Singapore: Barings Revisited — Auditors and the Detection of Corporate Fraud

Publication Date01 Apr 1997
AuthorBenny S. Tabalujan
SubjectAccounting & finance
Journal of Financial Crime Vol. 5 No. 2 International
Singapore: Barings Revisited Auditors and the
Detection of Corporate Fraud
Benny S. Tabalujan
In recent times, there has been some disquiet
within certain sectors of the Singapore business
community over the role of auditors in detecting
corporate fraud. The cause of this concern can
perhaps be attributed partly to the Barings collapse
in February 1995 and the subsequent suggestions
that the auditors of the Barings subsidiary in Sin-
gapore, Barings Futures Singapore Pte Ltd (BFS),
may have been negligent in their audit work. More
recently, in mid-1996, a substantial locally listed
company, Amcol Holdings Ltd (Amcol), was
placed under judicial management amid rumours
alleging possible misdeeds by senior executives and
directors. The Amcol saga has, once again, focused
some attention on the role of auditors and their
duty to detect fraud in company accounts.1
This article discusses the salient aspects of the
Barings collapse with a view to examining their
possible effects on the auditing profession in Sin-
gapore. The discussion is confined to the work of
auditors in relation to statutory audits required by
each company pursuant to s. 207(1) Companies
Act (Chapter 50) ('Companies Act').2
The article begins with a short description of the
auditing profession in Singapore and how it is
regulated. The next section outlines the key facts
of the Barings collapse, focusing particularly on the
role of the BFS auditors. An analysis is then
undertaken as to the arguments raised by two
camps on the role of auditors in detecting cor-
porate fraud: those who claim that audit failure is
to blame; and those who claim that management
failure is to blame. Finally, some recommendations
are offered with a view to resolving these issues.
The legislative framework governing auditors in
Singapore is found in the Accountants Act (Chap-
ter 2A) ('Accountants Act').3 The Accountants Act
establishes the Public Accountants Board (PAB)
which functions as the overall regulatory body for
auditors in Singapore. The statute also recognises
the Institute of Certified Practising Accountants of
Singapore (ICPAS)4 as the professional body for
accountants in Singapore.
At this point, it is important to clarify the way
the terms 'public accountant', 'auditor' and
'accountant' are used in Singapore. Essentially,
anyone who has received formal training in
accountancy may call himself an accountant. Typi-
cally, such a person has tertiary academic qualifica-
tions such as a Bachelor of Accountancy. Others
have a professional qualification, such as member-
ship of the UK-based Chartered Association of
Certified Accounts (ACCA), which is obtained
after having successfully completed the course of
study stipulated by the professional body.
There is no provision in the Accountants Act
which requires all accountants in Singapore to be
members of ICPAS or to be registered with the
ICPAS itself has four classes of members:
practising members, non-practising members, hon-
orary members and provisional members. Hon-
orary membership, as implied by the title, is
granted in exceptional circumstances and is not
relevant for this discussion. Provisional member-
ship is granted to individuals, such as recent grad-
who have yet to fulfil all the requirements
for what may be called full membership.
A full member of ICPAS is either a practising
member or a non-practising member. Practising
members are those who practise solely as public
accountants. The definition of 'public accountant'
is found in the PAB Rules which are issued pur-
suant to s. 57 Accountants Act. Rule 7 of the PAB
Rules state that no person is entitled to be regis-
tered as a public accountant unless he satisfies the
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