The event saw the release of two key reports, including a Survey of preparers of financial statements in companies in Singapore and ACRA’s Seventh Practice Monitoring Programme (PMP) Public Report. The survey of preparers of financial statements in companies in Singapore was conducted by ACCA and ACRA for the first time to examine the challenge of upholding the quality of financial reporting. The Seventh Practice Monitoring Programme (PMP) Public Report highlights the key findings of ACRA’s audit inspections on audit firms and other activities to promote audit quality.
Survey on Preparers of Financial Statements - Strengthening the Financial Reporting Value Chain in Singapore
The survey of preparers gauged preparers’ mindsets towards financial reporting, its challenges, and their preferred solutions to these challenges. Close to 400 accountants from large listed to small companies participated in the survey in May and June this year. Complementing the survey on financial preparers, a focus group of directors, preparers and auditors was held in June.
Key findings of the survey and focus group:
- Companies and preparers need to firmly take ownership over their financial statements. About 50% of the survey respondents appeared to believe that the primary responsibility over financial preparation fell on auditors rather than them. Adding to this were views from the focus group that some company officers are not fully engaged in financial reporting because they see it as a compliance exercise, and that many rely on their auditors to drive the process.
- Frequent changes and the increased complexity of Financial Reporting Standards (FRS) were posing a major challenge to some financial preparers.
- Survey respondents and focus group participants identified the following as top measures to raise the quality of financial reporting and to make it more relevant: employing and retaining qualified accountants in the finance function; continuous training for the finance team as well as for the board directors and management; funding for new technological support and professional assistance; and support from top management who recognise that external financial reporting is value-adding and not merely a compliance exercise.
Commenting on the results, Mr Kenneth Yap, Chief Executive of ACRA said:
“Quality financial information is the lifeblood of strong and vibrant markets. These survey findings underscore the pressing need to re-examine the responsibilities of each member of the financial reporting eco-system. Directors, audit committees, preparers and auditors must work with regulators to uphold investors’ trust and confidence in our market.”
Mr Chiew Chun Wee, Head of Policy, Asia Pacific, ACCA also said:
“The survey and focus group gave a clear message about the benefits of employing qualified accountants, and the need for companies to see the finance team not as a compliance team but as a communication team that bridges the gap between the company and its investors. For this bridge to have integrity and facilitate clear communication, companies need to give the finance team sufficient training, resources and authority to deal with today’s complex environment."
Seventh Annual PMP Public Report
This year’s report highlights progress made by some audit firms in the public interest entity (“PIE”) segment in establishing strong quality controls even in the midst of an increasingly challenging audit environment. The aim is to share leading practices that contribute to the execution of quality audits.
Audit areas that ACRA would like the audit firms in the PIE segment to focus on are the audits of cash flow forecasts and inventories. Of concern is that these deficiencies are still occurring even after having been identified in previous years. Public accountants should carefully re-examine and address the root causes of these findings.
The report also highlights how the workload of some firms in the non-PIE segment poses a major threat to audit quality. Excessive workloads can cause auditors to overlook issues or compromise on audit procedures. To break out of this mode, firms need to focus on delivering quality audits and charging fees commensurate with the value of their work.
Overcoming Challenges through Collaboration and Quality Assurance
Also at the conference, public accountants discussed how the profession can help companies to improve their accounting, and how audit firms can build a more sustainable professional practice. New tools was also released such as a toolkit “Getting Your Accounting Right” to help companies improve their accounting. The practical guide was developed by CPA Australia and the Singapore Management University’s School of Accountancy. The Financial Statements Review Committee of the Institute of Singapore Chartered Accountants also released a compilation of common financial report findings, for financial preparers and auditors to refer to.