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What Foreign Investors Need to Know about the Singapore Standards on Auditing

What Foreign Investors Need to Know about the Singapore Standards on Auditing

As mandated by Singapore’s Companies Act, company audits can only be done by a registered accounting professional who observes the SSA or Singapore Standards on Auditing. Like all countries worldwide, private companies’ financial statements undergo a legal audit annually unless exempted due to the company meeting specific criteria.

SSA is the best practice benchmark given out by the ISCA or Institute of Singapore Chartered Accountants. It explains the guidelines for auditors to carry out their audit work while maintaining a high-quality audit. It has seven series starting from 200 to 800.

The Accounting and Corporate Regulatory Authority (ACRA) is in charge of deciding the ethical requisites for registered accountants. Thus, its primary function includes registering public accountants, monitoring their work, publishing information about Singapore’s audit quality, and working with affiliates in the business community and profession to boost the eco-system of financial reporting. 

Legal Requisites of Singapore’s Statutory Audit

Within three months from incorporating the company in Singapore, an auditor must be assigned. The only exemption to this rule is when the company is exempt from audit. The audit exclusion applies to firms falling under the small group of companies. Under the Companies Act of Singapore, a company is a small firm when it meets the following conditions:

  • Classified as a private firm throughout the fiscal year; and,
  • Meets two or all of the following benchmarks for the immediate recent
  1. Total yearly revenue is equal to or less than SGD 10 million;
  2. Total assets are equal to or less than SGD 10 million; or,
  3. Workforce consists of 50 or fewer employees.

To qualify for audit exemption, a small group, meaning a company that is a group segment, must satisfy two of the three quantitative criteria cited above for the most recent two succeeding fiscal years.

Put in another way, a company that is a unit of a group qualifies as a “Small Company” if the entire group is classified as a “Small Group.” Once a company is ranked as a “Small Company or Group,” it stays as such for the following financial years unless disqualified.  Disqualification occurs when a small company or group:

  • Ceases being a private firm anytime during the financial year; if not,
  • Fails to meet two or all the quantitative benchmarks for the current, past two succeeding fiscal years.

Non-compliance Penalties

Like all laws, non-compliance denotes penalties. So, not assigning an auditor within the prescribed period or presenting false information to ACRA carries a punishment and penalties in Singapore. Under Section 173A(1) of the Singapore Companies Act,  companies must furnish the Registrar with a notice within 14 days of the following:

•       A person becoming a company director, CEO, auditor, or secretary; and

•       Any change in the selected director, CEO, auditor, or secretary due to, for example, resignation or retirement. 

Failure to follow this rule is a violation, making every company officer in default liable on the verdict to a penalty of SGD 5,000 or less on top of the default penalty.

Audit Types in Singapore

In Singapore, audits consist of two main types: Statutory and Non-statutory. Usually, the statutory audit exists as an external audit conducted each year to meet a particular set of rules set by legislation. It is mainly concerned with reviewing and spotting errors, besides checking financial accounts, reports, and related records.

This audit type entails the engagement of professional service by people not hired as an employee or member of the company audit team. Hence, statutory audits require the engagement of an accounting and audit firm in Singapore, such as PREMIA TNC. Statutory audits consist of the following audit types:

Financial audit

Technically, this type of audit may also be classified as a non-statutory audit when the certification of a company’s financial documents are merely requested by the board or shareholders. It becomes a statutory audit when performed as scheduled by law. This audit type is performed by auditors respecting the Singapore Standards of Auditing.

Tax audit

This is a statutory audit performed by the government agencies. In Singapore, IRAS exists as the agency that requests for such confirmations on companies.

Compliance audits

This type of audit is performed when companies need verification of their compliance with internal regulations or laws within their industry. The compliance audit ensures that the business runs compliant with the high-level standards. Often, this audit type is requested from financial institutions in Singapore.

Operational audits

This audit type reviews internal processes and systems to ensure a better level of efficiency and productivity. Generally, this is performed in compliance with industry requirements.
Aside from the statutory audits, companies may also request non-statutory audits as follows:

Internal audits

Singapore companies have the power to assign auditors to do risk management appraisals, review internal systems, and check corporate control regulations upon the directors’ request. Hence, this internal audit aims to improve the overall business operations and prevent fraud.

Forensic audits

Once a firm is under investigation, authorities reviewing the case usually demand a forensic audit. The forensic accountant typically does this audit type. Even when this audit type does not follow a specific regulation, it still requires due diligence in its completion with the proof utilized in the court case. Note that fraud, fake claims on insurance, and disputes among shareholders can trigger forensic audits in Singapore.

Foreign investors interested in Singapore’s business environment must know that local legislation orders companies in the city-state to undergo an annual audit process. As a result, all businesses in Singapore must engage registered accountants’ services.

Conclusion

On top of the statutory audit requirements, companies in Singapore may also request other types of audits requiring external auditors or a firm, such as PREMIA TNC. We take pride in conducting excellent audit services that ensure full audit conformity with ACRA and is consistent with the Singapore Standards on Auditing.

We are a professional company with substantial experience in abiding by ethics while taking into account the company’s situation to provide bespoke advice that is easy to carry out.

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