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.