KPMG has become the third accounting firm among the Big Four in Singapore to choose the limited liability partnership (LLP) route this year after it sealed its conversion yesterday.
It marks a significant year for the accounting profession. Three of the major players have transformed themselves from partnership structures to an LLP vehicle. Only PricewaterhouseCoopers (PwC) is left, although it is set to follow suit.
A partnership - the traditional vehicle for accountants, lawyers and engineers - puts partners' assets at risk should something go wrong.
As firms become larger, they function more like corporations with executive management committees than traditional partnerships.
The main advantage of an LLP is that if a partner is found to be negligent and is sued, only he can be made a bankrupt and not the remaining partners.
So it allows businesses to operate and function as partnerships while giving the partners limited liability protection.
An LLP can also own property, unlike a partnership. The LLP has grown in popularity, with firms in Britain and the United States having converted to similar vehicles years ago.
Despite Singapore legislation enabling such conversions having been in place since January 2005, it has taken time for the Big Four accounting firms to embrace the move.
Partly, this has stemmed from concern over clients' reactions and partly because it is a complex process.
Deloitte was the first to go down the LLP route in June, Ernst & Young converted in July and now KPMG. PwC is expected to become an LLP some time early next year.
Yesterday, KPMG managing partner Danny Teoh said: 'Service and quality by any name should always be uncompromising. There will not be any changes to existing working arrangements or in our ongoing work as auditors or advisers. No action is required on the part of our clients.'
This article was first published in The Straits Times on October 02, 2008.
