Auditing in Singapore
Agreeing the Terms of Audit Engagements
Agreeing the Terms of Audit Engagements in Singapore is governed by Singapore Standard on Auditing (SSA) 210. This standard outlines the auditor's responsibilities in agreeing the terms of the audit engagement with management and those charged with governance.
Key aspects of agreeing the terms of an audit engagement in Singapore include:
Establishing Preconditions for an Audit: Before accepting an audit engagement, the auditor must establish that certain preconditions are present. These include:
Management's acceptance of its responsibility for the preparation of financial statements in accordance with the applicable financial reporting framework.
Management's acceptance of its responsibility for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
The auditor's access to all information and explanations that the auditor considers necessary to perform the audit.
Obtaining the Audit Engagement Letter: The auditor and the client should agree on the terms of the audit engagement in writing through an audit engagement letter. This letter should include:
The objective and scope of the audit.
The auditor's responsibilities and limitations.
Management's responsibilities.
The expected form and content of any reports to be issued by the auditor.
The fees for the audit services.
Understanding the Entity and Its Environment: To effectively plan and perform the audit, the auditor must obtain an understanding of the entity and its environment, including its internal control. This understanding is ongoing throughout the audit engagement.
Identifying and Assessing Risks of Material Misstatement: Based on the understanding of the entity and its environment, the auditor identifies and assesses the risks of material misstatement at the financial statement and assertion levels. This risk assessment helps the auditor determine the nature, timing, and extent of audit procedures.
Performing Audit Procedures: The auditor performs audit procedures to obtain sufficient appropriate audit evidence to reduce audit risk to an acceptably low level. These procedures include:
Risk assessment procedures.
Tests of controls.
Substantive procedures.
Evaluating Audit Evidence: The auditor evaluates the audit evidence obtained to form an opinion on whether the financial statements are fairly presented in all material respects in accordance with the applicable financial reporting framework.
Issuing the Audit Report: Based on the evaluation of audit evidence, the auditor issues an audit report that expresses an opinion on the financial statements. The audit report may also include other matters that the auditor considers necessary to communicate to users of the financial statements.
By following SSA 210, auditors in Singapore can ensure that the terms of audit engagements are clearly agreed upon and that the audit is conducted in accordance with professional standards.
Key Considerations for Agreeing the Terms of Audit Engagements in Singapore (SSA 210)
1. Preconditions for an Audit:
Management's Responsibilities:
Preparation of financial statements in accordance with the applicable financial reporting framework.
Design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of financial statements free from material misstatement.
Providing the auditor with all necessary information and explanations.
Auditor's Responsibilities:
Obtaining sufficient appropriate audit evidence to reduce audit risk to an acceptably low level.
Expressing an opinion on whether the financial statements are fairly presented in all material respects.
2. Audit Engagement Letter:
Objective and Scope of the Audit: Clearly define the audit's purpose and the financial statements to be audited.
Auditor's Responsibilities and Limitations: Outline the auditor's role and any limitations, such as the inherent limitations of an audit.
Management's Responsibilities: Emphasize management's accountability for the financial statements and internal controls.
Expected Reports: Specify the type and content of reports the auditor will issue, including the audit opinion and any other required communications.
Fees for Audit Services: Clearly state the fees for the audit services.
3. Understanding the Entity and Its Environment:
Industry, Regulatory, and Other External Factors: Analyze the entity's operating environment, including industry-specific risks and regulatory requirements.
Nature of the Entity: Understand the entity's business model, operations, and ownership structure.
Accounting Policies and Estimates: Evaluate the entity's accounting policies and significant judgments.
Internal Control: Assess the entity's internal control system to identify and assess risks of material misstatement.
4. Identifying and Assessing Risks of Material Misstatement:
Risk Assessment Procedures: Perform procedures to obtain an understanding of the entity and its environment.
Risk Factors: Consider inherent and control risks that could lead to material misstatements.
Materiality: Determine the appropriate level of materiality for the audit.
5. Performing Audit Procedures:
Risk Response: Design and perform audit procedures to address assessed risks.
Audit Evidence: Obtain sufficient appropriate audit evidence through various procedures, including:
Risk assessment procedures
Tests of controls
Substantive procedures
6. Evaluating Audit Evidence:
Conclusion: Form an opinion on whether the financial statements are fairly presented in all material respects.
Consideration of Going Concern: Assess the entity's ability to continue as a going concern.
7. Issuing the Audit Report:
Audit Opinion: Express an opinion on the fairness of the financial statements.
Other Matters: Communicate other matters that the auditor considers necessary, such as key audit matters.
By adhering to SSA 210, auditors in Singapore can ensure that audit engagements are conducted with a clear understanding of the terms and objectives, thereby enhancing the quality and reliability of audit opinions.
How Bestar can Help
Bestar, as a reputable audit and assurance firm, can significantly assist in agreeing the terms of audit engagements in Singapore. Here's how:
Drafting the Audit Engagement Letter: Bestar's experienced auditors can draft a comprehensive audit engagement letter that clearly outlines:
The objectives and scope of the audit.
The auditor's responsibilities and limitations.
Management's responsibilities.
The expected form and content of audit reports.
The agreed-upon fees for audit services.
Understanding the Entity and Its Environment: Bestar's team can conduct thorough research and analysis to understand the entity's industry, operations, and financial reporting framework. This understanding helps identify potential risks and tailor the audit approach accordingly.
Identifying and Assessing Risks of Material Misstatement: Bestar's auditors can use their expertise to identify and assess the risks of material misstatement, considering factors like:
Inherent risks arising from the entity's nature of business and industry.
Control risks related to the entity's internal control systems.
Significant judgments and accounting estimates made by management.
Developing an Audit Strategy: Based on the risk assessment, Bestar can develop an effective audit strategy, determining the nature, timing, and extent of audit procedures. This ensures that the audit is focused on the areas of highest risk.
Communicating with Management and Those Charged with Governance: Bestar's auditors can effectively communicate with management and those charged with governance throughout the audit process, addressing any concerns or questions that may arise.
Ensuring Compliance with SSA 210: Bestar's team is well-versed in Singapore Standards on Auditing (SSAs), including SSA 210, ensuring that all aspects of the audit engagement comply with the relevant professional standards.
By utilizing Bestar's expertise, businesses can ensure that the terms of their audit engagements are clearly defined, the audit process is efficient and effective, and the final audit report provides valuable insights into their financial health.
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