What’s in this article
Auditing is an important step in maintaining your compliance with regulations and ensuring governance after your company is incorporated. With good auditing practices, you can achieve many benefits from risk mitigations and enhanced security.
What is a Business Audit?
A business audit is a documented evaluation of whether or not a company’s financial statements are materially correct along with the standards, evidence, and assumptions used to conduct the auditing procedure for the company.
The results of auditing will be written in the audit opinions and auditors of a company usually report on the following items in a company:
1. Financial Statements
An auditor reports whether or not the financial statements are error-free from material misstatements. Furthermore, material means the significant damage that will be faced by the company due to a misstatement or missing information. Thus, this action will be large enough to impact the auditor’s opinion of the financial statement.
2. Internal Controls
Most business audits require an auditor to assess the effectiveness of the company’s internal control. Internal controls are ‘rules’ that are put in place in the company’s daily operations to allow the company to produce fair and accurate financial statements and prevent theft of assets. However, if a weakness in any internal control is found, it must be disclosed immediately to avoid any further misstatements.
Analysis of Material Misstatement Risks
Audits involve the analysis of the company’s financial reports and the material misstatement risks present within them. Here are some of the differences between audited and unaudited companies are listed below.
| Audited Companies | Unaudited Companies |
|---|---|
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The unreliability of companies that are unaudited stems from the fact that the company would have no way to ensure that there are no misstatements in its reports and records.
Why Conduct a Business Audit in Singapore?
If you are looking to seek confidence that you and your company are meeting its core business goals, internal auditing is essential. In addition, this would give you a clear vision of how well your company’s internal operation is and where the problem lies if misstatements were to be found.
At the same time, having an internal audit can also protect your enterprise against fraud and prevent fraudulent activities such as thefts, unauthorised personnel’s entry into the warehouse etc. Moreover, these will cause overstatements in goods in the company’s record if inventories were to be stolen or damaged.
If you’re concerned about your company’s compliance with current laws, regulations, and standards, an internal audit can help reduce the burden of studying these requirements yourself.
Role of an Auditor in Singapore
The role of an auditor in Singapore include:
All of these help the company to avoid penalties in any event of arrears, which can amount up as financial losses.
Benefits of Auditing Your Business in Singapore
Completing an audit demonstrates your company’s trustworthiness and reliability by showing that you are fulfilling your responsibilities and obligations. Furthermore, there are companies whose reputations are built around how well they manage their assets.
Some of the benefits are:
1. Strong internal controls
Internal audits evaluate your internal control activities, which comprise of:
2. Process Efficiency
Internal audits help to identify gaps in your business operations, procedures and governance processes while providing appropriate recommendations on how to solve the misstatements.
3. Security
Internal audits assess your business’s cybersecurity environment for vulnerabilities and compliance with your security standards. Furthermore, auditors will provide and recommend possible ways to mitigate the issues raised.
Besides cybersecurity, we also evaluate physical security, such as the accessibility of inventory storage areas. Easier access increases the risk of theft, which is detrimental to the company.
4. Integrity
Internal audits analyse and review your financial statements and verify their accuracy and integrity. Especially in recent times, fraud has been increasingly common, hence the need for audit is extremely necessary to avoid financial losses.
5. Reduced Risks
Internal audits consider all the identified risks to your enterprise and analyse whether your risk mitigations are strong. Moreover, your auditor will identify the gaps and report back to you on the potential ways to go about resolving the issues.
6. Improved Compliance
Internal audits check the laws, regulations, and industry standards with which your organisation needs to comply and whether the company is adhering to these guidelines. However, if there are any issues in compliance, your auditor will have to raise an issue and provide suggestions on how to solve them.
Consequences of a Lack of Auditing in Singapore
Companies that fail to conduct audits, either internal or external, face consequences.
These include:
How to Respond to a Business Audit in Singapore
There are a few ways for companies to respond to audits:
1. Address Concerns
Not every business must comply with the recommendations provided by the auditing team. However, a company must always ensure that it remains legally compliant and it can do this through the use of information provided by audits.
2. Appeal to the Authorities
If your company lacks the necessary resources required to fulfil the recommendations, you can proceed to appeal this recommendation and request for an extension if necessary. Consequently, companies that disregard recommendations may face severe repercussions, including legal penalties.
3. Open Audits
Companies facing open audits should comply with the audit report’s recommendations. Hence, public disclosure will increase transparency.
FAQs
The Profit and Loss Account as well as the balance sheet need to be audited annually.
You should nominate at least one auditor within 3 months after your company is incorporated.
If your company is small, as long as it meets 2 out of 3 criteria as below, it is exempted from the audit:
- Total annual revenue is less than or equal to S$ 10mil;
- Total assets less than or equal to S$ 10mil;
- Have less than or 50 employees
