How To Prepare For An Audit Under Singapore’s Reporting Standards

Preparing for an audit can feel like a daunting task, especially with the rigorous demands of Singapore’s reporting standards. However, with proper planning and organization, audits can be a seamless process. This guide will walk Singaporean business owners through the essential steps to effectively prepare for an audit under the country’s regulatory standards.

By the end of this guide, you’ll know how to organize your financial documents, ensure regulatory compliance, and work collaboratively with auditors to make the process hassle-free.

Understanding the audit process in Singapore

Below are some background information on the audit process in Singapore that business owners should be aware of:

Regulatory requirements

In Singapore, annual audits are mandatory for all companies under the Companies Act, ensuring the accuracy of financial statements. Strict regulatory standards are upheld, including compliance with:

• Singapore Financial Reporting Standards (SFRS): The framework for preparing financial statements.
• Singapore Companies Act: Governs statutory requirements for companies, including audit obligations.
• Regulatory bodies such as ACRA (Accounting and Corporate Regulatory Authority) enforce these standards to ensure adherence.

Certain small companies may qualify for an audit exemption if they meet specific criteria.

Types of audits

Preparing for an audit begins with understanding its type. In Singapore, businesses should be aware of three main audit types:

• Internal audits: Focus on internal processes to enhance risk management and operational efficiency.
• External audits: Offer an unbiased assessment of financial statements, boosting stakeholder confidence.
• Statutory audits: Required under the Singapore Companies Act, ensuring compliance with SFRS.

Each type of audit has its own requirements, and understanding these beforehand will help you focus on the right areas.

The role of auditors

Audits must be conducted by an ACRA-approved qualified auditor. Auditors play a critical role in verifying the accuracy of your financial statements and ensuring compliance with regulations. They look for reliability, correctness, and proper disclosure in your documentation.

Meeting auditor expectations, such as maintaining clear records and timely cooperation, can streamline the audit process and prevent delays.

Things to prepare before your company’s audit

Before an audit commences, thorough preparation is essential to ensure a smooth and efficient process. Let’s take a look at the key steps you should take before an audit:

Preparing financial documents

Auditors will review financial documents to ensure accuracy and compliance. It’s important that you have these documents organized and readily available for the auditor’s review. Some common documents include:

• Financial records: Start by ensuring all financial statements—such as income statements, balance sheets, and cash flow statements—are up-to-date and accurate. Maintaining clear and organized records (e.g., invoices, receipts, bank statements) reduces errors and makes it easier for auditors to assess compliance.
• Supporting documents: Prepare all supporting documents that back up your financial statements. These may include contracts, tax filings, or inventory records. Ensure these documents align with SFRS and are easy to access.

Ensuring accuracy and compliance

Apart from organizing and preparing financial documents, it’s crucial to ensure their accuracy and compliance with ACRA guidelines. Here are some points to consider:

• Internal controls review: Take the time to evaluate your company’s internal controls. These are the processes and procedures that ensure data accuracy and mitigate the risk of fraud. Identify any gaps and address them proactively before the audit begins.
• Regulatory compliance: Verify that your company complies with Singapore’s Companies Act and other relevant regulations. You can do this by reviewing your company’s structure, shareholder information, and corporate governance policies.

Pre-audit meetings with auditors

Effective coordination begins before the audit even starts. Schedule a pre-audit meeting with your auditors to set expectations and clarify details. Use this session to:

• Discuss the audit scope, timeline, and objectives for better alignment.
• Define the roles and responsibilities of both your internal team and the auditors.
• Identify key documentation requirements to ensure you’re prepared.

A transparent discussion early on removes ambiguity and sets the stage for an efficient audit process.

Final review

Before the audit kicks off, conduct a thorough review of all records and documents to ensure completeness. Think of this as your last chance to spot any inconsistencies.

Additionally, prepare your staff for potential interviews or inquiries from auditors. Having your team ready helps create a smoother, more collaborative process.

What to expect during an audit process

In this section, we’ll take a look at what typically happens during an audit and how you can prepare for it.

Timeline and process

The audit process in Singapore typically involves several stages and can vary in duration depending on the size and complexity of the business being audited.

• Planning stage: This initial phase involves understanding the business, its environment, and identifying potential risk areas. Auditors will develop an audit plan tailored to the specific needs of the business. This stage can take a few days to a couple of weeks.
• Fieldwork stage: During this phase, auditors gather evidence by reviewing financial records, conducting interviews, and testing internal controls. The duration of fieldwork can range from a few weeks to several months, depending on the complexity of the audit.
• Review stage: After fieldwork, auditors review the collected evidence and draft their findings. This stage involves discussions with management to clarify any issues and ensure accuracy. It can take a few weeks.
• Reporting stage: The final stage involves preparing the audit report, which includes the auditor’s opinion on the financial statements. This report is then presented to the company’s management and board. The reporting stage usually takes a few weeks.

Overall, the entire audit process can take anywhere from a few months to over half a year.

Fieldwork and examination

This is considered the most intensive part of the audit, where auditors visit the company in person to conduct a detailed review of financial records, test transactions, assess internal controls, and perform compliance checks.

Being on-site helps auditors gain a better understanding of the company’s operations and verify the existence and condition of physical assets, such as inventory or equipment.

However, with advancements in technology and remote work capabilities, some parts of the audit may also be conducted remotely, depending on the company’s setup and the nature of the audit.

Ensure your team is ready to provide explanations and supporting data for any findings auditors may question. For instance, If your company recorded $10,000 in sales on Dec 31, auditors may examine the sales contract, delivery records, and proof of payment to ensure the revenue is booked in the correct year and complies with revenue recognition principles.

Collaboration is key

Collaboration is key during the audit execution phase. Whether clarifying a question or addressing a concern raised during the audit, approach the process with transparency. Tips to improve collaboration include:

• Regular updates on the progress of the audit to ensure all parties are on track.
• Addressing discrepancies or concerns head-on rather than sidestepping them.
• Sharing consistent and accurate information to avoid confusion.

A collaborative mindset often brings faster resolutions and strengthens the working relationship.

Build confidence with a stress-free audit experience

Remember—an audit isn’t just about compliance. It’s an opportunity to showcase your company’s financial transparency and establish trust among stakeholders. With expert guidance and thorough preparation, your audit can be a smooth and valuable process for your business.

Ready to transform your audit experience into a strategic advantage? Contact our experts at service@bbcincorp.com and ensure everything goes without a hitch.

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