In Singapore, adhering to stringent financial auditing requirements is essential for meeting legal obligations, promoting operational transparency, and building stakeholder confidence. Going beyond being a regulatory necessity, financial audits are a fundamental pillar of good governance and corporate accountability. This article discusses the significance of financial report audit, the role of auditors, and practical steps businesses can take to facilitate a smooth and efficient audit process.
Why Are Financial Report Audits Important?
A financial report audit serves as an independent verification of a company’s financial position and performance. By ensuring the accuracy and reliability of financial statements, audits bolster confidence among stakeholders, including shareholders, investors, and regulatory authorities.
External audits, in particular, help to maintain transparency and accountability. They serve as a check on management and assure that the company’s financial records meet legal and ethical standards.
Financial Report Audits Ensure Compliance with Accounting Principles
In Singapore, financial statements must align with the Singapore Financial Reporting Standards (SFRS) or the International Financial Reporting Standards (IFRS). Using a comprehensive financial report audit, auditors play a pivotal role in assessing financial statement accuracy and maintaining compliance with these principles.
Financial Report Audits are Mandatory By Law
Annual Financial Report Audits Required Under Singapore Companies Act
Under the Singapore Companies Act, public companies must undergo an annual audit conducted by an independent auditor. Businesses are required to appoint an external auditor within three months of incorporation. These external audit compliance measures are in place to keep financial statements aligned with the company’s true financial health.
Regarding Exemptions to Financial Report Auditing
Not all companies are subject to mandatory audits for financial reports. Under a 2014 amendment effective from July 1, 2015, some companies qualify for audit exemptions based on specific criteria, such as their revenue, assets, and employee count. However, exempted companies must still prepare accurate financial statements and follow relevant laws regarding financial reporting.
What Are the Types of Financial Report Audits?
Understanding the different types of audits is essential to ensuring a complete and accurate financial report audit process. Each audit type plays a unique role in assessing a company’s financial position and promoting transparency across reporting and compliance efforts.
Internal Audit: Keeping Our Finances in Check
An internal audit focuses on evaluating and improving a company’s internal control systems, risk management practices, and operational efficiency. Though not always mandatory, internal audits are crucial in identifying gaps or irregularities before they affect external reporting. These audits enhance the accuracy of financial reports by proactively detecting potential issues and supporting better governance from within.
External Audit: Independent Review for Financial Integrity
An external audit is a formal, independent financial report audit carried out by licensed auditors. It is designed to verify that a company’s financial statements reflect a true and fair view of its financial performance and comply with Singapore Financial Reporting Standards (SFRS). External audits are legally required for most companies and provide credibility to your financial reports—essential for stakeholders, regulatory bodies, and investors alike.
IRAS Audit: Tax & Financial Compliance Review
The IRAS audit is a tax-specific audit conducted by the Inland Revenue Authority of Singapore. It examines whether a company’s reported tax obligations match its financial activity. While it focuses on tax compliance, this audit directly ties back to financial report accuracy, as discrepancies in tax filings often arise from errors or omissions in the financial reports. Proper documentation and consistency in financial records are key to passing an IRAS audit successfully.
What Are the Fiscal Reporting Responsibilities of Financial Auditors?
A financial auditor is a licensed professional specialising in evaluating the accuracy and integrity of financial statements. With qualifications in Accounting or Finance, as well as industry experience, auditors provide unbiased assessments and recommendations for financial report audit. The work of a financial report auditor is integral to businesses, as they hold various key responsibilities for companies.
Reviewing financial statements for errors or misstatements
Auditors meticulously assess the financial statements to ensure there are no inaccuracies, omissions, or misstatements. This helps verify that the financial reports reflect the actual financial standing of the business. A clean and accurate report enhances investor confidence and builds a foundation of trust with stakeholders.
Examining adherence to Singapore financial audit regulations and accounting standards
Singapore’s regulatory framework requires strict adherence to the SFRS or IFRS. Financial auditors are responsible for evaluating whether financial statements comply with these standards. During a financial report audit, auditors identify inconsistencies and ensure that businesses remain compliant with statutory requirements, reducing the risk of penalties or legal consequences.
Offering independent advice to improve financial practices
Beyond compliance, auditors offer strategic insights to strengthen internal controls and improve overall financial reporting practices. This independent advice helps companies elevate the quality of their financial reports and prepare more effectively for future audits, including statutory, internal, and IRAS audits.
How Can You Prepare for a Financial Report Audit?
Proper preparation is crucial for a smooth and successful financial report audit process. By following this audit preparation checklist, you can reduce the likelihood of discrepancies during the audit process and minimise unnecessary audit fees in Singapore.
Calculate Stock-Based Compensation Expenses
All employee stock compensation must have been accurately valued.
Hire an Auditor for a Preliminary Financial Report Review
Engage a licensed auditor early to review your financial records.
Organise Documentation to Ensure Accuracy in Your Financial Reports
Compile invoices, receipts, contracts, and financial reports for review.
Update Financial Reporting Values
Reassess asset values and depreciation to reflect current conditions.
Prepare Financial Reports
Reports must be comprehensive, accurate, and adhere to relevant standards.
Strengthening Financial Report Audits Via Assurance Services
Beyond standard audits, businesses can enhance transparency and accuracy through assurance services. These services play a crucial role in a financial report audit by evaluating financial data, internal controls, and compliance with regulations. Assurance services help identify weaknesses in financial reporting, improve operational efficiency, and instil confidence in stakeholders by ensuring the accuracy and reliability of financial statements. By integrating assurance services into the financial report audit process, companies can strengthen their financial credibility and maintain compliance with industry standards.
Building Accountability Through Financial Audits
If you view financial audits as a mere regulatory obligation, it’s time to rethink that perspective. The process lays a solid foundation for good governance and business transparency. Whether it’s conducting a financial report audit or preparing for an external audit compliance check, the value of accurate and transparent financial reporting cannot be emphasised enough.
As a reputable audit and accounting firm in Singapore, Credo Assurance understands the importance of sound financial reporting. By meticulously reviewing financial reports, our auditors identify discrepancies, misstatements, or areas of concern, providing an unbiased view of your company’s financial health.
Contact us to find out more about our professional auditor services.
