Roles and Responsibilities of an Auditor

A company has the duty by law to ensure that the company’s accounts are in perfect order. Company accounts are supposed to accurately portray the financial position of the company to the members of the company and to the public.














To achieve this goal, the Companies Act of Singapore provides that:

- The directors of a company are duty-bound to appoint an auditor within 3 months of incorporation. The directors can appoint an individual or an auditing firm.

- The auditor will then hold office until the conclusion of the next general meeting. On conclusion of the general meeting, the members can either choose to reappoint the current auditor or to appoint a new one.

- The members of the company reserve the right to remove an auditor via the process stipulated in the Act.

- An auditor can also choose to resign from his/her post as auditor of the company.

Upon appointment, the auditors are entitled to have access to the books and records of the company at any time. Auditors are also entitled to ask for any clarifications from company officers in the exercise of their duties. It is actually a criminal offence for a company officer to knowingly make a false statement to an auditor of the company.

Some companies are not required to appoint auditors. The Companies Act provides that a dormant company and a small company are exempt from the duty to appoint auditors. However, it also gives the Registrar the power to compel the exempt companies to file their financial statements.

Who is eligible for appointment as an editor?

The law provides that a company can appoint an individual or a firm to be an auditor. The following, however, cannot be appointed as editors.

1. An officer or employee of the company.
2. (In a partnership) One of the partners in the partnership.

If the above were allowed to be auditors, there would be many instances where the director of a company is also appointed to be the auditor. Other people that cannot be appointed as directors include:

1. Body corporates.
2. Persons of unsound mind.
3. An undischarged bankrupt.

An auditor has to be recognized by law and has to be a qualified auditor. It is a criminal offence for a person who isn’t qualified to act as an auditor of the company.

Duties and Responsibilities of an Auditor.

The auditor’s job is basically to “study” how the company has managed its finances. This is the general duty of an auditor. To fully achieve this duty, the auditor has to perform the duties set out to him by legislation.

1. Duty to prepare an auditor’s report

The auditor is required to provide an accurate report regarding the financial statements prepared by the directors. In his report, he is supposed to state whether the financial statement:

- is a true representation of the company’s financial position.
- has been prepared in accordance with the relevant reporting framework.
- has been prepared in accordance with the law.
- The auditor has the duty to report certain irregularities to the Minister or to the Registrar.

2. Duty of auditors to trustees for debenture holders

The auditor has the duty to send reports to the trustees for debenture holders in every accounting action that involves the debentures. It is a crime for the auditor to fail to perform this duty.













3. Duty to carry out investigations

The auditor is entitled to carry out any investigations that will enable him to form an opinion on:
Whether the company keeps adequate financial records.
Whether the financial statements and the accounting records are in agreement.

The auditor is entitled to provide in his report whether, in his opinion, he was provided with all the adequate information required to draft a conclusive auditor's report.

Duties under common law.

Singapore’s legal system has the following sources of law:

- The Constitution.
- Legislation.
- Subsidiary legislation.
- Judge-made law.

Singapore is reliant on judge-made law to supplement legislation and the constitution. Judge-made law has had a direct influence on the duties and responsibilities of auditors. Over time, courts have established other duties that bind auditors.

1. Duty to identify and perform his duties according to the Companies Act and the company’s articles.

This allows the auditor to perform his duties as provided for by the law and by the company’s constitution.

2. Duty to perform tasks without a prejudicial mind.

This means that the auditor should approach his task with an open mind. The courts are guided by the following principle, “He (Auditor) is a watchdog but not a bloodhound.” The should not assume that the company is dishonest as he carries out his duties as an auditor.

3. Duty to inspect company securities.

It is the duty of the auditor to check on the status of company securities. He has the freedom to decide how he wishes to perform this duty. If he discovers that the company’s securities are not in order, he has to come up with a remedy to the problem.

4. Duty to exercise care.

The auditor should ensure that he is cautious as he carries out his duties. He is bound to take reasonable care and to observe professionalism as he carries out his duties.

5. Duty to act honestly.

The auditor must ensure that he remains truthful. He must not ratify anything that he believes to be false. In addition, he must do enough investigation before approving the company's finances.













6. Duty to provide professional advice

The auditor has the duty to provide his professional advice whenever he is required to do so.

Liability for failure to perform duties

- The auditor is liable to the company if he is guilty of the following actions.

- Professional negligence- The company can sue for damages if the auditor acts contrary to the expected professional standards.

- Misfeasance- This is where the auditor wrongfully exercises his powers.

- The auditor can also be found liable to third parties if the third parties suffer loss as a result of a defective audit.


Auditors are essential to the running of a company even though they are technically not officers of the company. The members need the auditor to confirm the true financial status of the company. The auditor hold the directors accountable for their financial decisions.

In addition, before buying company shares, most potential shareholders review the auditor’s reports. An auditor's report is extremely beneficial to financially stable companies since it attracts shareholders.

It is, therefore, crucial that a director performs his duties and responsibilities as required by law.


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