Choosing an audit firm in Singapore is an important decision for any company that requires a statutory audit. While audit fees are naturally a consideration, businesses should not select an auditor based on price alone.
The right audit firm should have the professional capabilities, relevant experience, resources and communication processes needed to perform the audit effectively and within the company’s required timeline.
For small and medium-sized enterprises (SMEs), this can be particularly important. Many SMEs operate with relatively lean finance teams, and an audit can become time-consuming if expectations are unclear, documentation is disorganised or communication between the company and auditor is inefficient.
A suitable audit firm can provide a structured audit process, clearly communicate information requirements and independently examine the company’s financial statements in accordance with applicable requirements.
This guide explains why choosing the right audit firm in Singapore matters, what businesses should consider when appointing an auditor, and the questions SMEs can ask before making a decision.
This article is intended for general information only and does not constitute accounting, auditing, tax or legal advice.
What Does an Audit Firm Do?
An audit firm performs an independent examination of a company’s financial statements.
Management remains responsible for preparing the financial statements and maintaining proper accounting records.
The auditor’s role is different.
The auditor plans and performs audit procedures, obtains sufficient appropriate audit evidence and ultimately expresses an independent audit opinion on the financial statements.
Depending on the nature of the business, audit work may involve examining areas such as:
- Revenue
- Expenses
- Cash and bank balances
- Trade receivables
- Trade payables
- Inventory
- Fixed assets
- Loans and borrowings
- Payroll
- Related-party transactions
- Accounting estimates
- Financial statement disclosures
The exact procedures performed depend on the circumstances of the engagement, including the auditor’s risk assessment and professional judgement.
Why Is Auditor Independence Important?
Independence is a fundamental part of external auditing.
The value of an audit comes partly from having an appropriately qualified external professional independently examine the financial statements.
An auditor must therefore comply with applicable professional requirements concerning independence and ethics.
This is one reason auditing should not simply be viewed as an extension of the company’s internal accounting function.
Management prepares and takes responsibility for the financial statements.
The external auditor independently examines them.
Maintaining this distinction is essential to the credibility of the audit process.
Does Every Singapore Company Need an Audit Firm?
No.
Not every Singapore-incorporated company is required to undergo a statutory audit.
Qualifying private companies may be exempt under Singapore’s small-company audit exemption framework.
Broadly, a private company may qualify as a small company if it satisfies at least two of the following three quantitative criteria:
- Annual revenue of S$10 million or less
- Total assets of S$10 million or less
- 50 employees or fewer
The relevant assessment period and other conditions must also be considered.
Companies that form part of a group may need to consider additional group-level requirements.
Therefore, a company should first determine whether it requires a statutory audit before appointing an audit firm.
Even where a statutory audit is not legally required, a business may sometimes choose to have its financial statements audited voluntarily because of requirements from shareholders, banks, investors or other stakeholders.
Why Choosing the Right Audit Firm Matters
An audit is not simply a matter of sending financial statements to an auditor and receiving a signed report.
The process can involve substantial interaction between the audit team, management and the company’s accounting personnel.
The suitability of the audit firm can therefore affect the overall experience.
Here are some of the main reasons the selection matters.
1. Different Audit Firms Have Different Industry Experience
Businesses operate in very different environments.
Consider the differences between:
A professional services company.
A construction contractor.
A retailer.
A manufacturer.
An investment holding company.
A charity.
A property business.
A technology company.
An importer and distributor.
Although fundamental auditing principles apply across engagements, different industries can involve different accounting issues and business processes.
For example, a retailer may have significant inventory and high transaction volumes.
A construction company may have project-based accounting considerations.
An investment holding company may hold financial investments and have relatively few operating transactions.
A charity or non-profit organisation may have different reporting considerations from a conventional commercial business.
An audit firm with relevant sector experience may already understand many of the common processes and accounting areas associated with the industry.
2. SME Experience Can Be Important
A Singapore SME may operate very differently from a multinational corporation.
Large organisations may have:
Large finance departments.
Dedicated financial controllers.
Internal audit teams.
Sophisticated enterprise resource planning systems.
Formal internal controls.
Dedicated compliance teams.
An SME may instead have one accountant, an external bookkeeper or a director who remains closely involved with finance.
This creates a different audit environment.
An audit firm experienced with SMEs may be familiar with lean finance teams and the accounting systems commonly used by smaller businesses.
That does not mean audit standards become less rigorous.
Rather, it means the auditor understands the operating environment in which the company maintains its records.
3. Communication Can Affect Audit Efficiency
Good communication is extremely important during an audit.
Auditors may need documents, explanations and supporting schedules from the company.
If audit requests are unclear, management may spend time preparing the wrong information.
If the company does not understand why a particular document is needed, it may delay responding.
A structured audit process can help.
For example, the audit firm may provide an information request list before fieldwork begins.
The company can then prepare items such as:
Trial balance.
General ledger.
Bank statements.
Bank reconciliations.
Receivable ageing.
Payable ageing.
Fixed asset register.
Inventory schedules.
Loan agreements.
Related-party schedules.
Major contracts.
Having clear requirements at the beginning can reduce repeated requests later.
4. Your Auditor Should Understand Your Business
An auditor needs to understand the company’s operations as part of planning the audit.
This includes understanding matters such as:
How the company earns revenue.
Who its major customers are.
How purchases are made.
Whether inventory is held.
How payments are processed.
Whether overseas transactions occur.
Whether the company belongs to a group.
Whether related-party transactions are significant.
What accounting systems are used.
Understanding the business helps the auditor identify areas that may present risks of material misstatement and design appropriate audit procedures.
Businesses should therefore be prepared to explain their operations clearly when speaking with prospective auditors.
5. The Audit Firm Must Have Sufficient Capacity
Timing matters.
Companies often have financial reporting, annual general meeting or annual return deadlines that need to be considered.
A capable audit firm should have sufficient resources to schedule and perform the engagement appropriately.
Before appointing an auditor, businesses can discuss:
When the accounts will be ready.
When audit work is expected to begin.
When supporting schedules will be provided.
Whether inventory attendance may be relevant.
When management expects the audit to be completed.
Whether group reporting deadlines exist.
A technically capable auditor may still not be suitable if the firm’s available timetable cannot meet the company’s legitimate reporting requirements.
This is why companies should avoid waiting until immediately before a deadline to appoint an auditor.
6. The Cheapest Audit Firm Is Not Automatically the Best Choice
Cost is important, especially for SMEs.
However, audit services should not be treated purely as a commodity where the lowest quotation automatically represents the best value.
A proper audit requires professional time.
The audit team needs to understand the business, assess risks, perform procedures, obtain evidence, document its work, review financial statement presentation and complete the necessary internal review process.
When comparing audit quotations, businesses should therefore understand what is included.
A lower fee may be perfectly reasonable for a straightforward engagement.
Similarly, a higher fee may reflect greater complexity or additional work.
The key is to compare the scope and circumstances rather than focusing only on the headline number.
7. Audit Complexity Should Influence Your Choice
Some businesses have relatively straightforward financial statements.
Others can be significantly more complicated.
Factors that may increase complexity include:
Multiple subsidiaries.
Foreign operations.
Foreign currencies.
Large inventories.
Multiple business locations.
Complex financing.
Significant accounting estimates.
Major related-party transactions.
Investments.
Business acquisitions.
Group consolidations.
Companies with more complicated financial reporting requirements may wish to consider whether the prospective audit firm has relevant experience and sufficient resources.
8. Group Companies May Require Additional Expertise
Auditing a standalone SME can be quite different from auditing a corporate group.
A group may have:
A holding company.
Multiple subsidiaries.
Overseas entities.
Intercompany transactions.
Intercompany loans.
Shared expenses.
Consolidation adjustments.
Different accounting systems.
The audit may require additional coordination.
Where a Singapore company is part of a larger group, there may also be reporting requirements imposed by an overseas parent company.
The company should explain its group structure when requesting an audit proposal.
9. Inventory Can Make an Audit More Complicated
Businesses holding significant inventory should discuss this with prospective auditors.
Inventory can include:
Raw materials.
Work in progress.
Finished goods.
Retail merchandise.
Food products.
Spare parts.
Imported products.
Inventory may be held at one location or across multiple warehouses.
Depending on the circumstances, the auditor may need to perform procedures related to inventory quantities and valuation.
Companies should therefore communicate their inventory arrangements early, especially where physical stock counts are involved.
10. Your Auditor Should Be Comfortable With Your Accounting Environment
SMEs use many different accounting systems.
Some have cloud accounting software.
Others have customised systems.
Larger SMEs may use enterprise-level accounting software integrated with inventory, sales or payroll systems.
The audit firm needs to obtain appropriate information from whatever accounting environment the business uses.
Businesses can discuss matters such as:
How transaction reports are generated.
How the general ledger is maintained.
Whether audit trails are available.
How supporting documents are stored.
Whether accounting records are maintained internally or externally.
A well-organised accounting environment can make the audit process substantially more efficient.
What Should You Look for in an Audit Firm in Singapore?
There is no single audit firm that is automatically suitable for every company.
Businesses should evaluate prospective auditors based on their particular circumstances.
Several factors can be considered.
Relevant Professional Qualifications
A statutory audit must be conducted in accordance with the applicable Singapore regulatory framework.
Businesses should ensure that the proposed auditor is appropriately registered and able to perform the required engagement.
For a Singapore statutory audit, companies can verify relevant public accountant information through official regulatory resources where appropriate.
Relevant Industry Experience
Ask whether the firm has experience with businesses similar to yours.
A company does not necessarily need an auditor that works exclusively within its industry.
However, familiarity with the business model and common accounting issues can be useful.
Experience With Similar-Sized Businesses
A S$2 million SME may have very different needs from a listed multinational group.
An audit firm accustomed to working with similarly sized businesses may have processes appropriate for the company’s finance team and accounting environment.
Responsiveness
Communication problems can create delays.
Before appointment, consider how clearly and promptly the audit firm responds to questions.
This may provide some indication of how communication could work during the engagement.
Clear Audit Timelines
The company and audit firm should have a shared understanding of important dates.
These can include:
Accounts completion.
Audit commencement.
Audit fieldwork.
Management responses.
Financial statement finalisation.
Expected audit completion.
Clear planning reduces the risk of last-minute surprises.
Transparent Fees
Businesses should understand the proposed fee and the scope it covers.
Questions may include:
What does the quoted audit fee include?
Are there circumstances in which additional charges may arise?
Are accounting services separate?
Are tax services separate?
Are consolidation services included?
Are other reports included?
Clear scope definition can reduce misunderstandings later.
Questions to Ask an Audit Firm Before Appointment
Businesses may find it helpful to ask prospective audit firms questions such as:
Do you have experience auditing businesses in our industry?
Industry experience can help the audit team understand the company’s business processes.
What information do you need to provide a quotation?
The firm may request management accounts, revenue figures, asset values and information about the company’s structure.
What documents should we prepare before the audit begins?
This allows the finance team to prepare early.
What is the expected timeline?
Confirm whether the proposed timetable is compatible with the company’s requirements.
Who will manage the engagement?
Understanding the team structure can improve communication.
How will audit queries be sent to us?
Some firms may use email, shared documents, audit software or other systems.
What could result in additional fees?
Understanding this before appointment can prevent disagreements.
Do you have experience with corporate groups?
This is particularly important where consolidated financial statements or group reporting are involved.
What Information Should You Give an Audit Firm for a Quotation?
To obtain a meaningful quotation, provide accurate information.
This might include:
- Company name
- Principal business activity
- Financial year-end
- Annual revenue
- Total assets
- Number of employees
- Number of bank accounts
- Number of transactions
- Whether inventory is held
- Number of subsidiaries
- Overseas operations
- Related-party transactions
- Whether consolidation is required
- Previous audited financial statements
- Latest management accounts
- Expected completion date
Providing incomplete information may result in a quotation that does not accurately reflect the actual engagement.
Why Your Latest Financial Statements Matter
Historical or management financial statements allow the prospective auditor to understand the scale and structure of the business.
For example, the auditor can see whether the company has significant:
Inventory.
Receivables.
Loans.
Fixed assets.
Investments.
Related-party balances.
A quotation based only on revenue may not capture these factors.
Should You Choose a Large or Small Audit Firm?
Firm size alone should not determine the decision.
Large international firms can offer substantial resources and international networks.
Mid-sized and smaller audit firms may also provide appropriate statutory audit services for SMEs.
The relevant question is whether the firm is suitable for the company’s particular needs.
A growing SME may value:
Direct communication.
Industry experience.
Reasonable response times.
Understanding of owner-managed businesses.
Appropriate audit capacity.
Competitive professional fees.
A larger company with international operations may place greater importance on global coordination and group reporting capabilities.
Different companies therefore have different priorities.
Warning Signs to Consider When Choosing an Auditor
Businesses may want to investigate further if they encounter situations such as:
A Quotation Given Without Understanding the Business
A basic indicative quotation may sometimes be possible, but the audit firm should ultimately understand enough about the engagement to determine the appropriate scope and resources.
Unclear Scope
The company should understand what services are and are not included.
Unrealistic Timelines
A promise to complete a complex audit almost immediately should be understood in the context of the actual work required.
Poor Communication Before Appointment
If basic questions are consistently unanswered before the engagement begins, the company may wish to consider whether communication will improve later.
No Discussion of Accounting Records
The condition of the company’s accounts can materially affect audit efficiency.
A prospective auditor will often need some understanding of the financial records before finalising an engagement.
What Happens After You Appoint an Audit Firm?
Once the auditor has been properly appointed and the engagement arrangements are in place, the audit process can begin.
Although every engagement differs, the process may involve several stages.
Audit Planning
The auditor develops an understanding of the company and plans the engagement.
Information Requests
Management provides financial records and supporting documentation.
Audit Fieldwork
The audit team performs procedures and gathers evidence.
Audit Queries
Questions are communicated to management or the accounting team.
Financial Statement Review
The financial statements and relevant disclosures are reviewed.
Completion Procedures
Outstanding matters are resolved and final audit procedures are performed.
Auditor’s Report
The auditor issues the appropriate independent auditor’s report following completion of the engagement.
Good cooperation between the company and audit team can help each stage proceed efficiently.
How Your Company Can Help the Audit Run Smoothly
Choosing the right audit firm is only half of the equation.
The company also needs to be properly prepared.
Before fieldwork, businesses should ensure that:
Bookkeeping is complete.
Bank accounts are reconciled.
Receivables are reviewed.
Payables are reviewed.
Fixed asset schedules are updated.
Inventory records are complete.
Related-party balances are reconciled.
Loan documents are available.
Major contracts are organised.
Supporting invoices can be located.
The trial balance is reasonably finalised.
Providing incomplete accounts to an auditor and changing them repeatedly during the engagement can create unnecessary work and delays.
Should a Company Change Its Auditor?
There can be legitimate reasons for considering a change in audit firm.
For example:
The business has grown significantly.
The corporate structure has become more complicated.
The company has expanded internationally.
Reporting requirements have changed.
The existing firm’s capacity no longer matches the company’s timetable.
The company wants a firm with different industry experience.
Communication expectations have changed.
Fees have changed substantially.
A decision to change auditor should nevertheless be considered carefully and carried out in accordance with the applicable legal and professional requirements.
Should You Change Auditor Every Few Years?
There is no universal answer for every private company.
Continuity can have advantages because an existing auditor already understands the business.
At the same time, companies should periodically assess whether their professional service providers continue to meet their needs.
The decision should be based on the company’s circumstances rather than changing firms simply for the sake of doing so.
Is a Local Audit Firm Suitable for an SME?
For many Singapore SMEs, a local audit firm may be suitable.
Local firms can have extensive experience dealing with:
Singapore private companies.
Owner-managed SMEs.
Local accounting practices.
Singapore corporate groups.
Charities and non-profit organisations.
Various local industries.
However, the appropriate choice depends on the company’s actual requirements.
A business with extensive international operations may require capabilities different from those of a straightforward local SME.
Why SMEs Should Start Looking for an Auditor Early
One of the easiest ways to make an audit unnecessarily stressful is to wait until the last moment.
Early engagement allows the company to understand what documents will be required.
It also gives management time to resolve accounting issues before fieldwork begins.
For example, the auditor may identify early that the company needs to prepare:
Inventory schedules.
Receivable ageing.
Fixed asset information.
Related-party reconciliations.
Loan documentation.
Bank reconciliations.
Rather than attempting to prepare everything immediately before a deadline, the company can organise these records systematically.
Frequently Asked Questions About Choosing an Audit Firm in Singapore
How do I choose an audit firm in Singapore?
Consider factors such as the firm’s relevant professional standing, experience, industry familiarity, ability to handle businesses of your size, communication, availability, proposed timetable and fees.
Should I choose the cheapest auditor?
Price can be considered, but it should not be the only consideration. The company should also evaluate the proposed scope, experience, communication and ability to meet its reporting requirements.
Can a small audit firm audit an SME?
Depending on the circumstances and applicable regulatory requirements, appropriately qualified local audit practices can provide statutory audit services to SMEs. Suitability depends on the complexity and requirements of the engagement.
Should my accountant and auditor be different?
Auditor independence requirements must be considered. The appropriate arrangements depend on the nature of the services provided and applicable ethical and regulatory requirements.
Can I change audit firms?
Companies can change auditors subject to the relevant statutory and professional procedures.
Does industry experience matter?
It can be useful because the audit team may already be familiar with common business processes and accounting issues within the sector.
When should I appoint an auditor?
Companies should avoid waiting until reporting deadlines are approaching. Starting discussions early provides more time for planning and preparation.
Audit Firm vs Accounting Firm: What Is the Difference?
The terms are sometimes used interchangeably in everyday business conversations, but accounting and statutory auditing serve different purposes.
An accounting firm may provide services such as:
Bookkeeping.
Management accounts.
Financial statement preparation.
Payroll.
Tax compliance.
GST support.
An audit firm performs independent audit work.
A company may use different professional firms for different services, particularly where independence requirements need to be considered.
Businesses should therefore understand exactly what service they are engaging.
Why Good Accounting Records Still Matter
Even the right auditor cannot make poor accounting records disappear.
The quality of the company’s bookkeeping remains important.
Consider two companies of similar size.
Company A has monthly reconciliations, organised invoices, an updated fixed asset register and clear intercompany schedules.
Company B has missing invoices, unreconciled banks, unexplained balances and incomplete records.
The second company’s audit is likely to involve considerably more management effort and back-and-forth communication.
Choosing an appropriate audit firm should therefore be combined with maintaining strong accounting processes internally.
Audit Should Be Viewed as a Professional Process
Some SMEs understandably view audit primarily as a compliance requirement.
However, it is important to understand what the audit actually represents.
An independent auditor is putting professional work behind the audit opinion.
This requires planning, evidence gathering, documentation, review and professional judgement.
Businesses should therefore give their auditors sufficient time and access to the information required to perform the engagement.
A well-organised audit process benefits both parties.
Conclusion
Choosing the right audit firm in Singapore matters because the audit process involves much more than simply signing off a set of financial statements.
The auditor needs to understand the company’s operations, identify relevant risks, obtain appropriate audit evidence and complete the engagement in accordance with applicable professional requirements.
For SMEs, the right audit firm should be suitable for the size and complexity of the business.
Relevant factors can include industry experience, experience with SMEs, communication, professional capabilities, available resources, audit timelines and fees.
Price is certainly important, but businesses should avoid making their decision based solely on the lowest quotation.
Instead, compare the overall scope and suitability of each proposal.
Before requesting an audit quotation, prepare accurate information about the company, including its revenue, total assets, principal business activities, corporate structure, inventory, subsidiaries and reporting deadlines. Providing the latest financial statements or management accounts can also help the prospective auditor understand the engagement.
Businesses should also start the selection process early.
Waiting until a statutory deadline is approaching can reduce the time available for audit planning, preparation and resolution of accounting issues.
Once an audit firm has been appointed, the company can further improve the process by maintaining complete accounting records, reconciling bank accounts, organising supporting documents and responding promptly to audit queries.
Ultimately, the appropriate audit firm in Singapore is one that has the professional capabilities and resources to perform the required engagement while communicating clearly with management throughout the process.
For SMEs requiring audit services in Singapore, careful auditor selection and good financial preparation can help create a more organised and efficient statutory audit process.
Find out more at Koh & Lim Audit PAC