AUDIT SERVICES IN SINGAPORE

Auditing is the process of assessing and analysing a company’s financial records and accounting procedures. This is performed to check whether the company is complying with the law and adhering to its own organisational goals. Audit services can be attained by having an in-house accounting team or outsourcing to a third party.

Auditing is a vital part of a company as it can check possible loopholes in the finances of a company, detect fraud, guide in making logical financial choices, and others.

In Singapore, within 3 months of a company’s incorporation or its constituting to become a legal corporation, it must hire an accountant or accounting firm to administer audit services. Furthermore, the company auditor must be approved by the Accounting and Corporate Regulatory Authority (ACRA).

Risk-based internal auditing is a kind of auditing approach wherein internal auditing is associated with the general risk framework of a company. At the onset, the company identifies, assesses, and prioritises its top-most risks. These risks are identified by the board of directors and management and will prompt the company to adjust and recalibrate its control management.

Various Singapore audit firms and companies are utilising risk-based internal auditing because it brings several advantages. One is that companies are able to allocate their resources for more important and urgent matters. Another is that processes become more polished and efficient because they are done based on risk. Additionally, risk-based internal auditing can help increase a company's chances of attaining its business goals. Adjusting your audit schedule to your risk management framework will also help companies switch tactics quickly when business objectives need to change.

Risk-based internal auditing is crucial because it gives the company a better understanding of possible risks, prompting them to create control and risk management practices for long-term safeguarding of assets.

International Financial Reporting Standards (IFRS) are a collection of accounting rules that guide public companies on how to organise and report financial information. This is established by the International Accounting Standards Board (IASB) and is used by over 120 countries for their accounting framework. The objective of this is for companies to generate uniform, transparent, and consistent financial reports that can be compared and contrasted with those of other companies.

On the other hand, the accounting standard used by Singapore is the Singapore Financial Reporting Standard (SFRS). This is based on the IFRS, and companies with financial periods that start on or after January 1, 2003, need to comply with it.

As accounting standards across the world become more complex, Singapore has issued the SFRS for small businesses. This is designed for small- and medium-sized entities to have an alternative framework from SFRS, which entails requirements that may pose a burden on their resources. SFRS for small entities is based on IFRS for small entities and aims to maintain the quality and comparability that the investment industry can benefit from. The key difference is that the reference for SFRS for small entities is from SFRS and not IFRS, together with its scope, description, and applicability to small entities.

Step 1: Planning

The audit team gathers relevant information from the audited entity to have a holistic view of the latter’s operations. An audit program, which includes audit methodology, is also created during this stage to conduct the audit and achieve objectives.

Step 2: Notification

The audit team will inform the audited entity, specifically the designated department and its staff, through a letter or announcement. This notification includes the upcoming audit, its objectives, the time of an open meeting, the scope of the audit, and other important matters.

Step 3: Opening Meeting

Managers, unit heads, and other staff that will be part of the audit will attend an opening meeting. This gathering will serve as a platform to discuss the audit program, purpose, and objectives. There’s a chance that the auditing program will be altered or changed depending on what will be discussed.

Step 4: Fieldwork

This step includes testing the audited entity’s records, practices, and resources, as well as evaluating their internal controls and compliances. Interviews with the department head and staff may also be conducted. The basis for this fieldwork is the audit plan.

Step 5: Report Drafting

Once the field work is accomplished, the audit team will draft a report. This will include findings and recommendations that are needed for improvement, coverage of the audit, significant background, and audit objectives. There are instances where further fieldwork may be needed after writing a draft.

Step 6: Management Response

The draft report will be forwarded to the department head of the audited entity for them to review and respond to the recommendations that were given. One crucial aspect that should be present in their response is an action plan.

Step 7: Closing Meeting

This serves as a venue to check and discuss the audit report and the response of the audited entity. Concerns or questions from the audited entity regarding the result of the audit must be addressed before releasing the final audit report. Usually, the department management and other personnel from the audited entity attend this closing meeting.

Step 8: Final Audit Report Distribution

A final audit report that includes the response of the management will be distributed to personnel and individuals who are part of the audit.

Step 9: Follow-up

The Office of Internal Audit Services will conduct a follow-up review six months after the audit report is distributed. This follow-up is to assess if the corrective solutions were truly administered.

Audit services are mandatory in Singapore unless they are exempted by law. Registered companies must abide by the Singapore Companies Act, which requires them to present their audited financial statements annually. This also allows governing bodies to check whether the company adheres to the Singapore Financial Reporting Standards (SFRS).