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 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.
Ensuring Compliance with Accounting Principles
In Singapore, financial statements must align with the Singapore Financial Reporting Standards (SFRS) or the International Financial Reporting Standards (IFRS). Auditors play a pivotal role in assessing financial statement accuracy and maintaining compliance with these principles.
Adherence to Generally Accepted Accounting Principles (GAAP) is another key focus area for auditors. By examining financial statements for inconsistencies and identifying areas of non-compliance, auditors perform a GAAP adherence audit to help companies maintain financial integrity and mitigate risks associated with regulatory breaches or misstatements.
Statutory Financial Audit Requirements in Singapore
- Mandatory Audits
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.
- Audit Exemptions
Not all companies are subject to mandatory audits. 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.
Types of Financial Audits
- Internal Audit
Focuses on improving internal controls, risk management, and operational efficiency.
- External Audit
Conducted by independent auditors to identify the company follows statutory and regulatory requirements.
- IRAS Audit
A tax audit conducted by the Inland Revenue Authority of Singapore to determine the accuracy of tax reporting.
The Role 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. Their key responsibilities include:
- Reviewing financial statements for errors or misstatements.
- Examining adherence to Singapore financial audit regulations and accounting standards.
- Offering independent advice to improve financial practices.
Preparing for a Financial 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
Engage a licensed auditor early to review your financial records.
- Organise Documentation
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.
Assurance Services: Promoting Financial Trust
In addition to audits, many companies benefit from assurance services, which involve evaluating financial data and internal processes to provide confidence to stakeholders. These services also pinpoint the areas for improvement in financial reporting and operational controls.
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.
