The annual statutory audits add value to a company. Smaller companies invest in audits for the same reasons as larger companies, but there are particular issues facing smaller companies that make investment in an audit worthwhile:
- The cost of the audit is often marginal for small companies, particularly where the auditor is involved in the preparation of the statutory accounts.
- Small companies who prepare their own accounts often need help in arriving at adjustments, such as those for obsolete stocks, bad debts and other provisions
- Small companies grow, and may find themselves subject to a statutory audit requirement – the first year and the subsequent years of an audit can be very trying if the accounts are not in good order
- An audit is essential in financing negotiations, take-over and buy-out
- The close involvement of the auditor provides companies with comfort when faced with tax and regulatory investigations
Most of the directors of smaller companies may believe that because there is no longer any statutory audit requirement, there will no longer be any external ‘checking’ of the books and records. The power and resources of the Inland Revenue Authority of Singapore are not to be underestimated and increasing all the time. This means that there are likely to be more investigations in the future.