Trade Union Audit
- Roger Pay
- Jan 3
- 8 min read
Updated: Jan 3
In the regulatory landscape of Singapore, Audit Guidance Statement (AGS) 5 (Revised) serves as a critical framework for practitioners auditing entities in specific industries, including Trade Unions.
The revised statement, updated to align with the Singapore Standards on Auditing (SSAs) and the Trade Unions Act, ensures that auditors provide a high level of transparency and accountability regarding the funds contributed by workers.
1. Scope and Objective of AGS 5
AGS 5 is not a standalone standard but a guide that provides practical assistance to auditors. For trade unions, the primary objective is to ensure that the financial statements are prepared in accordance with the Trade Unions Act and that the union's funds have been used for authorized purposes.
Applicability: Effective for audits of financial statements for periods beginning on or after 15 December 2023 (following conforming amendments from SSA 600 Revised).
Regulatory Compliance: It bridges the gap between general auditing standards (SSAs) and the specific statutory requirements of the Trade Unions Regulations.
2. Key Audit Requirements for Trade Unions
Under AGS 5 and the Trade Unions Act, auditors must focus on several high-risk areas unique to the labor movement:
A. Verification of the "Annual Return"
Auditors are required to verify the Annual Return (Form M) against the accounts and vouchers. This is a statutory obligation where the auditor must declare that the return is in agreement with the records.
B. Unauthorized Payments
The auditor must specifically flag:
Any payment that appears to be unauthorized by the trade union's own rules.
Expenditures that contravene the provisions of the Trade Unions Act (e.g., using funds for political purposes without following strict legal protocols).
C. Deficiency or Loss
The audit must report the amount of any deficiency or loss incurred due to the negligence or misconduct of any person. This puts a heavy emphasis on internal controls over cash management and procurement.
3. The Audit Process: Critical Steps
Risk Assessment: Understanding the union’s rules (Constitution) and how membership dues are collected.
Internal Control Evaluation: Assessing the "Safe Custody of Funds." Since trade unions handle significant volumes of subscription fees, the risk of misappropriation is a key focus.
Substantive Testing: * Testing the accuracy of membership records (the primary source of income).
Vouching expenditures to ensure they align with the "objects" of the union (e.g., welfare benefits, industrial relations expenses).
Reporting: Issuing an opinion that covers both the financial fairness (True and Fair View) and compliance with the Act.
4. Key Changes in the "Revised" Statement
The "Revised" status of AGS 5 primarily incorporates:
SSA 600 (Revised) Alignment: Enhanced focus on group audits, which is relevant for trade unions with multiple branches or affiliated associations.
Auditor Reporting Standards: Modernized reporting formats, including the communication of Key Audit Matters (KAMs) if the union is of significant public interest.
Quality Management: Aligning with SSQM 1 and 2, ensuring the audit firm has robust systems to manage audit quality specifically for specialized vocations.
5. Summary Table: Auditor Responsibilities
Feature | Requirement under AGS 5 |
Primary Legislation | Trade Unions Act (Chapter 333) |
Financial Framework | Financial Reporting Standards in Singapore (FRSs) |
Audit Focus | Safe custody of funds, authorized expenditures, membership dues |
Statutory Form | Verification of Form M (Annual Return) |
Reporting Duty | Must report negligence, misconduct, or unauthorized payments |
Conclusion
Auditing a trade union under AGS 5 (Revised) requires a blend of traditional financial auditing and rigorous compliance checking. For auditors, the stakes are high: they act as the gatekeepers for the financial interests of thousands of union members.
Sample Report on Other Legal and Regulatory Requirements
Based on the requirements of the Trade Unions Act (Chapter 333) and the guidelines provided in AGS 5 (Revised), the auditor's report for a trade union must include a specific section addressing statutory compliance.
Unlike a standard corporate audit, the auditor of a trade union has a legal duty to report on the use of funds, the accuracy of the "Annual Return" (Form M), and any instances of negligence or unauthorized expenditure.
_________
Sample Report on Other Legal and Regulatory Requirements
Report on Other Legal and Regulatory Requirements
In our opinion:
(a) Proper Accounting Records The accounting and other records required by the Trade Unions Act to be kept by the Union have been properly kept in accordance with the provisions of the Act.
(b) Verification of Annual Return (Form M) We have verified the Annual Return of the Union for the financial year ended [Date], which is to be submitted to the Registrar of Trade Unions in the prescribed Form M, with the accounts and vouchers relating thereto. We found the Annual Return to be in agreement with the said accounts and vouchers.
(c) Authorized Use of Funds During the course of our audit, nothing has come to our attention that causes us to believe that:
Any payment made by the Union appeared to be unauthorized by the rules of the Union or contrary to the provisions of the Trade Unions Act; or
There was any amount of deficiency or loss incurred by the negligence or misconduct of any person.
(d) Safe Custody of Funds The Union has maintained an adequate system of internal accounting controls to ensure the safe custody of funds and that all transactions are properly authorized and recorded.
_________
3 Critical Clauses Explained
Under Regulation 19 of the Trade Unions Regulations, your report must specifically address these "red flag" areas. If any of the following occur, the auditor must modify the sample text above:
Clause | What the Auditor is Checking |
Unauthorized Payments | Did the union spend money on activities not listed in its Constitution/Rules? (e.g., prohibited political donations). |
Deficiency or Loss | Is there a "hole" in the accounts caused by a specific officer's negligence? (e.g., lost investment or missing cash). |
Form M Reconciliation | Does the summary submitted to the Ministry of Manpower (MOM) match the audited ledger exactly? |
Next Steps for Implementation
To finalize this draft, you should cross-reference the "Objects of the Union" found in the Union’s Rulebook (Constitution). Any expenditure that does not serve these objects must be disclosed in this section of your report.
How Bestar Singapore can Help
In Singapore’s rigorous labor-regulatory environment, trade unions are held to high standards of financial stewardship. Bestar Singapore, a leading mid-tier accounting and audit firm, specializes in navigating the complexities of Audit Guidance Statement (AGS) 5 (Revised) and the Trade Unions Act.
Here is how Bestar Singapore provides strategic value to trade unions during the audit process:
1. Statutory Compliance Expertise (Trade Unions Act)
The Trade Unions Act requires more than just a "true and fair" view of financial statements; it demands a specific audit of fund usage. Bestar helps unions meet these stringent requirements by:
Form M Verification: Ensuring that the Annual Return (Form M) submitted to the Registrar of Trade Unions is perfectly reconciled with audited vouchers.
Authorized Expenditure Review: Vouching transactions against the Union’s Constitution to ensure no funds were used for prohibited purposes (e.g., unauthorized political contributions).
Negligence Detection: Implementing rigorous testing to identify any "deficiency or loss" caused by misconduct, protecting the union’s leadership from liability.
2. Risk-Based Internal Control Assessment
Trade unions often handle high volumes of cash and membership subscriptions. Bestar’s audit team focuses on the "Safe Custody of Funds" by:
Subscription Audits: Verifying the completeness of membership dues through data-driven testing.
Payment Controls: Evaluating the authorization levels for welfare benefits and strike funds to prevent internal fraud.
Branch Audits: For larger unions, Bestar applies SSA 600 (Revised) protocols to ensure that branch-level finances are consolidated accurately at the headquarters level.
3. Tech-Driven Audit Accuracy
Bestar utilizes advanced digital tools to move beyond traditional manual sampling. This is particularly beneficial for unions with thousands of members:
100% Transaction Testing: Using AI-driven software to scan entire ledgers for anomalies or duplicate payments.
Digital Audit Trails: Helping unions transition from paper-heavy records to digital systems that satisfy ACRA’s Financial Reporting Surveillance Programme requirements for 2026.
4. One-Stop Corporate Support
Beyond the audit, Bestar acts as a "Strategic Partner" by offering integrated services:
Tax Advisory: Ensuring the union utilizes relevant tax exemptions available to non-profit organizations and registered trade unions.
Governance Consulting: Providing actionable insights to the Executive Council on how to improve financial transparency and member trust.
XBRL Conversion: Expertly handling mandatory electronic filings to ensure the union remains in good standing with the Ministry of Manpower (MOM) and other authorities.
Why Choose Bestar for Your Trade Union Audit?
Feature | The Bestar Advantage |
Experience | Proven track record with 600+ clients across specialized sectors like MCSTs, Charities, and Unions. |
Professionalism | ISCA-registered auditors with deep knowledge of AGS 5 (Revised). |
Efficiency | Clear audit timelines and streamlined communication with a dedicated Relationship Manager. |
Value | Competitive pricing starting from $1,000, ensuring high-quality compliance for unions of all sizes. |
Secure Your Union’s Financial Integrity
Don't treat your annual audit as just a legal hurdle. With Bestar Singapore, it becomes an opportunity to strengthen your union’s governance and protect your members' contributions.
Trade Union Audit Readiness Checklist
To ensure your trade union is fully compliant with the Trade Unions Act and AGS 5 (Revised), preparation must begin well before the auditors arrive. This checklist is designed to help your treasury and administrative teams organize the necessary documentation and tighten internal controls for the 2026 financial year.
1. Statutory & Governance Documents
These are the foundational documents that define the legal boundaries of your union’s spending.
[ ] Updated Constitution/Rulebook: Ensure you have the latest version registered with the Registry of Trade Unions (RTU).
[ ] Certificate of Registration: A copy of Form C.
[ ] List of Officers: An updated list of Executive Council members and their titles (Form K).
[ ] Minutes of Meetings: Signed minutes of the Annual Delegates Conference (ADC) and Executive Council meetings, especially those approving major expenditures or investments.
2. Financial Records & Reporting
Under Regulation 16A, proper accounts must be kept to show a "true and fair view."
[ ] General Ledger & Journals: Up-to-date records of all transactions, including cash books.
[ ] Form M (Annual Return): A draft of the Annual Return. The auditor must verify this specific form against your vouchers.
[ ] Trial Balance & Financial Statements: Draft Profit & Loss and Balance Sheet.
[ ] Fixed Asset Register: Listing all union property, equipment, and any disposals made during the year.
3. Membership & Revenue Verification
Since membership dues are the lifeblood of a union, auditors will perform deep testing here.
[ ] Membership Register: A complete list of all members, categorized by "Ordinary," "Associate," or "Life" members.
[ ] Check-off Reports: Monthly reports from employers showing union dues deducted from members' salaries.
[ ] Arrears List: A report showing any outstanding membership fees and the union’s plan for recovery.
4. Expenditure & Internal Controls
AGS 5 requires auditors to report any unauthorized payments or negligence.
[ ] Payment Vouchers: Organized chronologically with original invoices and proof of payment attached.
[ ] Welfare & Benefit Claims: Documentation for payouts made to members (e.g., death benefits, bursaries) ensuring they match the Union's rules.
[ ] Authorized Signatory List: Updated bank mandates and a record of who is authorized to sign cheques/approve digital transfers.
[ ] Bank Reconciliations: Monthly statements for all union accounts, including "Benevolent Funds" or "Special Funds."
5. Specialized Compliance Areas
[ ] Investment Records: If the union has invested funds, provide authorization from the RTU (if required) and latest valuation statements.
[ ] Political Fund Records: If a political fund exists, ensure it is kept strictly separate and follows the specific balloting rules of the Act.
[ ] Staff Payroll & CPF: Records of salary payments for union employees and proof of timely CPF contributions.
Pro-Tip: The "Authorized Purpose" Test
Before the audit starts, perform a self-check: Pick 10 random large expenses from the past year and ask: "Which specific Rule in our Constitution allows this expenditure?" If you can't find it, you may need to prepare a management explanation or seek retrospective approval from the Executive Council.
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