Why is Proper Audit Preparation Important?
Ensures Accuracy and Transparency
Preparing for an audit helps verify the accuracy of financial records, ensuring that assets, liabilities, income, and expenses are recorded correctly. This transparency is important for stakeholders and enhances trust in the company’s financial health.
Improves Compliance
Audits often involve reviewing compliance with tax laws, financial regulations, and industry standards. Preparing thoroughly ensures that all required documentation is in order, helping the business avoid regulatory issues, penalties, or legal consequences.
Boosts Internal Controls
The audit process highlights areas where internal controls could be improved, such as authorisation processes, expense tracking, or inventory management. Preparation helps identify and address these gaps before the audit, strengthening business operations.
Reduces Business Disruptions
Being organised and prepared helps streamline the audit process, reducing the time and effort needed from the team and minimising disruptions to regular business operations.
What Are the Steps in Preparing for an Audit?
Step 1: Organise Financial Documents
Gather and review key financial records, such as bank statements, invoices, receipts, payroll records, and tax filings. Ensure these documents are accurately recorded and filed systematically for easy access.
Step 2. Reconcile Accounts
Reconcile bank accounts, accounts payable, accounts receivable, and other ledgers to ensure the accuracy of financial records. This step helps prevent discrepancies and minimises errors in the audit.
Step 3. Review Internal Controls
Evaluate internal controls for compliance and effectiveness. This may involve reviewing authorisation processes, inventory management, cash handling, and expense controls to ensure they align with regulatory requirements and company policies.
Step 4. Update Financial Statements
Ensure that financial statements, including the balance sheet, income statement, and cash flow statement, are up to date and prepared according to the Singapore Financial Reporting Standards (SFRS). Cross-check these statements for accuracy and completeness.
Step 5. Prepare Compliance Documentation
Compile documents required for regulatory compliance, such as tax returns, Goods and Services Tax (GST) filings, and CPF contributions. This includes ensuring compliance with the Accounting and Corporate Regulatory Authority (ACRA) and Inland Revenue Authority of Singapore (IRAS) requirements.
Step 6. Organise Supporting Schedules and Notes
Prepare schedules that support financial entries, such as depreciation schedules, fixed asset registers, and inventory valuations. Ensure these schedules align with financial statements and include any necessary notes for clarity.
Step 7. Conduct a Preliminary Review
Perform an internal review or pre-audit to identify issues before the official audit begins. This may involve checking entries, investigating inconsistencies, and making necessary adjustments.
Step 8. Communicate With the Audit Team
Coordinate with the external audit team to understand the audit scope and requirements. Clarify timelines, provide access to requested records, and designate a contact person for any questions or additional information.
Step 9. Prepare for Walkthroughs and Interviews
Be prepared for the auditor to interview key personnel and perform walkthroughs of processes. Train relevant staff on audit expectations and procedures, ensuring they are ready to answer questions accurately.
Step 10. Implement Changes and Document Findings
Address any weaknesses or gaps identified during preparation and document changes made. This step can demonstrate proactive management and improve internal processes.
What Are Some Audit Preparation and Planning Tips?
Notify Key Company Personnel About the Audit Dates and Important Items
Communicate the audit dates to relevant staff and ensure they are aware of key items that may be reviewed. This will allow them to prepare and gather necessary documents or information beforehand.
Review Previous Audit Findings
Take note of any previous audit findings and address them before the upcoming audit. This shows a commitment to addressing weaknesses and improving processes and will help to contribute to a smoother process.
Arrange and Collect Documents Required
One of the most commonly faced issues during audits in Singapore is the disorganised and incorrect collating of necessary supporting documents. Auditors often encounter problems such as missing documents or documents that are not compiled.
If the documents required are collected and assembled well in advance, it can save the time and effort needed otherwise to locate them. Having soft copies of these documents can be one good way to organise and arrange them.
Reconcile Account Balances
Some of the most common reasons for incorrect financial statements are missing entries and account balances that do not match. To rectify this, businesses should reconcile details to general ledger account totals and detailed listings. For example, it should reconcile all bank accounts, account receivables, account payables, and equipment lists.
You can also request the auditor to provide templates and copies of documents previously provided so that information can be prepared in a way that the auditor can accept.
The Importance of Audit Preparation and Planning in Singapore
During audit planning, remember that it is an intricate process that needs precise planning, attention to detail, and proactive measures. Businesses in Singapore can streamline the audit process, comply with regulatory requirements, and maintain high standards of financial integrity and transparency with proper preparation.
Engaging a corporate services provider such as InCorp who understands the complexities of the audit process can also leverage professional guidance and support to ensure accuracy in their financial reporting. Navigate the various aspects of audit in Singapore with ease and confidence when you choose us!
FAQs about Audit Preparation and Planning in Singapore
- The price of an audit in Singapore varies. Contact our knowledgeable team to find out more about the process!
- All Singapore-registered companies must appoint an auditor within 3 months of incorporation except for companies that fall under the scope for audit exemption, such as small companies.
- They include mandatory annual audits and compliance with prevailing auditing standards in Singapore.
About the Author
InCorp Content Team
InCorp’s content team includes talented copywriters from our regional group and globally. We contribute informative, thought leadership, and market-trending articles to guide aspiring business entrepreneurs to a higher level across the Asia-Pacific region.
