Mandatory insurance may boost SME trust in small audit firms

Minimum coverage starts at $1m, rising with the size of the firm up to $50m.

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Small and medium enterprises (SME) in Singapore may become more willing to hire sole proprietors and partnership-run accounting firms once proposed rules making professional indemnity insurance mandatory take effect, according to analysts.

"This reform is a positive step towards increasing SMEs' trust in hiring freelance or small-firm accountants," Karen Yeo, head of financial lines at Howden Singapore Pte. Ltd., told Singapore Business Review. "Given that accounting firms are regulated by the same professional standards, SMEs would have greater confidence in engaging smaller firms," she continued.

The Accounting and Corporate Regulatory Authority (ACRA) said 408 accounting firms operating as sole proprietorships or partnerships would be affected. At present, only accounting corporations and limited liability partnerships (LLP) must have professional indemnity coverage, which protects firms against claims arising from negligence or errors.