2007 - October
Sound governance structures and internal controls vital in prevention of unauthorised transactions
23 Oct 2007 Category: Media Releases
23 October 2007, Singapore -- The Institute of Certified Public Accountants of Singapore (ICPAS) applauds the steps taken by Sembcorp Marine, to disclose some unauthorised transactions made by one of its senior employees resulting in potentially large financial losses, with the view to transparency and disclosure to all stakeholders. This case once again, highlights the importance of internal controls within an entity.
The Companies Act requires every public company and every subsidiary of a public company to devise and maintain a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and recorded for the preparation of true and fair financial statements and to maintain accountability of assets.
In addition, auditing standards issued by ICPAS also state that the responsibility for setting internal controls rests with those charged with governance of the entity, who ensure, through oversight of management, that the entity establishes and maintains internal control to provide reasonable assurance with regard to reliability of financial reporting, effectiveness and efficiency of operations and compliance with applicable laws and regulations.
Incidentally, at the Institute’s recently held seminar on Audit Committees, there were discussions and debate on the roles and responsibilities of various parties in and various components of Corporate Governance. It also touched on how audit committees function and possible areas for improvement. ICPAS has also issued a simple guide on the work of the Audit Committee, which provides information on general responsibilities, reporting and measuring effectiveness of an audit committee and so on.
Good corporate governance can help increase shareholder value by safeguarding all shareholders’ interests and enhancing corporate performance. For it to be effective, the board, the management and other players in the corporate environment should embrace the spirit of good corporate governance. They need to pay careful attention as to how corporate governance practices and processes are actually implemented rather than follow a box-ticking approach designed to meet minimal standards of compliance. The many players in corporate governance include the board of directors, audit committee, internal auditors and external auditors, amongst others.
A company’s financial statements are the responsibility of its directors and the management. The primary responsibility for the prevention and detection of fraud and error also rests with those charged with governance and the management of the company. The management, with the oversight of those charged with governance, needs to establish appropriate controls to prevent and detect fraud and error within the company. It is responsible for providing the board with complete, accurate and timely information. However, in discharging their responsibilities, directors must be pro-active in seeking information and questioning the management rather than relying solely on information offered by the management.
The board’s stewardship responsibility in, for example, reviewing and approving corporate strategies, budgets and financial plans, monitoring organisational performance and achievement of strategic objectives, ensuring that an appropriate risk management system is in place, reviewing the integrity and adequacy of internal controls and reporting to shareholders, is undoubtedly a heavy one. The board, when it may not have the expertise to do so, is empowered by the law to seek professional or expert advice from external sources. However, the ultimate judgment in decision-making has to be exercised in good faith and the directors are not absolved from asking further questions where such inquiry is warranted in the circumstances.
Members of the audit committee play an important role in the corporate governance framework of companies and should take a proactive approach in the performance of their duties. The auditor’s role is to express an opinion on the financial statements based on conclusions drawn from the audit evidence obtained during the audit. He is required to obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the audit opinion and to consider the risk of material misstatement in the financial statements arising from fraud error. The internal audit function plays an important part in monitoring key controls and procedures and is an integral part of a company’s internal control system.
Recent cases in the corporate world call attention to the need for greater emphasis on having sound governance structures and internal controls.
ICPAS strongly advocates best corporate governance practices and views the integrity and professionalism of directors, management, auditors and other intermediaries as paramount in ensuring good corporate governance. It will continue to play an active role to protect the public interest by encouraging high quality practices by its members and continues to facilitate the convergence of national and international auditing standards. We expect our members to uphold the high standards they are entrusted with and to continually upgrade and update themselves given the range of opportunities and resources.
About Institute of Certified Public Accountants of Singapore
Established in June 1963, the Institute of Certified Public Accountants of Singapore (ICPAS) is the national accountancy body that develops, supports and enhances the integrity, status and interests of the accountancy profession in Singapore.
The Certified Public Accountant Singapore (CPA Singapore) is a professional in accountancy, finance and business who has the relevant work experience in addition to a recognised accountancy qualification. They are highly versatile and well sought after as business leaders beyond the accountancy, banking and finance industries.
Today, the Institute of Certified Public Accountants of Singapore (ICPAS) has 19,000 members and/or CPAs Singapore working and making their mark worldwide, which makes the CPA Singapore a designation with international recognition.
ICPAS’ international outlook and connections are reflected in its membership of
regional and international professional organizations like the ASEAN Federation of Accountants (AFA), the Asia-Oceania Tax Consultants’ Association (AOTCA) and the International Federation of Accountants (IFAC).
The Institute also caters for the training and professional development of its members through regular courses conducted by its training arm, the Singapore Accountancy Academy (SAA).
For more information, please contact:
Ms Catherine Chan
Institute of Certified Public Accountants of Singapore
Tel: 65 6749 8060 Ext 813
Fax: 65 6749 8061
Ms Karen Neo
Institute of Certified Public Accountants of Singapore
Tel: 65 6749 8060 Ext 817
Fax: 65 6749 8061