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Singaporean regulators and institutes release retail investors’ guide to enhanced auditor’s report

To help investors understand the enhanced auditor report (EAR) which is implemented as of this year, The Singaporean regulators, the Accounting Corporate Regulatory Authority (ACRA) and the Securities Investors Association Singapore (SIAS) in collaboration with the Institute of Singapore Chartered Accountants (ISCA) have published a guide which helps retail investors to identify important risk areas in financial statements of listed companies and understanding how these areas are audited.

The EAR was approved by ACRA in July 2015 for audits of financial statements for periods ending on or after 15 December 2016. It introduced two changes: First auditors are now required to communicate key audit matters in their report on the financial statements of listed entities, marking a move away from the traditional pass/fail audit opinion.

The second important change relates to the aspect of going concern. Previously when a material uncertainty over a business's going concern arose, auditors were required to highlight this matter in their report. Under the enhanced standards auditors will now have to ensure that the business has made adequate disclosures in its financial statements regarding management's judgement and assessment on going concern.

The guide published by ACRA, SIAS and ISCA gives an explanation of the different types of audit opinions, how unfavourable audit opinions could be identified, and the issues investors should look out for. The guide also includes a list of relevant questions with regards to key audit matters that investor could consider asking to directors, management and auditors during annual general meetings.

The guide is available here.

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