Regulators roll out more stringent auditor reporting rules for listed firms

Vague opinions won't cut it anymore.

Regulators today unveiled more stringent reporting rules for auditors of listed firms, in order to provide more transparency for investors and other stakeholders.

The enhanced auditor reporting standards were issued today by the Institute of Singapore Chartered Accountants (ISCA) and were approved by the Accounting and Corporate Regulatory Authority (ACRA)’s Public Accountants Oversight Committee (PAOC).

The new standards feature two key changes. First, auditors will be required to communicate key audit matters (KAMs) in their reports on the financial statements of listed entities beyond the traditional “Pass/Fail” audit opinion.

KAMs may include significant risk areas of the financial statements most susceptible to misstatements, the entity’s major transactions during the year that required extensive auditing efforts or areas involving key management judgments and estimates such as the valuation of investments.

When circumstances arise that result in a material uncertainty over a company's prospects, such as the loss of a major customer, auditors will also be required to ensure that listed companies make adequate disclosures in their financial statements regarding management’s judgement and assessment on the issue.

This ensures more transparency on an entity’s viability, which is of significant public interest.