What is the Procedure for Appointment of Auditor in Singapore

What is the Procedure for Appointment of Auditor in Singapore | Bestar

What is the Procedure for Appointment of Auditor in Singapore

The procedure for appointing an auditor in Singapore involves finding a qualified candidate, obtaining board approval, and then shareholder endorsement, followed by official filing. Here's a breakdown:

Eligibility:

• Only public accountants or accounting firms approved by the Accounting and Corporate Regulatory Authority (ACRA) can be appointed as auditors ["requirements of appointing an auditor in Singapore"]

Timeline:

• You must appoint an auditor within 3 months of incorporation unless your company qualifies for an exemption (details on exemptions can be found on ACRA's website).

Process: / Steps:

1. Finding a Qualified Auditor: 

• Reach out to accounting firms or public accountants approved by ACRA.

• Ask for quotes and proposals to find one that fits your needs and budget.

2. Board Approval: 

• The company directors need to formally approve the appointment of the auditor.

3. Shareholder Approval (AGM):

• During the first AGM, the shareholders will vote to approve or reject the appointment of the initial auditor or reappoint them for another year.

• Subsequent AGMs will also include a vote on reappointing the current auditor or selecting a new one.

4. Filing with ACRA: 

After the appointment is approved at a board meeting or AGM, you'll need to file the change with ACRA via BizFile+ [ Appointing Directors, Company Secretary and Other Key Personnel]. There's a 14-day timeframe to do this after the effective change date.

Additional points:

• If the directors fail to appoint an auditor, a company member can apply to ACRA to have one appointed for them.

• Auditors can be removed by a resolution passed at a general meeting with special notice.

Who Appoints the First Auditor or Auditors

In Singapore, the directors of a company are responsible for appointing the first auditor or auditors within 3 months of incorporation, unless the company is exempt from an audit.

Here's a breakdown:

• Responsibility: The company's board of directors has the legal obligation to appoint the first auditor(s).

  
  

• Timeline: They must complete this appointment within the first 3 months after the company is officially incorporated.

It's important to note that the appointment requires approval from the shareholders. During the company's first Annual General Meeting (AGM), shareholders will have the opportunity to vote on whether to:

• Approve the initial auditor's appointment.

  
  

• Reject the appointment and potentially choose a different auditor.

  
  

• Reappoint the initial auditor for another year.

So, while the directors initiate the process and select a qualified candidate, the shareholders ultimately have the final say on who becomes the first official auditor.

Who approves Auditor Appointment

In Singapore, auditor appointment goes through a two-step approval process:

1. Board Approval: The company's directors hold the initial responsibility to choose and approve a qualified auditor.

2. Shareholder Approval (AGM): However, the final say on the appointment rests with the company's shareholders. During the first Annual General Meeting (AGM) held after incorporation, shareholders will have the opportunity to:

• Approve:  They can endorse the board's choice and officially appoint the selected auditor.

  
  

• Reject: Shareholders have the power to reject the board's selection and potentially choose a different auditor through a vote.

  
  

• Reappoint: If the initial appointment is for a year, shareholders can vote to reappoint the same auditor for another year during subsequent AGMs.

Therefore, while the directors initiate the process, the shareholders ultimately hold the power to approve the auditor's appointment in Singapore.

What are the Procedures Auditors need to Perform before Accepting a New Client

In Singapore, auditors follow these procedures before accepting a new client to ensure a smooth and independent audit engagement:

Client Due Diligence:

• Understanding the Client's Business: The auditor will want to gain a good understanding of the company's business, operations, and financial position. This involves reviewing the company's financial statements, business plans, industry specifics, and any relevant regulatory requirements. The auditor needs to grasp the client's operations and risk profile.

  
  

• Independence Assessment:  The auditor must assess potential conflicts of interest to maintain independence from the company to ensure an objective audit . This might involve reviewing existing relationships with the company, its directors, or any related entities.

  
  

• Risk Assessment: The auditor will want to identify potential areas of high risk for the company, such as internal control weaknesses, fraud risk, or complex accounting areas. This helps them plan the audit scope and procedures effectively.

Engagement Terms:

• Engagement Letter: The auditor will typically draft and negotiate an engagement letter with the company. This document clearly outlines the scope of the audit, fees, deadlines, communication protocols, and responsibilities of both the auditor and the company. It's negotiated and signed before the engagement begins.

  
  

• Acceptance of Audit Risk: The auditor will need to consider the inherent risk of the business and the risk of undetected material misstatements in the financial statements. They should be comfortable with this level of risk before accepting the appointment.

Communication and Agreement:

• Discussions with Management: The auditor may want to meet with company management to discuss the proposed audit approach, expectations, timeline, and access to necessary records and personnel.

  
  

• Understanding of Shareholders' Expectations (if applicable): In some cases, the auditor may want to understand the expectations of the company's shareholders, particularly if there are concerns about the audit process.

Additional Considerations:

• Predecessor Auditor Enquiry (if applicable): If the company has had a previous auditor, it's good practice to seek permission from the client to contact them for information on historical issues or reasons for resignation.

These procedures are not mandatory by law but are considered best practices for auditors to ensure they can conduct an independent and effective audit while mitigating risks.

Remember, these procedures can help ensure a successful and independent audit engagement for both the company and the auditor.

What is the Format of Consent Letter for Appointment of First Auditor

While there's no prescribed format for a consent letter for the first auditor appointment in Singapore, here's a general structure you can use:

Bestar Assurance PAC's Letterhead

Date

[Name of Company]

[Registered Address]

Dear Sirs/Madams,

Subject: Consent to Act as Auditor

This letter confirms our acceptance of your appointment as the first auditor of [Company Name] for the financial year ending [date].

We understand that this appointment is subject to the approval of the shareholders at the upcoming Annual General Meeting (AGM).

We hereby declare that:

• We are a [Public Accountant/Accounting Firm] approved by the Accounting and Corporate Regulatory Authority (ACRA) of Singapore.

• We satisfy the conditions for appointment as set out in Section 141 of the Companies Act (Chapter 50 of Singapore).

• We are not disqualified for appointment under the Companies Act or the Chartered Accountants Act (Chapter 33).

We look forward to a productive working relationship with [Company Name] and are committed to conducting the audit in accordance with International Standards on Auditing (ISAs) and relevant Singapore regulations.

Please find attached a copy of our engagement letter outlining the scope of the audit, fees, and other relevant terms.

Should you require any further information, please do not hesitate to contact us.

Sincerely,

[Your Name]

[Your Title]

[Your Firm's Contact Information]

Encl.: Engagement Letter

Here are some additional points to consider:

• You can modify the wording to better suit your specific situation.

• If there are any specific conditions related to the appointment, you can mention them in the letter.

• It's a good practice to keep a copy of the signed consent letter for your records.

What Preparation is Necessary by the Client Before Commencement of Audit

Here's a breakdown of the preparations a client in Singapore should undertake before the commencement of an audit:

Document Organization:

• Ensure all relevant financial records are organized and readily accessible for the auditor. This includes:

• Bank statements

• Cash receipts and disbursement records

• Sales and purchase invoices

• Payroll records

• General ledger

• Inventory records

• Fixed asset records

• Tax returns

• Contracts and agreements

• Prepare a trial balance summarizing all account balances as of the audit date.

Reconciliations:

• Complete key account reconciliations, such as bank reconciliations, accounts receivable reconciliations, and accounts payable reconciliations. This helps ensure the accuracy of financial records.

Inventory Count:

• If applicable, conduct a physical inventory count as close to the audit date as possible. This may involve collaborating with the auditor on the counting procedures.

Management Representation Letters:

• Prepare management representation letters to formally confirm certain matters to the auditor. These letters typically address areas like completeness and accuracy of financial records, absence of fraud, and compliance with regulations.

Internal Controls:

• If you have a formal internal control system, provide the auditor with relevant documentation and allow them to understand its effectiveness.

Previous Year's Audit Reports:

• Have the prior year's audit reports and management letters readily available for reference. This helps the auditor understand any recurring issues or adjustments.

Communication and Availability:

• Designate a point person within the company to be the primary contact for the auditor. This person should be knowledgeable about the company's finances and operations.

  
  

• Ensure key personnel are available for interviews with the auditor throughout the audit process.

Additional Tips:

• Discuss any anticipated accounting issues or complexities with the auditor beforehand.

  
  

• Address any outstanding accounting tasks or bookkeeping errors before the audit starts.

  
  

• Familiarize yourself with the scope of the audit and the audit approach planned by the auditor.

By completing these preparations, the client can ensure a smoother and more efficient audit process. Remember, good communication and collaboration between the client and the auditor are key to a successful audit engagement.

Additional Resources:

Here are some additional resources you might find helpful:

• ACRA Appointment of Auditors: https://www.acra.gov.sg/how-to-guides/setting-up-a-local-company/appointing-directors-company-secretary-and-other-key-personnel

  
  

• Company Audits in Singapore: [Company Audits in Singapore: Requirements and Exemptions Singapore]

  
  

• Practice Direction No. 4 of 2015 (Resignation of Auditors)

  
  

• APES 110: [LinkAPES 110] (Auditing Practice Statement 110 - Acceptance of Appointments and Ongoing Relationships) issued by the Accounting and Corporate Regulatory Authority (ACRA) of Singapore.

How Bestar can Help

What is the Procedure for Appointment of Auditor in Singapore

Here's how Bestar can help your business:

• Expertise in Singaporean Regulations:  Bestar understands local statutory requirements and has knowledge of industry best practices in Singapore. This can be beneficial if you're unsure about specific audit procedures or need guidance on complying with Singaporean accounting standards.

  
  

• Focus on Small and Medium Enterprises (SMEs): Bestar has experience working with SMEs. This familiarity can translate to a more efficient and cost-effective audit process tailored to your company's size and needs.

  
  

• Comprehensive Audit Services:  We offer a variety of audit and assurance services. This includes statutory audits, internal audits, and reviews of specific financial statements. Having a wider range of services under one roof can be convenient.

  
  

• Risk Management and Advisory Support: Bestar offers risk management and consulting services. This can be valuable if you're looking for an auditor who can go beyond just reviewing past financial statements and also help you identify and mitigate potential future risks.

  
  

• Global Mindset with Local Experience: We combine international best practices with an understanding of the Singaporean market. This blend might be useful if your company operates internationally or has aspirations to do so.

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