INITIATIVES TO UPHOLD TECHNICAL EXCELLENCE AND AUDIT QUALITY
In January 2021, Singapore Exchange Regulation (SGX RegCo) added Listing Rule 705(3A), which requires issuers reporting under the Singapore Financial Reporting Standards (International) [SFRS(I)] to apply SFRS(I) 1-34 Interim Financial Reporting in their interim financial statements.
ISCA issued technical guidance on 3 May 2021 to aid issuers regarding compliance for the new Listing Rule 705(3A), which comprised Financial Reporting Guidance 3 (FRG 3) Preparation of Interim Financial Statements under SFRS(I) 1-34 Interim Financial Reporting (in compliance with the SGX Listing Rule 705(3A) and two sets of accompanying illustrative condensed interim financial statements.
FRG 3 aims to help issuers understand the implications of the Listing Rule 705(3A) for their interim financial statements and highlights key areas to note when preparing a set of interim financial statements under SFRS(I) 1-34. The accompanying illustrative condensed interim financial statements show how certain key requirements pertaining to SFRS(I) 1-34 and SGX Listing Rule Appendix 7.2 can be met concurrently in the interim financial statements.
ISCA’s FSRC continued its collaboration with ACRA for its Financial Reporting Surveillance Programme (FRSP) for the seventh year. The FRSP guides companies to meet the accounting standards’ requirements, and this enables investors to have reliable and meaningful financial statements for decision-making.
ISCA issued EP 100 Implementation Guidance (IG) 4 Clarification on Financial Institutions Considered as Public Interest Entities in October 2020 to clarify the scope of entities that falls within the definition of financial institutions in EP 100 (Revised on 14 August 2020). In July 2021, ISCA issued EP 100 IG 4 (Revised) to reflect the changes to the definition of a financial institution in EP 100 (Revised on 7 July 2021).
As part of the Interbank Offered Rate (IBOR) reform, the use of the Singapore Swap Offer Rate (SOR) and the Singapore Interbank Offered Rate (SIBOR) will be replaced by the Singapore Overnight Rate Average (SORA) progressively over the next few years.
Because the change to SORA can cause transitional issues and challenges for financial institutions and corporates, the Monetary Authority of Singapore (MAS) established the Steering Committee for SOR & SIBOR Transition to SORA (SC-STS) in August 2019. Subgroup 7 (SG7) – one of the subgroups under SC-STS – reached out to ISCA to share potential accounting issues arising from the transition in Singapore.
To support the accountancy profession and uphold Singapore’s reputation as a global financial hub, ISCA’s Financial Reporting Committee (FRC) set up the IBOR Working Group – comprising stakeholders from banks and the accountancy profession as well as representatives from ISCA’s Banking and Finance Committee – to provide guidance on the accounting issues. Robust and rigorous deliberations have been held by the IBOR Working Group since June 2021.
In October 2021, ISCA issued Financial Reporting Bulletin 9 (FRB 9) Accounting Implications of the Interest Rate Benchmark Reform in Singapore. FRB 9 shares accounting considerations on specific matters to assist entities in their understanding of the accounting for financial instruments and hedge accounting affected by the replacement of interest rate benchmarks within these contracts. This FRB will be revised as and when necessary.
ISCA revised its Ethics Pronouncement (EP) 100 Code of Professional Conduct and Ethics on 7 July 2021 to adopt two Final Pronouncements from the IESBA:
- Revisions to Part 4B of the Code to Reflect Terms and Concepts Used in International Standard on Assurance Engagements 3000 (Revised) (Revisions to Part 4B)
- Revisions to the Code to Promote the Role and Mindset Expected of Professional Accountants (Role and Mindset)
Revisions to Part 4B of EP 100 (Revised on 7 July 2021) seek to align Part 4B with the assurance terms and concepts used in International Standard on Assurance Engagements (ISAE) 3000 (Revised). Role and Mindset provisions reaffirm the profession’s responsibility to act in the public interest and the fundamental role of the Ethics Code in meeting that responsibility.
EP 100 (Revised on 7 July 2021) became effective from 31 December 2021.
In connection with the issuance of a prospectus by an issuer, SGX Listing Rule 246(9) states that the application must include the auditors’ report to management on the internal control and accounting systems of the issuer and its principal subsidiaries. Where there are weaknesses in an issuer’s internal control and accounting systems, SGX may require a confirmation from the auditors that the weaknesses are not material.
ISCA’s Corporate Finance Committee noted a divergence in practice with the issuance of auditors’ reports on the issuer’s internal control and accounting systems. ISCA responded accordingly, issuing SAP 2 (Revised 2021) Auditors and Public Offering Documents to include a new section on “Confirmation on Internal Controls Required by SGX” and a new illustrative auditors’ report on internal controls under Example 7 of Appendix 1.
The enhancements to SAP 2 (Revised 2021) provide the required guidance on what reporting auditors should comment on in their report on internal controls, facilitating consistency in practice across the accountancy profession.
ISCA, with the support of the ISCA AASC (Auditing and Assurance Standards Committee) Data Analytics Sub-Committee, collaborated with ACRA to issue Audit Guidance Statement (AGS) 13 Data Analytics in a Financial Statements Audit, which provides guidance for auditors regarding the application of data analytics in the audit of financial statements.
At ISCA’s Practitioners Conference 2021, AASC Data Analytics Sub-Committee Chairman Mr Sanjay Panjabi Gordhan encouraged auditors to use data analytics when auditing financial statements. He shared how data analytics could manage large volumes of data more effectively and provided an overview of how auditors could kick-start their data analytics journey using AGS 13.
To support the profession in the adoption of data analytics and AGS 13, a complimentary webinar on the key principles of AGS 13 was conducted for ISCA members by Mr Panjabi, Deloitte Singapore Director Mr Tee Chong Yu and Deloitte Singapore Manager Mr Gino Lee in November 2021.
ISCA, with the support of the AASC AGS 1 Sub-Committee, engaged MAS to finalise the illustrative report and auditor reporting arrangements in relation to the Payment Services Act – reflecting the revisions to AGS 1 Sample Independent Auditor’s Report. The Urban Redevelopment Authority (URA) has also been engaged in updating the illustrative report regarding the additional licence condition it introduced for housing developers pertaining to mortgages, charges or encumbrances in relation to land and/or building projects. Both the illustrative reports were updated for AGS 1 in June 2021.
ISCA’s Auditing and Assurance Standards Committee (AASC) has formed the AASC Core Sub-Committee to enhance the standard-setting process and more effectively deal with topical auditing and assurance issues.
Chaired by AASC Chairman Mr Hans Koopmans, the AASC Core Sub-Committee serves as the technical arm of AASC and comprises subject matter experts from accounting firms with extensive experience in auditing and assurance. Apart from providing technical input, the AASC Core Sub-Committee supports AASC by spearheading the timely development of guidance or locally developed standards to support the profession.
During the year, ISCA issued several new and revised auditing and assurance standards, including:
• New and revised quality management standards:
- Singapore Standard on Quality Management (SSQM) 1 Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements
- SSQM 2 Engagement Quality Reviews
- SSA 220 (Revised) Quality Management for an Audit of Financial Statements
• SSA 315 (Revised 2021) Identifying and Assessing the Risks of Material Misstatement
• SSRS 4400 Agreed-Upon Procedures Engagements