Diversity and Inclusion for Business and Accountancy Profession



Diversity and inclusion at the workplace have always been important issues with critical implications for businesses, but there is a very real risk that diversity and inclusion practices may now be relegated to the back seat as a strategic priority as businesses confront unprecedented disruptions as a result of Covid-19. This may be due to the unintentional consequences of companies figuring out how to respond to the pandemic crisis as they address their most basic needs to survive, such as managing the finances, adapting to new business models, consolidating workforce capacity, and ensuring the safety of their employees and stakeholders. However, we caution that companies which deprioritise the diversity and inclusion practices may place themselves at a disadvantageous position for future growth and subsequent renewal after the pandemic. The benefits of team diversity in processing relevant information and reconciling conflicting viewpoints in a complex environment is even more critical as companies navigate through unprecedented disruption and uncertainty in this ongoing crisis.


Even before the Covid-19 pandemic, Singapore has not performed well in the world in terms of workplace diversity and inclusion practices. In September 2019, consulting firm Kantar released its inaugural Kantar Inclusion Index that polled employees in 14 countries; Singapore emerged the second-worst performing country in terms of workplace diversity and inclusion practices. Around the same time, Singtel was listed as the only Singaporean company to make the top 100 most diverse and inclusive organisations in the world in a different poll by Refinitiv, a financial data market company. The Refinitiv D&I Index looked at 400 environmental, social and governance (ESG) data points to determine the relative performance of over 7,000 publicly listed companies across the globe, scoring organisations on the four main pillars of diversity, inclusion, people development and controversies. Singtel ranked 79th, and was among 23 Asia-Pacific companies that made the top 100 list. Earlier in March this year, Singapore’s Council for Board Diversity announced that the largest 100 primary-listed companies on the Singapore Exchange (SGX) achieved 16.2% women’s participation on boards as at end-2019. While progress has been made, albeit an improvement of one percentage point from the previous year, it raises concerns whether the council’s intermediate target of hitting 20% women’s participation on boards can be achieved by the end of 2020.


Worldwide, the diversity and inclusion practices in the audit and accountancy profession also require further positive action. In its 2019 report on the trends in the accountancy profession in the United Kingdom (UK), the Financial Reporting Council (FRC) highlighted that the audit and accountancy profession is lagging behind other businesses for the diversity of senior management. The statistics revealed that while women make up 46% of manager-level roles at audit and accountancy firms, only 17% of women achieve partner-level positions in the UK. This contrasts significantly with diversity levels in the FTSE 350 companies in which women filled 30% of the executive board positions. The FRC noted the irony that many of these audit and accountancy firms advise their clients on diversity and inclusion practices, and yet performed worse than their clients in general. Even more concerning is the fact that one third of the UK audit and accountancy firms do not even collect diversity data for their workforce. In particular, the FRC called for the UK firms to do more to improve the pipeline of future talent and promote women, ethnic minority groups and disabled people to the top levels of management.


The relationship between work group diversity and performance has been extensively studied in the field of organisation behaviour. There are two viewpoints of how group diversity affects performance, namely, the information perspective and the social categorisation perspective.

The information perspective suggests that diverse groups possess a broader range of task-relevant knowledge, skills and abilities that are distinct and non-redundant, which enable these groups to outperform homogeneous groups that may suffer from group think. The social categorisation perspective, however, proposes that team diversity may induce within-team conflicts and negatively affect team performance. This is because individuals use similarities and differences as a basis to categorise themselves and others into their own in-group or out-group. However, research studies have yielded mixed results, suggesting that the relationship between team diversity and performance is also dependent on the task setting.

Academic research on how team composition and diversity affect performance in audit firms are scant due to the limited availability of detailed data on team composition in audit engagements. A study finds that in Belgium, client firms pay higher audit fees to female audit partners.1 The authors conclude that the audit fee premium commanded by female engagement partners may be due to client firms perceiving female partners as delivering higher audit quality compared to their male counterparts. Another study which examines Italian Big Four firms also find that an audit team with a greater diversity of educational background among team members and a higher proportion of women in senior positions of the engagement team improve audit quality.2

Diversity within the engagement team is important, but diversity between the leading partners in an audit engagement is also crucial to audit quality. Using available data from CPA firms in China, a recent study conducted by one of the authors finds that the diversity between the signing partner and review partner enhances audit quality.3 In particular, diversity in audit partner teams’ educational background, gender and generational cohort all positively affect audit quality. In addition, the positive effects of audit partner diversity on audit quality are even more pronounced if the audit partners are more experienced and have been working together as a team for a longer period of time. These findings suggest that in a complex task setting such as auditing, the diversity between the signing partner and review partner will enable them to possess different opinions and perspectives on audit engagement. This helps reduce the judgement biases that each partner has when interpreting, implementing and enforcing the accounting and auditing standards for their client firms. Furthermore, the need to reconcile conflicting viewpoints may require the leading partners to process relevant information more thoroughly during the audit engagement, thus resulting in higher audit quality.

In the same study, CPA firms in China were surveyed and the findings revealed that although CPA firms consider the diversity of audit partners in client assignments, most firms only consider diversity in work-related experience (for example, types of industry specialisation) for each client assignment. Thus, audit firms are less likely to be aware of the positive impact from audit partner team diversity embedded in educational background, gender and generational cohort on audit quality. The study highlights the importance yet possibly overlooked team characteristics that should be considered in practice during team assembling for client assignment.


The Covid-19 pandemic has caused unprecedented disruption to the business environment and caused disproportionate social impact on minority groups. Companies, in their focus to survive, are likely to deprioritise diversity and inclusion practices. To ride through this crisis and prepare for future growth after the pandemic, we caution that the companies, including accounting firms, should not lose focus on diversity and inclusion practices as a strategic priority. Companies should not only focus on middle management but also continue to improve the pipeline of future talent and promote employees in the minority groups to top management. The benefits of team diversity in processing relevant information and reconciling conflicting viewpoints in a complex environment is even more critical during these challenging times for companies to survive and prosper in the new normal.

Kevin Koh is Associate Professor, and Lau Chew King is Lecturer, Accounting, Nanyang Business School, Nanyang Technological University.

1 Hardies, K., Breesch, D. and Branson, J. (2015). “The Female Audit Fee Premium”. Auditing: A Journal of Practice & Theory 34(4), 171-195

2 Cameran, M., Ditillo, A. and Pettinicchio, A. (2018). “Audit Team Attributes Matter: How Diversity Affects Audit Quality”. European Accounting Review 27(4), 595-621

3 Koh, K., Li, L., Liu, X. and Wang, C. (2020). “The Effect Of Audit Partner Diversity On Audit Quality: Evidence From China”. Working Paper, Nanyang Technological University, University of International Business and Economics, and Central University of Finance and Economics


This article was first published by ISCA Journal.