What Is the Difference Between Accounting and Auditing?
Accounting involves tracking, recording, and summarizing a company’s financial transactions. It ensures that financial statements are accurate and up to date, helping businesses manage cash flow, budgeting, and tax obligations. Many companies in Singapore outsource their bookkeeping to professional accounting firms for efficiency.
Auditing, on the other hand, is the process of reviewing financial statements prepared by accountants. Auditors verify whether these records comply with standards and are free from errors or fraud. In short, accounting builds the records, and auditing ensures they are trustworthy.
Types of Audits: Internal vs External
Audits can be internal or external, depending on the purpose and reporting structure.
Internal Audit
Internal audits focus on improving a company’s internal processes. These are conducted by in-house auditors or an internal team and are reported to management. They evaluate internal controls, risk management, and governance processes.
External Audit
External audits are conducted by independent, ACRA-approved audit firms. Their reports are intended for shareholders and external stakeholders. The goal is to provide assurance that financial statements are accurate and comply with Singapore Financial Reporting Standards (SFRS).
Why Auditing Matters: Benefits for Businesses
Regulatory Compliance: Helps businesses stay compliant with ACRA and IRAS regulations and avoid penalties.
Expertise: Audit firms offer financial insight and help navigate regulatory complexities.
Risk Management: Auditors identify internal control weaknesses and areas of financial risk.
Credibility: Audited reports enhance investor trust and improve creditworthiness.
Resource Optimization: Outsourcing audits saves time and internal resources.
Strategic Planning: Insights from audits can guide business decisions and long-term planning.
Consequences of Audit Non-Compliance in Singapore
Singapore companies must comply with audit regulations under the Companies Act 1967. Failure to do so can lead to severe penalties, including:
Not appointing an auditor within the required timeline
Failure to notify ACRA about auditor changes within 14 days
Submitting false or misleading information to authorities
Fines of up to S$5,000 and possible default penalties for non-compliant officers
FAQs
1. Do all businesses in Singapore need to be audited?
No, small companies that meet the audit exemption criteria under the Companies Act may not need annual audits.
2. Can I outsource accounting and auditing in Singapore?
Yes, many SMEs outsource these functions to specialized firms to ensure accuracy, compliance, and cost efficiency.
3. What is the role of an external auditor?
External auditors independently assess your company’s financial statements and issue reports to shareholders or regulators.
4. What standards do auditors follow in Singapore?
Auditors adhere to the Singapore Standards on Auditing (SSA) and the Singapore Financial Reporting Standards (SFRS).
5. Can non-compliance with audit laws affect my business?
Yes, it can lead to fines, reputational damage, and loss of trust among investors and stakeholders.
