The Singaporean regulator, Accounting and Corporate Regulatory Authority (ACRA), has released the findings of its inspection of audit firms in Singapore and called for small and medium firms to further improve quality of their audits.
ACRA found that larger audit firms had placed a greater emphasis on audit quality and that there was a greater involvement of audit partners in the audit process. However the regulator found recurring audit deficiencies at small firms auditing non-listed companies in particular in the areas of revenue recognition, fair value measurements and construction contracts.
ACRA identified the low involvement of the audit partners in the audit process and the insufficient technical knowledge as the main causes for these recurring deficiencies.
ACRA chief executive Kenneth Yap said smaller firms are overstretching themselves by taking on too many clients, thereby spending less time and effort on the audit process. "They should set realistiv workload benchmarks and ensure that they have sufficient staff-to-client ratios to maintain the quality of their audits."
Singapore Public Accountants Oversight Committee chairman Tan Cheng Han said: ""It is untenable that the same audit deficiencies are recurring in the same segment of the industry time and again. It is apparent that some public accountants do not take audit quality sufficiently seriously."
The PAOC will be paying particular attention to such deficiencies during its practice review outcomes with public accountants, he continued, while ACRA will also step up its enforcement actions.
ACRA inspected the audit papers of nine of the 17 firms which audit companies listed on the Singapore Exchange, including the Big Four. The Big Four audit 60% of the 774 companies listed in Singapore, representing 64% of the total market capitalisation of $997bn.
The inspections of firms auditing non-listed companies was outsource to the Institute of Singapore Chartered Accountants, with oversight by ACRA.