Based on ACRA’s study, Listed Companies in Singapore recorded over 22,000 audit adjustments worth more than $78 Billion at just 412 listed company. For the full article see the link at
Factual and Misclassification errors make up the bulk of adjustments (>80%) with Judgmental estimates and projections as the third largest component. While classification adjustments are less of a concern, factual errors certainly raises some red flags.
Financial Statement Standards do change frequently and it is challenging for many accountants in industry to keep up with training, attend courses and with self study. At audit firms, there are technical accounting and training managers who ensure staff are properly trained in the application of the standards and thus are better able to identify these errors. With auditors facing increased risks to their practice if material errors are not picked up, the onus has shifted to the companies to ensure financial statement accuracy.
Recent trends have to move towards more disclosure, present more forward looking information which involves the use of estimates and projections and assess situations with low, medium or high probability of occurrence. Other standards require complex computations with large data sets and specialized implementation knowledge to determine the correct answer. It is no surprise then that companies rely on the auditors to come up with the adjustments as the investment and effort into keeping up with the standards, ensuring accurate interpretation and reporting may be unrealistic for many companies to perform in-house.
Finance is always under pressure to reduce costs and improve efficiency. Being a cost center, obtaining budget approvals for compliance related activity may be the lowest company priority and seldom gets funded unless there is serious reputational risk. Outsourcing has become an established trend and more changes are on the way with Robotic Process Automation (RPA) and Artificial Intelligence or Optical Character Recognition (OCR) tools. The challenge for companies that use any of the above is to be able to introduce the requirements of new standards into existing processes to drive compliance. This requires some human thought, intervention and thinking to ensure the appropriate changes are introduced into current processes to meet the compliance expectations.
For listed companies and even unlisted companies and SME’s that eventually would like to follow a route to listing, getting your internal accounting processes, people, policies, procedures and knowledge base in alignment with the reporting requirements, there is help available. Of course auditors will help to point out the areas of improvement but resources will be required to implement those changes and fix the processes. Ezee Pte. Ltd. [CFO on Demand | Finance Advisory | Accounting | Tax | Corporate Secretarial | Compliance | Automation | Project Management ] can help with any resource needs you may have. Our consultants have prior audit experience, and have worked with large Listed Multi National Corporations to help you with your requirements. You can reach us at www.ezeesg.com, email@example.com, or call us at +65 97637904.