SINGAPORE: The government is considering giving the Accounting and Corporate Regulatory Authority (ACRA) the power to sanction audit firms as it reviews the Accountants Act, Senior Minister of State for Law and Finance Indranee Rajah said on Tuesday (Oct 3).
“Amongst others, we are looking to empower ACRA to conduct firm-level inspections, and where necessary, mete out sanctions for non-compliance through this review,” she said at an ACRA event.
The government is embarking on a review of the Accountants Act as it seeks to enhance corporate transparency and raise accounting standards, said Ms Indranee.
She added that this is in line with audit regulatory regimes in the US, the UK and Australia, and that a public consultation will be launched next year.
This review is another step in improving corporate governance in Singapore, almost a year after ACRA, the accounting and corporate regulator, issued new disclosure guidelines.
Enhanced auditing standards kicked in at the end of last year, where auditors take a more in-depth look at a company’s health and try to identify potential risk areas, compared to the past when auditors gave just a “pass or fail” opinion on its financial statements. Auditors must also provide more in-depth explanations of the audit process under the enhanced auditor’s report.
The guidelines, effective for financial reports released on or after Dec 15 last year, specify that the enhanced auditor’s report must contain key audit matters (KAMs), or those involving significant transactions, management judgement and risks.
A study conducted by ACRA, the Association of Chartered Certified Accountants (ACCA), the Institute of Singapore Chartered Accountants (ISCA), and the Nanyang Technological University found that the top KAMs were related to impairment and valuation.
For instance, impairment of receivables, or the risk that debts will not be collected, was found to be highlighted as a key audit matter among 36 per cent of the 180 financial reports sampled.
Since these enhanced guidelines kicked in, the study found that some 40 per cent of the companies sampled added more disclosure, and did so in greater depth.
The survey also found that investors are using the enhanced auditor’s reports to identify significant accounting and audit issues, before reading through the financial statements.
“This move towards greater transparency is boosting investor confidence. There was assurance that significant issues were being looked at by audit committees,” Ms Indranee said at the Singapore Accountancy and Audit Convention.
This will also help investors save time, said National University of Singapore associate professor of accounting Mak Yuen Teen.
"Rather than having to wade through pages and pages, investors can get to focus on matters auditors have highlighted – the key audit matters. So I’m not saying investors should just rely on key audit matters, but I think from the ordinary retail investors with time limitations, key audit matters is one of the areas they can focus on, as a starting point to look at," he said.
Another regulatory change related to financial reporting includes a new framework that helps listed companies meet the International Financial Reporting Standards, which they must follow from the interim financial period ending March 2018.
To help companies better transit to the new reporting standards, ISCA is launching a roadmap with the Singapore Institute of Directors.
It is also crucial for the accountancy sector to stay ahead of tech disruptions, said Ms Indranee.
She stressed that the profession needs to transform and adapt, and announced the launch of the Skills Framework for Accountancy. The framework, which provides an overview of the career pathways available, also lets individuals identify what skills are needed to enter the industry.
This was developed by SkillsFuture Singapore, Workforce Singapore and the Singapore Accountancy Commission, as well as employers and educational institutions.