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SINGAPORE: The economic downturn has highlighted some issues within the audit community in Singapore that need working on.
While most auditing firms meet regulatory standards, recent findings showed that there are key performance gaps and systemic threats to audit quality, especially among the smaller audit firms.
Singapore has over 500 small public accounting firms, many of which have less than five partners or are sole proprietorships. And a recent review by the Accounting and Corporate Regulatory Authority (ACRA) showed that there are broad weaknesses among this group.
These include a number of systemic issues such as the balance between the desire for low costs, and the need to allocate sufficient time to perform audits to the required standards.
ACRA said a high volume/low fees model may lead to threats to audit quality such as superficial level of professional supervision by partners. And the current business environment is posing an additional hurdle.
Second Minister for Finance and Transport Lim Hwee Hua said: "I think the current economic situation has thrown up some additional challenges, so this will relate to perhaps the taking on of more auditing work because of the special situations that some companies may find themselves in.
"It may relate to the valuation of the businesses or special situation from the downturn itself, so I think it will take a while for these issues to be resolved properly. At the same time... as small companies go overseas, the load and the requirement will step up substantially.
"We will therefore need the sector that caters to the SMEs (small and medium-sized enterprises) to be stepped up as well, especially in terms of expertise, abilities and capabilities, so that they will match the companies as they go abroad."
The minister was speaking on the sidelines of the annual Public Accountants Conference on Wednesday.
Meanwhile, ACRA said it is looking into how it can help the audit firms.
Deputy chief executive, ACRA, Ow Fook Chuen, said: "ACRA is working very closely with those in the profession and the institute (Institute of Certified Public Accountants of Singapore) to tackle some of these issues which we have identified.
"I think it is in the area of consolidation of resources, leveraging on capabilities of infrastructure. But amid all the challenges, we still see some opportunities. I think the SME business community is growing."
And as Singapore positions itself as an audit and financial hub, experts said it is vital that key capabilities are met.
For auditing firms that have failed to reach required standards, ACRA has imposed regulatory action such as a mandatory peer review or attendance of a three-day regulatory course, and in some cases licence suspension.
Experts also said that audit firms in Singapore also need to ramp up capabilities to cater for the increasing number of international businesses flowing into the city state, seeking it out as a growing audit hub.
ACRA also commissioned a separate survey by the Singapore Management University, which aimed to gain a greater understanding of the decision-making process of audit committees of listed firms.
The survey showed that most audit committees of listed companies agreed on the main criteria for appointing external auditors.
- CNA/yt
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