How To Choose An SME Accountant in Singapore

Posted on September 29, 2024September 29, 2024 by Auditor Diary

How to find an accountant for small business in Singapore? Before trying to answer that, perhaps you’re considering accounting tools and online software that can make it easy for business owners to do their accounts. However, not all business owners have the time or expertise to use the full suite of services and functions offered by accounting software. Furthermore, some types of business models, like e-commerce shops, require complex accounting and bookkeeping systems to record cash flow and inventory.

In this case, finding an accountant that’s a good fit for your small business is important. It can save you money and time in the long run. I’ll be sharing how to identify your accounting needs and choose an accountant.

The Importance of Having a Business Accountant

The first step is to decide whether you need an accountant in the first place. There isn’t a one-size-fits-all answer. But if you’re new to accounting and have questions about how accounting would help your business, it might be time to hire a professional accountant.

An accountant can provide essential guidance if you’re new to accounting and find financial statements and terminology confusing. They’ll help establish a financial strategy and prevent costly errors for your business. They can help you with essential questions like:

How to select a business structure
How to file tax returns
How to plan for rapid business growth
How to prepare for an IRAS audit
How to apply for business loans
How to claim tax relief
How to buy a business or expand it

If these scenarios apply to you, it’s time to look for a suitable accountant.

Identify Your Accounting Needs

SMEs can choose in-house accountants or consider outsourcing accounting and bookkeeping functions. Outsourcing is a good idea if you run an SME with a lower yearly revenue turnout.

According to Payscale, the average annual salary for an accountant in Singapore is around $52,000; in contrast, outsourcing to an accounting firm can offer a more economical option, with high-quality packages tailored for SMEs ranging from $500 to $900 per year.

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You might also want to learn about The Role of Auditors in Corporate Governance for Investors
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How to Choose an Accountant

The Evaluation Process

Don’t rush it: A quick online search can help you understand what’s out there, but it’s best to go through referrals from trusted sources like business advisors, bankers, or industry contacts rather than doing online searches. Attending local business networking events can also help.
Choose a certified professional: Working with a chartered accountant offers assurance of qualifications and up-to-date knowledge. Ensure your accountant or accounting service is registered with the Institute of Singapore Chartered Accountants (ISCA).
Assess prospective accountants: Ask key questions to analyse how the accountant can benefit your small business. We’ve provided a list of questions in the later part of this article.

There are several additional certifications that chartered accountants can obtain in Singapore, such as:

Certificate in Payroll Administration (CPA)
Certified Information Systems Auditor (CISA)
Certified Internal Auditor (CIA)

Key Questions for a Small Business Accountant

Ask questions to understand their accounting experience and how they can improve the financial health of your small business:

Ensure they have small business experience and understand your unique challenges.
Beyond taxes and auditing, what additional accounting services do they offer, like bookkeeping, risk assessment, or financial reports?
How can they help your business grow? Look for someone who can be a long-term advisor for key business financial decisions.
Understand which accountant or accounting team you will work with, your main point of contact, and how the communication will be handled.
If you are hiring an in-house accountant, consider how they will fit in with your company’s work culture. Ask them the relevant questions to determine their working style and preferences.
Discuss confidentiality, client testimonials and how they keep up with Singapore’s accounting system, tax regulations, audit requirements, and accounting best practices.
Know their fees upfront—whether hourly or on a retainer—and salary expectations.

Streamline Your Business with Professional Accountants

After you’ve selected a suitable candidate, negotiate terms and draft an engagement letter outlining services, fees, and expectations. Clear communication is vital for a successful business relationship, so keep in touch regularly.

Spend less time doing your accounts and more time growing your business. By delegating your accounting tasks to a professional, your finances will be managed more effectively, and you’ll also avoid costly errors. A professional chartered accountant can handle the detailed accounting software, freeing up time to focus on growing and enhancing your business.

How Financial Disclosures Affect Auditors and Investors

Posted on August 30, 2024August 30, 2024 by Auditor Diary

Content:

Why are Financial Disclosures Important for Investors?
How do Audits Promote Transparency?

How Financial Disclosures Affect Auditors and Investors — Audits are formal examinations of company financial records. They reasonably assure that a company’s financial statements accurately reflect its financial status and outlook. Auditors offer a professional third-party opinion about the credibility of the company’s financial reports.

Companies often specify financial disclosures in their financial statements. These financial disclosures are both quantitative and qualitative. Quantitative financial disclosures include analyses of balances and transactions, revenue, profit, and major customer information. Qualitative financial disclosures contain information on accounting policies and procedures, discussion on risk areas, and going concern assumptions. Auditors review these financial disclosures, request evidence as proof and ensure the company is honest about its disclosures.

This blog explains the importance of transparency in financial disclosures.

Why are Financial Disclosures Important for Investors?

Financial disclosures contain all necessary information about an organisation that could affect investors’ decisions. As mentioned earlier, it includes quantitative and qualitative information to cater to the needs of all types of investors and stakeholders.

Transparency in financial disclosures is based on concisely and truthfully disclosing relevant information to stakeholders. It means that all parties, including auditors, stakeholders, lenders, and investors, should have access to identical and comprehensive information about the company. Financial disclosures are deemed adequate and transparent when the financial information provides a clear outlook of the company’s financial situation.

Transparent financial disclosures are essential for investors because they affect decision-making. Investors need reliable information to help them choose whether they want to invest in a company or what product they want to invest in. Incomplete or inaccurate information could affect investors’ ability to make a wise investment decision.

How do Audits Promote Transparency?

Transparency is crucial in financial markets because it provides clarity for investors, stakeholders, and customers about the financial transaction they intend to make. For investors, transparency includes financial information about the company, like audit reports. For customers, transparency includes information about fees and rates.

financial transparency | theauditordiary.com | Image by snowing on Freepik.com

Audits promote transparency in financial disclosures by ensuring that disclosures are accurate. Auditors need access to comprehensive financial records and sufficient evidence to make a fair judgement. The audit process encourages companies to provide proof to back up the disclosures made in their financial statements. Providing proof improves the transparency of their financial disclosures.

A company with greater clarity in financial disclosures will build investor, stakeholder, and customer confidence. Audits increase a company’s trustworthiness because financial evidence that is reviewed and approved by certified auditors is perceived to be more credible.

Audits reduce information asymmetry and ensure that management’s information does not differ from what they provided to other parties. Investors and stakeholders with fair access to clear and accurate information will feel more secure investing in the company. They are reassured that the company is not withholding any important information from them.

Companies that are not transparent about their financial disclosures through audits risk losing investor trust. This can be seen in the Hyflux and KPMG audit episode.

Following Hyflux’s liquidation in 2021, Hyflux alleged that KPMG was negligent in auditing its 2011-2017 records.

KPMG denied the allegations and argued in its defence that the obligation to prepare the financial statements in compliance with the law and reporting standards lies with the plaintiffs’ management and board.

KPMG maintained that Hyflux Group’s financial statements were audited in accordance with auditing standards, and there were no material misstatements. Auditors also conformed to professional standards when making judgement calls. Any incorrect judgements do not indicate auditor misconduct or negligence.

Hyflux’s directors were charged with disclosure-related offences in 2022.

Conclusion

Financial audits are crucial in promoting transparency in financial disclosures, reducing information asymmetry, and protecting stakeholders’ interests. Companies must adopt transparent financial reporting practices to protect investors’ interests.

Safeguarding Investments Through Independent Financial Audit

Posted on July 2, 2024August 30, 2024 by Auditor Diary

Independent financial audits help ensure the accuracy and reliability of a company’s financial statements. They prevent investors from being misinformed by fraudulent financial claims.

Independent auditors check financial data and examine business processes to provide an objective third-party opinion about the accuracy of the financial statements. As such, independent audits protect investors’ and shareholders’ interests and increase investor confidence in a company.

However, inaccurate financial statements hinder auditors from conducting effective financial audits. It puts the investors at risk. This article explores the importance of financial audits for investors.

Why are Financial Audits Important?

Companies usually prepare their financial statements according to prevailing accounting standards. The Accounting and Corporate Regulatory Authority (ACRA) issues these standards in Singapore. These financial statements contain information about the company’s financial performance and condition.

Many investors and stakeholders use these financial reports to make critical financial decisions. However, it is not enough for a company to claim that its financial statements are accurate. Investors and stakeholders have more trust in companies that undergo independent financial audits. This is because independent financial audits provide reasonable objective reassurance that the statements reflect the company’s financial position. Investors trust professional audit reports to verify that a company’s bookkeeping and accounting processes are credible and do not conceal any financial mismanagement.

Independent financial auditors examine management disclosures and financial statements like income/cash flow statements and balance sheets. They also review business processes and operations and provide professional recommendations on improving controls to improve business quality.

Consistent financial audits enhance investor confidence in the company’s operations. Regular financial audits with clean outcomes decrease the chances of fraud occurrence. It encourages existing investors to keep their investments and attracts new investors. Regular financial audits also increase business ratings. Investors are more likely to invest in a company with good ratings.

Role of Financial Audits in Investment Decision-Making

Investors and stakeholders often apply financial due diligence (FDD) to assess risks in an investment or business decision. Investors and stakeholders are strongly encouraged to do due diligence on a potential investment. It includes reviewing the company’s financial records and performance.

Financial audits serve as a due diligence tool for investors. They provide opinions that help the investor or stakeholder understand the company’s financial position and make an informed decision.

Auditors are qualified professionals who specialise in reviewing financial records and business controls. A 2020 study confirmed that audits by big four audit firms like KPMG are of higher quality than other firms. Auditors can identify red flags like accounting inconsistencies and assess the quality of corporate management processes. Audit reports contain comprehensive assessments of a company’s profitability and performance. As such, investors trust auditors’ opinions and often rely on audit reports to save time spent doing due diligence. Most investors begin the FDD process by looking through audit reports.

However, investors should not only depend on audits to make investment decisions. Good FDD requires personalised information on historical financial performance, risk identification, and future cash flow projections. FDD findings are usually customised to suit the individual needs and concerns of the investor. On the other hand, audit reports are conducted according to audit frameworks (GAAS – Generally Accepted Auditing Standards) and cater to broad audiences, including regulators and creditors. Audit reports may not cover specific areas of interest in detail. As such, investors should treat audits as a supplementary tool to enhance their due diligence process.

Importance of Accuracy and Reliability in Investment Financial Statements: Hyflux and KPMG Audit Episode

Auditor independence is essential for providing unbiased audit assessments. For an effective audit, auditors should not be influenced by internal control limitations, management override or other factors. Inaccurate financial information could also hamper the audit process and mislead investors, leading to potential investment losses.

One example of how inaccurate financial statements affected investors was the Hyflux and KPMG audit episode.

Due to financial issues, Hyflux, a Singapore-based water treatment firm, went into liquidation in 2021. KPMG was Hyflux’s auditor.

In 2022, Hyflux claimed that KPMG’s auditors had been negligent in auditing their 2011-2017 financial records. KPMG denied the allegations and argued in its defence that the obligation to prepare the financial statements in compliance with the law and reporting standards lies with the plaintiffs’ management and board.

Hyflux’s directors were charged in 2022 for failing to disclose crucial financial information about the Tuaspring Integrated Water and Power Project in their financial records.

Hyflux’s inaccurate financial statements had a part to play in the KPMG-Hyflux audit scandal. However, at the time of writing, the trial to determine the final legal verdict is still ongoing.

Conclusion

Financial audits safeguard investments by offering a professional opinion about the credibility of a company’s financial records and financial position.

Companies are responsible for ensuring clean audits by complying with professional accounting and reporting standards. They should disclose all necessary information to enable investors to make wise decisions.

References

https://www.investopedia.com/terms/i/independentauditor.asp

https://www.pwc.com/im/en/services/Assurance/pwc-understanding-financial-statement-audit.pdf

https://www.acra.gov.sg/accountancy/accounting-standards

https://kpmg.com/xx/en/home/insights/2018/04/building-confidence-and-trust-in-capital-markets.html

https://completecontroller.com/benefits-of-maintaining-an-audit-ready-business

https://gocardless.com/guides/posts/what-is-a-financial-audit

https://www.investopedia.com/terms/d/duediligence.asp

https://www.mooresingapore.com/news/sept-2020/financial-due-diligence-and-audit,-is-it-just-a-ti

https://www.cfedu.info/single-post/2020/04/28/7-key-differences-between-financial-due-diligence-and-audit

https://www.businesstimes.com.sg/companies-markets/timeline-hyflux-market-listing-liquidation

https://www.businesstimes.com.sg/companies-markets/energy-commodities/hyflux-seeks-s6846-million-kpmg-alleged-negligence
https://www.straitstimes.com/business/ex-hyflux-ceo-olivia-lum-ex-cfo-and-four-others-charged-for-violations-of-securities-and-futures-act

https://www.straitstimes.com/business/companies-markets/hyflux-chief-olivia-lum-deeply-saddened-by-losses-suffered-by-investors

https://www.cpaaustralia.com.au/-/media/project/cpa/corporate/documents/tools-and-resources/ethics/cg-vol-8.pdf?rev=f5c600d33e444601982dba3ea4d6f8f7

https://www.straitstimes.com/business/companies-markets/hyflux-chief-olivia-lum-deeply-saddened-by-losses-suffered-by-investors

https://www.bi.edu/research/business-review/articles/2020/08/why-the-big-four-provide-higher-quality-audits

Crypto News: The FTX Collapse and Aftermath

Posted on June 4, 2024June 4, 2024 by Rachel Lee

Introduction:

In the fast-paced world of cryptocurrency, FTX emerged as a major player in 2019.

Founded by Sam Bankman-Fried, it quickly gained traction as the third-largest crypto exchange, offering a platform for trading digital assets like bitcoin, dogecoin, and ether.

This blog will discuss the significant event that rocked the cryptocurrency world: the FTX scandal.

From its meteoric rise to the sudden collapse and the FTX legal consequences, l shall unpack the key events and implications of what many call crypto’s “Lehman moment.”

The Rise of FTX:

FTX rose to international prominence, making Bankman-Fried a household name in the crypto community with strategic acquisitions, aggressive marketing, and competitive trading fees.

FTX Red Flags:

While many crypto platforms struggled amidst the decline in cryptocurrency prices, FTX appeared resilient. However, cracks began to show when the balance sheet of Alameda Research, a crypto investment firm owned by Bankman-Fried, came under scrutiny. It was revealed that Alameda Research’s value was heavily reliant on speculative crypto tokens, raising concerns about FTX’s financial stability.

FTX Bankruptcy:

In early November 2022, FTX collapsed. The revelation of Alameda Research’s precarious financial position triggered a wave of customer withdrawals, ultimately pushing both FTX and Alameda into bankruptcy. The once-thriving exchange came crashing down. To investors and traders, it wasn’t just a headline; it felt personal.

FTX Legal Consequences:

The fallout didn’t end with FTX’s collapse. In December 2022, the U.S. government brought civil and criminal charges against Sam Bankman-Fried and top executives for misappropriating over $8 billion in customer deposits. Bankman-Fried faced trial in October 2023 and was convicted in November 2023.

FTX Lehman Moment Effect:

The crypto news sent shockwaves throughout the cryptocurrency industry, spreading mistrust among the public. Many view the FTX effects as “Lehman moment,” drawing parallels to the collapse of Lehman Brothers during the 2008 financial crisis.

Market Volatility: The volatile crypto market lost billions and fell below a $1 trillion valuation.

Cryptocurrency Values: The value of FTT plummeted, taking other coins down with it, including Ethereum and Bitcoin.

Ripple Effect: The collapse of FTX led to customers withdrawing billions of dollars worth of assets from Binance, the world’s largest crypto exchange.

Regulatory Implications: The event underscored the need for greater transparency, accountability, and regulatory oversight within the crypto sector, prompting stakeholders to reassess their approach to crypto volatility and compliance.

Conclusion:

As we reflect on the FTX scandal and its aftermath, it is a stark reminder of the cryptocurrency industry’s inherent risks and challenges. While it shook confidence, it’s also a chance for change. By learning from past mistakes and embracing responsible practices, we, aspiring accountants, can pave the way for a more resilient and trustworthy crypto ecosystem.

Stay tuned for more insights on my blog, where I’ll keep you updated with the latest developments in the world of finance and accounting.

Until next time,

Rachel.

The Role of Auditors in Corporate Governance for Investors

Posted on May 12, 2024September 29, 2024 by Rachel Lee

As a chartered accountancy student, I firmly believe corporate governance goes beyond financial matters. It encompasses social and environmental standards, reflecting a company’s commitment to the public interest.

From auditor analysis to providing accounting analysis and accounting knowledge, I want to reflect on the role of audits in corporate governance and shed light on the importance of upholding them by reflecting on the Hyflux case as an example.

Corporate governance is not only a set of rules, but insights for accountants that guide how businesses are run. It’s all about making sure decisions are fair and transparent and everyone involved, like shareholders, employees, and customers, is treated fairly. Good corporate governance helps companies stay strong and trustworthy in the long run.

We must work diligently to uphold investors’ trust in the companies we audit. This involves providing impartial evaluations of their financial records and operational procedures with our strong chartered accountant knowledge.

As a budding accountant, I approach this responsibility sincerely, understanding that our efforts directly influence stakeholders’ confidence in the business community.

In Singapore, company management and directors set up controls, manage risks, and share information openly. Our diligence and vigilance are not just professional duties; they are essential safeguards that underpin the integrity of the financial ecosystem.

Supporting their efforts, the Corporate Governance Advisory Committee (CGAC) plays an important role in promoting best practices, while the Monetary Authority of Singapore (MAS) and Singapore Exchange (SGX) enforce regulatory compliance.

It’s a team effort to keep things fair and transparent.

Role of Auditors in Corporate Governance

Auditors analyse a company’s financial records based on evidence to form an unbiased opinion on its credibility. We must provide insights and recommendations to enhance reporting and operational efficiency and offer reassurance on internal controls, risk management, and corporate governance.

Investors trust us due to their independence and expertise, guided by industry standards set by firms like KPMG.

I feel it’s an auditor’s responsibility to spot risks, advise without bias, and ensure the company’s compliance with regulatory guidelines.

An auditor’s responsibilities include:

Risk Identification:

Assessing internal controls and highlighting areas of vulnerability.

Objective Advice:

Share expertise to improve financial reporting and operational processes.

Reporting:

Reviewing financial information to ensure transparency and legal compliance.

Why is Corporate Governance Important?

Investors:

Imagine you’re deciding whether to invest in a company. Clear communication about how it’s run and its financial health is key, right? That’s where good governance comes in. As budding auditors, we must make sure the reports we see, like audit insights and financial statements, are reliable. When governance is strong, investors trust that the company is honest and responsible, which attracts more investments.

Regulatory Compliance:

Have you ever heard of playing by the rules? Good governance helps companies do just that. In Singapore, breaking the rules can land you in serious trouble, even with the law. I believe industry-specific laws ensure companies adhere to them. Whether it’s finance or manufacturing, following the rules keeps everyone out of trouble.

Community Relations:

Companies aren’t just about making money; they’re part of a bigger picture. It’s called good governance when they care about the environment and society. Companies build a connection with the public by supporting charities or using eco-friendly practices. Auditors check that they’re walking the talk, ensuring their actions match their words.

Risks of Weak Corporate Governance

In simple terms, weak corporate governance can lead to big problems, such as not managing risks properly, breaking the rules, and losing investors’ trust. Just look at what happened to Hyflux, a water company in Singapore. Hyflux shut down after going into liquidation in 2021, and the most important events leading up to that happened during 2016-2020.

In 2022, KPMG defended Hyflux audit partner allegations against KPMG by explaining that the plaintiffs’ management and board are obligated to prepare the financial statements in compliance with corporate regulatory and accounting standards. This led to Hyflux being charged with disclosure-related offences in 2022.

KPMG followed professional auditing standards while auditing Hyflux’s accounts.

Conclusion

In conclusion, insights from accountancy studies encourage companies to prioritise transparency and adhere to strict rules and practices. These practices instil confidence in investors and meet the increasing demand for honesty from all stakeholders, including investors and government regulators. Collaborating with auditors is akin to having a trusted companion verify your work, ensuring fairness for all parties involved.

I will share more insights into the dynamic world of accountancy on my blog and write about industry trends and best practices that shape the accounting and financial landscape in Singapore.