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Audit confidence increases in Singapore thanks to enhanced auditor’s report

Investor confidence has increased in Singapore since the adoption last year of the enhanced auditor report offering more insightful and details disclosures, according to a joint study by the local regulator and local and international professional bodies.

The study was produced by the Accounting and Corporate Regulatory Authority (ACRA), the Association of Chartered Certified Accountants (ACCA), the Institute of Singapore Chartered Accountants (ISCA) and Nanyang Technological University (NTU). It analysed enhanced auditor’s reports and annual reports of 180 entities listed on the Singapore Exchange as well as the views of 270 audit committees and investors.

The study highlighted that 40% of auditor’s reports contained more key audit matters (KAMs) than in the previous year financial statements. Eighty nine percent of surveyed investors said that they were more likely to read the auditor’s report before reading the financial statements as the KAMs identified significant issues.

Over half of the surveyed audit committees (56%) and investors (57%) indicated that they had developed moderately to significantly more confidence in audit quality.

Nearly three quarter (74%) of the 109 audit committees surveyed reported more robust discussions with management and auditors over KAMs. Also 52% of the surveyed audit committees said the process of considering KAMs and reviewing enhanced audit reports had resulted in their companies making moderate to significant improvements. Fifty seven percent felt they had gained deeper insights into the financial reporting risks of entities.

ISCA CEO Lee Fook Chiew said: “For a first-year of implementation, the results are indeed encouraging. At the same time, we see room for the enhanced auditor’s report to improve further to contribute to higher financial reporting quality and more meaningful engagement among the stakeholders.”

ACCA chief executive Helen Brand said: “Key Audit Matters were introduced to give better information on the audit process to investors. In addition to achieving that, our work also identified improvements all the way through the financial reporting chain: better conversations between management, audit committees and auditors, and higher quality financial reporting. This is encouraging and we hope will in time lead to greater realisation of the value of audit.”

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