Regulatury Framework of Financial Reporting in Singapore

Topics: Auditing, Audit, Internal control Pages: 9 (2070 words) Published: December 15, 2012
* The Companies Act is a set of legislation (laws) that set out how a company should be incorporated, operated and liquidated. * It also dictates the roles and responsibilities of the directors and the rights of shareholders. * Ensure that company remains law abiding and that shareholders’ interests are protected. * Administered by ACRA (Accounting & Corporate Regulatory Authority).

Roles of Organisations
* ASC (Accounting Standard Council) – sets the accounting standards for both corporate and non-corporate organizations, and also for charitable organizations. * CCDG (Council of Corporate Disclosure and Governance) – function mainly on corporate governance * ICPAS (Institute of Certified Public Accountants of Singapore) – independent organization of the accountancy profession in Singapore that serves to register members and provide services to them * ACRA – serves to regulate the accounting profession and overseeing accountants e.g. registration of companies and review of work by practicing accountants.

Role of the External Auditor
* The role is to check whether the company and the directors have actually adhered to the rules set out by the Companies Act and the ASC. * The auditor will issue an opinion to shareholders that everything is OKAY.

Opinion and Certification
* Opinion is a point of view given by an auditor based on his level of experience and personal judgment. * Certification is to make a positive statement about some factual occurrence. * It is not possible for an auditor to provide certification because the auditor is not able to check and verify all the transactions in the company in a short period of time. * He always conducts sample checks and sampling is not able to assist the auditor to provide a certification.

An audit is defined as a process by which a competent, independent person accumulates and evaluates evidence about quantifiable information related to a specific economic entity for the purpose of determining and reporting on the degree of correspondence between the quantifiable information and established criteria.

External Auditor VS Internal Auditor
* External auditors audit the company’s financial statements and issue an audit opinion. * Internal auditors review if the operations of the company are efficient and effective.

Responsibility of Management
1. adopting sound accounting policies
2. maintaining adequate internal control
3. making fair representations in the financial statements 4. prevention and detection of fraud

Responsibility of Auditors
Reporting only to shareholders of company when expressing opinion on financial statements.

Misstatements are considered material if the combined uncorrected errors and fraud in the financial statements would likely to have changed or influenced the decisions of a reasonable person using the statements.

Reasonable assurance
Reasons why auditors is responsible for reasonable but not absolute assurance: 1. Most audit evidence results from testing a sample of a population which inevitably includes some risk of not uncovering a material misstatement. 2. Accounting presentations contain complex estimates, which inherently involve uncertainty and can be affected by future events. 3. Fraudulently prepared financial statements are often extremely difficult, if not impossible for the auditors to detect, especially when there is collusion among management.

Refers to unintentional misstatement in the financial statements.

* refers to intentional act by one or more individuals to obtain an unjust or illegal advantage. * Two types of fraud relevant to auditors:
a) misstatements resulting from fraudulent financial reporting b) misstatements resulting from misappropriation of assets

Professional Skepticism...
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