DIVING MANUALS

Adoption of Restructured Code and Inducements Provisions in Singapore

ISCA revised its Ethics Pronouncement (EP) 100 Code of Professional Conduct and Ethics in August 2020 to adopt the final pronouncements relating to the Restructured Code and Revisions to the Code Pertaining to the Offering and Accepting of Inducements issued by the IESBA.

New additions include an enhanced conceptual framework, more robust safeguards provisions to address threats to fundamental principles, strengthened provisions pertaining to the offering or accepting of inducements and application guidance on professional judgement and professional scepticism. The revised code is effective as of 1 March 2021.

EP 100 IG 4 – Clarification on Financial Institutions Considered as Public Interest Entities

ISCA issued EP 100 Implementation Guidance (IG) 4 – Clarification on Financial Institutions Considered as Public Interest Entities on 14 October 2020 to clarify the scope of entities that falls within the definition of financial institutions in EP 100 (Revised on 14 August 2020). In EP 100 (Revised on 14 August 2020), the definition of public interest entities (PIEs) includes all listed entities, entities in the process of issuing debt or equity instruments for trading on Singapore Exchange, financial institutions, large charities and large institutions of a public character. Professional firms auditing PIEs are subject to higher independence requirements, such as stricter rotation requirements and prohibition from providing certain non-assurance services, to ensure a high level of audit quality and integrity of the audited financial statements.

ISCA provided views to several consultation papers issued by international standard-setters such as the IASB, IAASB and IESBA as well as to the following public consultations held by our local regulators.

SGX RegCo on Enhancements to Regulatory Regime

In January 2020, SGX RegCo conducted a public consultation on proposed enhancements to the regulatory regime. In January 2021, the enhancements were published. The requirement for all issuers to appoint an auditor registered with ACRA would ensure that their audits are regulated by ACRA and minimise the effects of jurisdictional differences, an enhancement consistent with what ISCA had advocated.

As part of the enhancements, SGX RegCo also added Listing Rule 705(3A) which requires issuers reporting under SFRS(I) to apply SFRS(I) 1-34 Interim Financial Reporting in their interim financial statements. This provides a good framework for comprehensive disclosures and enhances comparability of issuers’ interim financial statements on an international level. SGX RegCo also highlighted that ISCA would be issuing a new technical guidance to aid issuers on the compliance with the new Listing Rule 705(3A). The said technical guidance, Exposure Draft Financial Reporting Guidance 3 (ED FRC) was issued in February 2021 for public consultation.

ACRA’s Proposed Amendments to the Companies Act

ACRA conducted a public consultation in July 2020 on proposed amendments to the Companies Act. ISCA supported the proposal for micro non-publicly accountable companies to be allowed to prepare reduced or simplified financial statements to reduce their compliance burden. We provided feedback that there is a need for a separate financial reporting framework for this proposal to be executed effectively. We shared ISCA’s Micro Accounting Model, a self-contained financial reporting framework, developed to facilitate micro entities’ preparation of reliable financial statements using accounting principles consistent with the IFRSs.

SGX RegCo on Enhancements to Enforcement and Whistleblowing Frameworks

Whistleblowing policies and practices are critical elements of issuers’ internal control system and corporate governance. As such, ISCA agreed with SGX RegCo that issuers should disclose how they have complied with best practices on whistleblowing. We highlighted the need for more guidance surrounding the design of the whistleblower mechanism to ensure effectiveness.

ISCA proposed two additional best practices on channels for whistleblower to report anonymously and on disclosure of issuers' commitment to timely investigations and more transparent reporting. With regard to anonymous reporting, we shared that current technology allows for both anonymous reporting and two-way communication. Hence SGX RegCo could consider requiring issuers to provide an option for whistleblower to report anonymously as long as two-way communication is enabled for the whistleblower to provide further information for investigation.

ISCA Sustainability Reporting E-Learn – Relevance of Sustainability Reporting to the Accountant

As sustainability considerations grow in prominence globally, ISCA developed a Sustainability Reporting E-Learn, with the support of its Corporate Reporting Committee, to highlight the relevance of sustainability reporting to the accountant.

The E-Learn provides an introduction to sustainability and sustainability reporting and their importance to organisations. It provides insights into how sustainability is relevant to the accountant’s role, including the Chief Financial Officer’s responsibility as steward of capital, by illustrating that sustainability has financial consequences despite being non-financial in nature.

Proposed Non-authoritative Guidance on Extended External Reporting (EER) Assurance

The IAASB issued a Consultation Paper for non-authoritative guidance to address the challenges that practitioners face in applying ISAE 3000 (Revised) in EER assurance engagements. EER encapsulates various forms of reporting, including sustainability reporting.

ISCA organised a focus group to engage key stakeholders and obtain the perspectives of both practitioners and preparers. The Institute’s comment letter highlighted that while the proposed guidance provided useful application materials, it is lengthy and challenging to read. As such, important considerations, such as assurance over qualitative information which forms the bulk of EER reports, should be presented more prominently in a concise separate document.

Since qualitative information could be vague or inherently subjective, we also highlighted that there are practical challenges in determining subject matter information in an EER report that are suitable for assurance. We suggested the inclusion of further guidance, with illustrative examples as appropriate.

Proposed Sustainability Standards Board (SSB) by the IFRS Foundation

The IFRS Foundation published a Consultation Paper (CP) that included a proposed SSB to improve the consistency and comparability in sustainability reporting. ISCA has responded to the CP in support of this initiative.

We emphasised the need for a set of universally adopted standards to avoid further fragmentation in sustainability reporting approaches. To achieve this, we recommended a participatory approach to the standard setting process by engaging all major regions like the ASEAN to ensure that key stakeholder needs are considered.

We also highlighted the need for any newly developed sustainability reporting standards to go beyond climate-related disclosures and address other environmental, social and governance concerns.

ISCA Audit Manuals

The ISCA Audit Manual for Standalone Entities (ISCA AMSE), first issued in October 2016 and updated annually, helps audit professionals understand the requirements of Singapore Standards on Auditing and apply them during the audit process. Developed to meet the needs of SMPs in Singapore, the audit programmes and working paper templates aim to improve efficiency and effectiveness of audits.

The ISCA Audit Manual for Group Entities (ISCA AMGE), an illustrative guide to assist audit professionals in carrying out group audits, was first issued in October 2018. It is intended to help audit professionals understand and effectively apply SSA 600 Special Considerations — Audits of Group Financial Statements (Including the Work of Component Auditors) in group audits.

Illustrative Financial Statements

ISCA’s Illustrative Financial Statements helps SMPs and their SME clients understand and apply required disclosures. The 2019 edition was issued in January 2020, before Covid-19 became a global pandemic with significant impact to business activities and economic conditions. As such, ISCA produced an addendum to the IFS 2019 to provide guidance to entities with a 31 December 2019 financial reporting date on the subsequent events disclosures that may be required arising from the Covid-19 outbreak. This addendum provides considerations and illustrations of disclosures when an entity determines the Covid-19 events to be material non-adjusting events.

IFS 2020, which includes disclosure requirements that should be considered when reporting on the financial effects of Covid-19 in financial statements, was issued in January 2021.