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AUDITOR reporting standards here will be enhanced from 2017 onwards, allowing investors and other stakeholders to draw deeper insights from their reports of listed entities.
In announcing two key changes on Thursday, the Institute of Singapore Chartered Accountants (ISCA) and Accounting and Corporate Regulatory Authority (ACRA) said that they would allow auditors' reports to be more transparent and contain more information on key audit matters.
Firstly, auditors will be required to communicate key audit matters in their reports on the financial statements of listed companies, beyond the traditional pass or fail audit opinion.
These may include significant risk areas in the financial statements that are most susceptible to mis-statements; the company's major transactions during the year that required extensive auditing efforts; or areas involving key management judgements and estimates, such as the valuation of investments, said the national accountancy body.
Secondly, auditors will also have an added responsibility to ensure that a company has made "adequate disclosures" in its financial statements regarding the management's judgement and assessment on going concern, or the ability of the firm to continue operations, even if circumstances do not result in a material uncertainty. Such circumstances could include, for example, the loss of a major customer being mitigated by secured orders from other customers.
This ensures more transparency on an entity's viability, which is of significant public interest, said ISCA.
ACRA has reviewed and approved the application of these enhanced standards for Singapore, which will take effect for audits of financial statements for periods ending on, or after, Dec 15 next year.
Said ISCA's CEO Lee Fook Chiew: "This is probably 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."
ACRA welcomed the enhanced standards. "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," said its CEO Kenneth Yap. "This will boost stakeholder confidence in our markets, and reinforce our reputation as a trusted place for business."
Amendment: An earlier version of this article wrote that the announcement was made by ISCA. ACRA has clarified that this is a joint announcement by both. The article has been updated to reflect that.