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Higher audit standards extended to public bodies

From Feb 1, audits of institutions like charities must meet same independence standards as listed firms
Tuesday, November 11, 2014 - 05:50
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The Accounting and Corporate Regulatory Authority (Acra), announced on Monday that the Code of Professional Conduct and Ethics (Code) for public accountants and accounting entities will be strengthened further from Feb 1, 2015.

Singapore

SINGAPORE'S public accountants and public accounting firms will soon have to adhere to stricter professional conduct and ethics guidelines aimed at greater audit independence.

The Accounting and Corporate Regulatory Authority (Acra), the industry's regulator, announced on Monday that the Code of Professional Conduct and Ethics (Code) for public accountants and accounting entities will be strengthened further from Feb 1, 2015.

The changes include extending higher independence standards to all audits and reviews of public interest entities (PIEs), large charities and large institutions of a public character (IPCs) as opposed to only audits of listed and public companies currently, and having new requirements to further safeguard the independence of auditors. "As a profession that serves the public interest, it is crucial that public accountants remain a profession with integrity and independence, and serve as a valued and trusted source of information and advice," Acra said in its announcement.

"In this era of economic volatility and a rapidly evolving corporate landscape, the Code is a vital set of guiding principles for public accountants to rely on and enable them to make the right decisions when faced with conflicting choices between economic interests and ethical considerations."

The changes are a result of a review of the Code carried out by Acra's Public Accountants Oversight Committee, with the support of the latter's Ethics Sub-Committee. The amendments took into account revisions made to the International Ethics Standards Board for Accountants (IESBA) Code up to September 2013.

The current Code is largely based on IESBA's 2006 Code of Ethics.

The key changes to it include:

  • Extending higher independence standards to all audits and reviews of PIEs, large charities and IPCs, instead of just those of listed companies now; this is in recognition of the need for a high degree of public confidence in the financial information of such entities.
  • Subjecting review engagements - whereby the public accountant expresses a conclusion which provides a limited assurance on the client's financial information, as opposed to a reasonable assurance provided in an audit engagement - to the same independence requirements as audit engagements. This recognises that, even though the type of assurance given is different in each instance, both audit and review engagements involve the public accountant expressing a conclusion on historical financial information.
  • New requirements to further safeguard the independence of auditors, such as the identification of a Key Audit Partner (KAP), who would make key decisions or judgments on significant matters with respect to the audit; additional requirements will be placed on KAPs, such as partner rotation, cooling-off period before joining a PIE audit client in certain positions, and prohibiting a KAP from being evaluated on or compensated based on that partner's success in selling non-assurance services to the partner's audit or review clients.

This announcement comes days after the Ethics Pronouncement 200 came into effect. Issued by the Institute of Singapore Chartered Accountants, the new pronouncement contains enhanced mandatory requirements for professional accountants, including public accountants, in terms of the controls and procedures they will have to put in place to counter money-laundering and terrorism-financing efforts. The pronouncement has been adopted by Acra, and will be applicable to public accountants and accounting entities registered under the Accountants Act who are regulated by Acra.

 

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