Auditing – what is it?
Simply put, an audit is an examination of a company’s accounts to ensure their validity and accuracy. Audits are usually carried out by a third party organization in order to minimize the chance of fraud. In more complex terms, an audit, then is “the systematic and independent examination of books, accounts, statutory records, documents and vouchers of an organization”. Audits exist to make sure that financial statements and non-financial disclosures truly reflect the status of a company. Additionally, audits are performed to make sure that the accounts are being maintained in accordance with the law.
How does auditing work?
Given that auditing is vulnerable to immoral handling, governments all around the world have established formal procedures that must be followed in order to register and practice as an accountant. In Singapore, the Accounting and Corporate Regulatory Authority (ACRA) carries out this responsibility. Once an individual registers as a public accountant, the ACRA will monitor his or her work. Additionally, the ACRA researches and publishes information regarding audit quality in Singapore. Year round, the ACRA works with the business community to strengthen the financial reporting eco system.
Still, the nature of auditing requires even more protection and oversight. In fact, the ACRA is routinely observed by the Public Accountants Oversight Committee (PAOC) via the Accountants Act. PAOC members are typically not registered as public accountants; again, this is done to minimize unethical and motivated regulations. Rather, PAOC members come from the public service field or the business community.
Registering as a public accountant
Once an individual registers as a public accountant, he or she has the clearance to audit financial statements in Singapore. The individual is responsible for the final audit opinion, and therefore responsible for complying with the Singapore Standards on Auditing (SSA).
Individuals must register as a public accountant in order to carry out the full range of duties required by the job. For example, the Accountants Act requires registration as a public accountant for appointment as a judicial manager. However, one does not need to register as a public accountant to provide other services in Singapore unless required by law. These services range from tax and accounting to corporate advisory work.
To register as a public accountant, ACRA requires applicants to have:
- a prescribed qualification
- the prescribed audit experience
- the prescribed amount of continuing professional education
- membership of the Institute of Singapore Chartered Accountants (ISCA).
The registration process essentially ensures that a public accountant is ready for the auditing responsibilities. Find out more about the registration requirements and how to register as a public accountant here.
Monitoring refers to the monitoring of work done by accountants and is done to ensure that audit opinions are based on evidence. For starters, the monitoring process demands that registered public accountants follow the Code of Professional Conduct and Ethics. The registered public accountant is also excepted to keep up to date with evolving requirements by pursuing professional education. Additionally, the registered public accountant submits his or her audit work for inspection under ACRA’s Practice Monitoring Programme (PMP).
The PMP checks the work of public accountants to see if it follows the Singapore Standards on Auditing (SSA). The SSA follows International Auditing Standards; therefore, the PMP checks to see if the work done in Singapore follows the globally accepted audit standards.
You can find out more about the PMP here.
Why you should audit
Now that we know a little bit more about the auditing process, let’s examine some of the reasons why you should consider having your company audited. For one, auditing your company ensures that you are following the most up to date laws set forth by the government. Additionally, performing an audit is a great way to validate your financial status (and thereby increase your credibility). In any business or banking negotiation, having evidence to back up your claims will be extremely beneficial. Another reason is to minimize the risk of fraud. A third party auditor uses judgment free from bias in order to spot any suspicious irregularities or inconsistencies that you may not be able to notice for yourself. Finally, an auditor can point out any possible areas of improvement in your reporting process, thereby increasing your efficiency.
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