Singapore’s accounting regulator has reviewed and approved the enhanced auditor reporting standards issued by the institute of Singapore Chartered Accountants (ISCA) in a pledge to improve transparency and audit insights.
Following the Accounting and Corporate Regulatory Authority (ACRA)’s Public Accountants Oversight Committee (PAOC)’s approval, the enhanced standards will take effect for audits of financial statements for periods ending on or after 15 December 2016.
Two changes are being introduced under the enhanced standards. First auditors will be 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.
"Key audit matters may include significant risk areas of the financial statements most susceptible to misstatements, the entity’s major transactions during the year that required extensive auditing efforts or areas involving key management judgments and estimates such as the valuation of investments," a communication by ACRA read.
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.
"While not in itself new, such information was previously provided only to the audit committees," KPMG in Singapore head of audit Roger Tay said. "It will also now be available to shareholders and other stakeholders as a result of the new auditing standards in communicating key audit matters in the independent auditor’s report."
He welcomed the changes as he believes that as a result investors and other market stakeholders will benefit from more transparency and better insights into financial reporting.
ACRA chief executive Kenneth Yap said: "The expanded auditor’s report supports our efforts to introduce more transparency in the marketplace by providing greater insight into the audit process and raising the quality of disclosure in financial statements. This will boost stakeholder confidence in our markets, and reinforce our reputation as a trusted place for business."
ISCA chief executive officer Lee Fook Chiew described the enhanced standards as the most significant development impacting the auditing profession in recent times. "Auditors are now positioned to adopt a more significant role in presenting their professional judgement on the financial health and accounting practices of an entity," he added.
PAOC chairman Tan Cheng Han concluded: "The profession must take these added responsibilities seriously and seize this opportunity to bring the quality of audits to a new level."