Chap 7

Question 0

Keeping accounting records

Answer 0

S199

Statutory duty to keep proper ‘accounting records’ ( includes source documents ) for a period not less than 5 years from the end of the financial year in which those transactions or records relate to

Failure to do so - offence for the company and every officer who is in default.

Penalty - fine not exceeding $5k or to imprisonment for a term not exceeding 12 months and a default penalty.

Question 1

Statutory duties

Answer 1

Keeping accounting records
Minus books
Maintenance if registers
Maintaining ‘internal controls’ ( public companies and their subsidiaries only )
Preparing and presenting financial statements
Directors statement

Question 2

The records kept must

Answer 2

• sufficiently explain the transactions and financial position of the company
• enable true and fair profit and loss accounts and balance sheets to be
• be kept in such manned as to enable them to be conveniently and properly audited

Question 3

Accounting records may be used if IRAS decides to conduct a ‘tax audit’ to

Answer 3

Investigate a company’s tax returns

Question 4

Accounting records that are more then ______ years old will most likely be useful to a liquidator who is trying to recover any of company’s property that may have been misapplied.

Answer 4

2

Question 5

Records must be kept at the

Answer 5

Registered office of the company or at such other place as the directors think fit

Question 6

All directors may at any time inspect the accounting records - members only have a right to be given a copy of the audited FS - just prior to each AGM.

Answer 6

Know

Question 7

A public accountant , acting on behalf of a director , and who has obtained an order of court may inspect the records

Answer 7

Know

Question 8

Minute books :

Answer 8

Records within one month proceedings of members’ meetings , proceedings of directors’s meetings and proceedings of manager’s meetings.

Question 9

The companies act requires a company to maintain the following registers :

Answer 9

Register of members ( only for public companies ) . ACRA will maintain the soft copy for private companies.
Register of substantial shareholders
Register of debenture shareholders
Register of directors , CEO , managers , secretaries and auditors
Directors’ and CEO SH
Register of charges

Question 10

Maintaining internal controls ( public companies and their subsidiaries only )

Answer 10

Must devise and maintain a system of internal accounting controls.

Mainly to protect public investors.

Controls must be sufficient to provide a reasonable assurance that (I) assets are safeguarded against loss from unauthorised use or disposition (ii) that transactions are properly authorised (III) transactions are recorded as necessary to permit the preparation of true & fair FS (iv) to maintain accountability of assets

Question 11

Preparing and presenting FS

Answer 11

• show the ‘true & fair view’ of the financial position and performance of the company for that period at every annual general meeting.
• must comply with the requirements of the Accounting Standards
• AGM : must be held not later than 18 months after the incorporation of the company and subsequently , once at least in every calendar year at intervals of not more than 15 months. May apply to the Registrar of Companies for an extension with good reason.
• in the case of a private company , the FS must be updated to a date not more than 6 months before the date of the AGM. In the case of public company , that is listed , the FS must be dated to not more 4 months before the date of the meeting
• a private company may dispense with the holding of AGM. Directors need not lay the accounts or consolidated accounts before the company at it’s general meeting where dispensation had been obtained.
• must keep at it’s registered office a copy of each document laid at it’s AGM or where it has dispensed with the meeting , a copy of it’s FS and related documents sent to all persons entitled to attend the meeting .
• registrar can inspect these documents

Question 12

Directors statement :

Answer 12

Directors must prepare a statement signed by 2 of the directors stating :

• whether in their opinion the FS give a ‘true&fair view’ of the financial position and performance of the company
• as at the date of the statement there are reasonable grounds to believe that the company will be able to pay it’s debts as and when they fall due.

Must be attached to the FS before the auditor reports on the accounts.

Question 13

Method of effecting ordinary or special resolutions at EGMs without holding a physical meeting of the members.

Answer 13

Written resolution to the members and having them endorse it by appending their signatures to it.

As long as more than 50% ( ordinary resolution ) or 75% ( special resolution ) sign the circulating resolution , considered passed , as long as it is signed by majority within 28 days of circulation.

Permissible only if the Companies Act does not expressly require a physical meeting to be held.
The Act does not allow circulating resolutions resolutions where the Act requires ‘special notice’ to be given. Eg: proposals to remove an auditor or director of a public company.

Question 14

For AGMs, S175A must be complied with before resolutions can replace a physical meeting.

Answer 14

Need to know !

Question 15

Recording of minutes

Answer 15

Must keep minutes of all meetings of it’s directors and members in a minute book within one month of the meeting.

Must be signed by the Chairman of the meeting itself or the next succeeding meeting.

Question 16

Purpose of recoding minutes

Answer 16

Constitute as evidence of the proceedings at the meeting to which the minutes relate , especially decisions which have been taken at the meeting.

Question 17

Minute book must be kept by

Answer 17

The company at it’s registered office or principal place of business in Singapore and be open to inspection by any member without charge.

Question 18

Lodging annual returns , FS and special resolutions

Answer 18

Act requires every company to lodge with the Registrar an annual return containing information to update the Registar’s record relating to the company.

Lodged within one month after the days of AGM

Information must be current as of the date of the company’s AGM or any date within the first 14 days after the AGM.

Question 19

Usual decisions made at AGM

Answer 19

Scrutiny of the company’s audited accounts for the previous accounting period

Appointment of directors and auditors

The declaration of final dividend ( if applicable )

Known as ordinary business

Question 20

Special business

Answer 20

Note

Question 21

Conditions for the exemption form holding an actual / physical AGM

Answer 21

Not be worthwhile for private companies

Under S175A,

• company is a private company
• it’s articles do not insist that a physical meeting must be convened
• a unanimous resolution passes at a previous meeting ( by all members entitled to vote ) agreeing that AGMs need not need to be convened ( eg: for a specific number of years )

Question 22

EGM

Answer 22

Any other general meeting of the members ( besides the AGM and statutory meeting )

Question 23

Two main reasons for an audit

Answer 23

To report to members on the preparation of the company’s financial statements

To report to ACRA any breaches of the companies ACT which are detected during an audit

Question 24

When must audit be done ?

Answer 24

Before the FS are presented before the AGM

FS must be audited not less than 14 days before the AGM

Must comply strictly with the requirements set out in the Accounting standards.

Question 25

Intention of audit

Answer 25

To ensure that the accounts are prepared in a format to give a ‘true & fair view ‘ of the financial state of the company

Question 26

What type of companies must get their FS audited ?

Answer 26

Public

Private which does not fall within the definition of a small company

Question 27

What type of companies are exempt from the audit requirements ?

Answer 27

Relevant dormant companies
Small companies
A parent company which is a small company and is part of a small group
A subsidiary company which is a small company and is part of a small group.

Question 28

Exceptions for audit

Answer 28

When the company has received a formal request from the Registrar or any member

Question 29

Copies to members

Answer 29

Copy of accounts & directors statement and auditors report must be sent to all persons entitled to receive notice of general meetings of the company not less than 14 days before the date of the AGM.

To give members enough time to examine the accounts and to raise questions on the accounts at AGM

Question 30

Accountants Act makes it a requirement that a company auditor is

Answer 30

Independent , and is not in any way related to the company or indebted to the company

Question 31

Companies Act makes it a requirement that a person cannot knowingly consent it act as an auditor of a company unless

Answer 31

They are an accounting entity

Question 32

Accounting entity

Answer 32

Public accountant
Accounting corporation
Accounting firm
An accounting limited liability partnership

Question 33

An unqualified person who acts as auditor is guilty of an offence and liable to criminal sanctions

Answer 33

Know !

Question 34

Powers and duties of auditors

Answer 34

Auditors report

Access to documents

Access to information from individuals

Punishment for obstructing access

Content of report

Auditor’s report at AGM

Duty to report breaches

Question 35

Companies Act requires an auditor of a company to report on the following documents

Answer 35

FS which are to be laid before the company in the general meeting

The company’s accounting and other records ( receipts , invoices and employee claims ) relating to those accounts

Question 36

Access to documents

Answer 36

Companies Act gives him the right of access at all times to the accounting and other records including the statutory registers of the company

Question 37

Access to information from individuals

Answer 37

Entitled to require from any officer and auditor of a related company information and explanation as ye desires for the purpose of his audit.
If auditor is an auditor of a holding company , his right of access to information extends to the records and officers of any subsidiary company of such company .
Enable him to report on the consolidated accounts of the corporate group

Question 38

Punishment for obstructing access

Answer 38

Wilful failure 
Refusal 
Obstruction 
Delay 
by any officer or auditor of a related company to give an auditor access to such information as he may require under the Act as an offence .

Question 39

Content of report

Answer 39

• whether the FS are in compliance with the requirements of the Accounting Standards including whether it gives a true & fair view of the matters required under section 201.
• whether there is any non-compliance with accounting standards such that a true and fair view of the companies financial position would not be obtained
• whether there is any defect or irregularity in the accounts or consolidated accounts such that a true and fair view of the company’s financial position would not be obtained
• whether the auditor is not satisfied on any matter , the reasons for their dissatisfaction

Question 40

Auditor must form an opinion on the following matters :

Answer 40

• if auditor has managed to obtain all information and explanation required
• if proper accounting and other records have been kept
• if returns received from branch offices are adequate
• if procedures and methods used by parent or subsidiaries in arriving at an amount taken into the consolidated financial statement were appropriate to the circumstance of consolidation
• if consolidated financial statements are prepared otherwise than as one set of consolidated financial statement for the group, and whether he agreed with the reason for preparing them that way

Question 41

Auditor must state in his report

Answer 41

Details of any deficiency, failure or shortcoming.

Can issue a qualified opinion or an opinion with a disclaimer

Question 42

Directors as well as the Registrar ( upon application to the Court ) can cause the financial statements of the company to be revised if they are of the view that these documents do not comply with the requirements of the Act .
Summary FS & directors statement may be revised accordingly

Answer 42

Know !

Question 43

Auditors report at annual general meeting

Auditor or his authorised representative is entitled to :

Answer 43

Auditors report must be attached to the accounts and if any member requires , be read before the company in general meeting and be open to inspection by any member at any reasonable time .

• attend any general meeting if the company
• receive any notices of and other communications relating to any general meeting which a member is entitled to receive
• to speak at any general meeting in any part of the business of the meeting which concerns the auditor in his capacity as an auditor

Question 44

Duty to report breaches

Answer 44

Watchdog function

Responsibility to report immediately to the registrar on any breach or non- observance of any of the provisions of the Act which cannot be adequately explained by a comment in his report

And the last part

Refer to notes pg 11 last para

Question 45

An auditor must exercise a reasonable degree of care and skill when performing his duties , eg when he certified what he believes is true.

Answer 45

Know this

Question 46

Duty of care and skill :

If the auditor performs his duties negligently resulting in loss being suffered , he can be sued :

Answer 46

1) under the law of contract by persons who have a contractual r/s with him and
2) under the law of tort of negligence by persons to whom he owes a tortious duty of care

Question 47

Duty of care and skill ( auditor ) -

Contract

Answer 47

The company whose accounts the auditor audits ( and any other person who engages an auditor to perform particular acts of auditing ) is entitled to a careful performance by the auditor of his work.
In such a case , the person clearly has a contract for services with the auditor and can sue on the contract in the event of a breach.

Question 48

Duty of care and skill ( auditor ) - Tort

Answer 48

Where there is no contractual r/s between the auditor and the plaintiff but the parties were in circumstances in which the auditor knew that the plaintiff was relying on his skills , arguably , a duty of care under the tort of negligence will arise.

Question 49

Duty of care and skill ( auditor ) -

The cases and textbook writers have agreed that an auditor owes a duty of care to persons including the following :

Answer 49

The company and

The members as a class ( but not individually )