Audit Assignment
For a decade, audit firm KPMG had stamped Hyflux's annual reports with a clean bill of health, attesting to the water treatment company's ability to continue to operate.
But with the company now facing the possibility of liquidation after a scuppered restructuring deal on Thursday, its shareholders and investors are asking why auditors failed to flag the risk of Hyflux spiralling into heavy debt.
The Accounting and Corporate Regulatory Authority (ACRA), which enforces Singapore's strict auditing and accounting laws and standards, said in a statement that it will also "assess if further action is warranted".
Corporate governance experts believe the accounting and auditing issue is likely to centre on Hyflux's 2017 books, which the company released in March last year and carry the unqualified opinion of the auditors. It had slipped into the red for the first time in 2017 since its listing in 2001.
Yet two months later in May, Hyflux shocked investors when it filed for bankruptcy protection. Its financial statements were prepared on the basis of going concern - an accounting method that assumes the company will remain solvent and operational indefinitely until proven otherwise.
Required
In recent years, we have witnessed the sudden collapse of large corporations such as Hyflux in Singapore and Carillion in the U.K. Some investors and analysts have attributed this phenomenon to ethical threats impairing auditors' independence and objectivity. Critically discuss the extent that external auditors are truly independent from their clients.
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.