Globally, accounting firms, particularly those auditing public interest entities, are regulated through stringent frameworks. Peer reviews and national bodies like the Public Company Accounting Oversight Board (PCAOB) in the United States, the Financial Reporting Council (FRC) in the UK, the Canadian Public Accountability Board (CPAB) in Canada, and the National Financial Reporting Authority (NFRA) in India monitor the quality and independence of audit practices. These frameworks ensure audits are consistent with national and international standards, safeguarding public confidence in financial reporting.

In Singapore, it is ACRA (Accounting and Corporate Regulatory Authority) that oversees the regulation of public accountants and audit firms, including those engaged with entities of public interest. Unlike in most countries, where professional bodies like the Institute of Singapore Chartered Accountants (ISCA) take on regulatory roles, the task of monitoring compliance and audit quality lies solely with ACRA in Singapore. Through its Practice Monitoring Programme (PMP), ACRA evaluates audit practices to ensure firms align with the Singapore Standards on Auditing (SSA) and other regulatory requirements.

The Practice Monitoring Programme (PMP), overseen by ACRA, aims to ensure that public accountants and public accounting firms in Singapore maintain high audit standards. As part of the regulatory framework, ACRA conducts inspections of auditors and firms to assess their compliance with auditing standards and practices.

Accounting Firms Inspected Under PMP

ACRA prioritizes public accounting firms and auditors responsible for financial reporting in sectors critical to public confidence. This includes:

• Audits of public companies and listed entities.
• Auditors handling large or complex private enterprises.
• Firms with significant market influence and operations affecting Singapore’s economy.

The PMP reviews focus on the adequacy of internal controls, audit planning and execution, quality control systems, and compliance with the Singapore Standards on Auditing (SSA). These inspections are aimed at identifying weaknesses in processes that could impair audit quality.

Implications of Failing PMP

Failure to meet the standards set out under the PMP can result in substantial consequences for public accountants and firms, depending on the severity of the findings:

1. Corrective Actions

• Mandatory Training: Auditors may be required to attend relevant training programs.
• Process Improvements: Firms must revise internal controls and audit processes.
• Peer or Hot Reviews: Specific engagements may undergo peer or “hot” reviews for mentoring and quality assurance of a certain number of audit engagements.

2. Regulatory Restrictions

In cases of serious non-compliance, ACRA may impose restrictions, such as:

• Limited Audit Scope: Public accountants may be restricted from auditing certain types of financial statements, including:
  • Entities required by law to be audited.
  • Public companies that are not dormant.
  • Large private companies, exempt private companies (EPCs) with annual revenue over $10 million, and public interest entities.
• Industry-Specific Restrictions: Some accountants may be barred from auditing entities in particular industries.
• Enhanced Monitoring: ACRA may increase oversight to ensure compliance.

3. Disciplinary Actions and Public Sanctions

Severe violations may result in:

• Suspension or Cancellation of Registration: The accountant’s registration may be revoked.
• Public Orders: ACRA may issue public orders detailing the violations and mandated corrective actions.
• Escalation to the PAOC: Serious breaches are referred to the Public Accountants Oversight Committee (PAOC) for further action.

4. Impact on Reputation

PMP findings are published, and adverse outcomes can tarnish the reputation of accountants and firms, affecting client relationships and future business opportunities.

5.  Ongoing Monitoring

Firms that fail PMP reviews are subject to follow-up inspections to ensure effective implementation of corrective actions.

The PMP reflects ACRA’s commitment to ensuring a high standard of audit quality to safeguard public interest. It serves as a quality control mechanism and a means to instil accountability across public accounting firms. Non-compliance with PMP standards not only results in penalties but also risks reputational damage, emphasizing the importance of maintaining audit quality and adhering to regulatory expectations.

KNAV Comments

Regulatory bodies play a critical role in ensuring that audits of companies impacting public interest are performed according to established standards. However, their oversight complements—rather than replaces—the need for a strong internal control framework within organizations. Compliance should be seen not as an imposition but as a commitment to integrity and professionalism, promoting accountability and trust. A robust internal control framework strengthens financial reporting processes, ensuring that governance, risk management, and compliance are not taken lightly but are ingrained in the organization’s culture.

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