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FROM 2017 onwards, auditor reports of listed entities will be more transparent and contain more information on key audit matters with the adoption of the enhanced auditor reporting standards in Singapore. The new standards were issued on July 30, 2015 by the Institute of Singapore Chartered Accountants (ISCA), the national accountancy body.
Two key changes are being introduced under the enhanced standards. First, auditors will be required to communicate key audit matters in the auditor's reports on the financial statements of listed entities beyond 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 judgements and estimates such as the valuation of investments. The second key change relates to the aspect of going concern, or the ability of an entity to continue its operations. Currently, when circumstances arise - such as the loss of a major customer - that result in a material uncertainty over an entity's going concern, the auditor will be required to highlight this matter in the auditor's report.
The enhanced standards now impose an added responsibility on auditors to ensure that the entity has made adequate disclosures in its financial statements regarding management's judgement and assessment on going concern even if the circumstances do not result in a material uncertainty, such as 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.