regulators; strengthening internal processes; and intensively training people on recent developments standards, especially changes to regulations.

Meanwhile, in terms of growth prospects, the local industry players believe that several factors will make accounting practice in the country grow in importance. These include increasing demand for good corporate governance and transparency, companies’ plans for expansion, and clients’ increasing confidence in professional services firms as business advisors.

Ms. Españo said that organizations nowadays are very much expected to become good corporate citizens. This involves protecting data and information of the stakeholders, accounting for and reporting on the organization’s impact on society, and introducing more diversity in senior management.

“While large enterprises want to comply and even become their industry’s benchmark, they need advice on how to begin the process towardsgood corporate governance,” Ms. Españo explained.

Isla Lipana & Co., on the other hand, is banking on family enterprises and start-ups that are aiming to grow their businesses in and outside the country. In this regard, they need professional accounting firms to help them prepare for big financing and capital-raising activities.

Moreover, the firm also sees growth opportunities for advisory and assurance services.

“The increasing complexity of business, the emergence of new technologies, the regulatory environment, and increasing stakeholder interest have driven demand for our broader assurance services, particularly in areas such as cybersecurity and privacy, advanced data analytics, as well as enterprise systems solutions. Companies are seeking broader digital solutions and insights to address governance, risk and compliance,” Atty. Cabrera said.

For her part, Ms. Españo said that organizations today recognize professional services firms as trusted business advisors, rather than just external auditors or tax consultants.

“Companies are asking their auditing firms for solutions to complex business concerns. As a result, more and more professional services firms are seeing growth in advisory services, which include services related to business risk and business consulting,” she said.

Looking forward to where the industry will be five years down the line, Ms. Españo expects that more firms will embrace smart technologies — not just the big firms, but even emerging firms and individual practitioners.

“Technological advancements give us tools to continue to improve the efficiency and effectiveness of our work in an increasingly complex business environment, but there is still a need for the professional evaluation, judgment and skepticism that business advisors like us bring to the task,” she said.

Assuming that AI will greatly change the way organizations operate, Atty. Cabrera said that they at Isla Lipana & Co. are imagining an industry where client service delivery will be highly dependent on technology, by a mobile, virtual and contingent work force.

For its part, RT&Co. raised concern about who will likely dominate the local finance and accounting scene. Mr. Reyes said, “The Philippines may become dominated by big foreign accounting firms, until and unless we repeal the law to protect Filipino CPAs and ensure — Filipino First.”