Understanding the different types of Auditing
Auditing is regulated by the MAS to ensure Firms (FA, ILP Insurers, Fund Managers) maintain structural integrity and client safety. These are mandatory checks often hidden in the fine print of the Notices.
Back to Home
Return to the main page.
View Master Numerical List
A key study guide for RES5.
I. Audit of Financial Statements (General FA Firm)
This is the standard financial oversight mandated by the Financial Advisers Regulations (FAR).
| Rule / Concept | Coherent Rule (The Deadline) | Source |
|---|---|---|
| Annual Audit Submission | A licensed FA must submit its audited accounts and auditor's report to the MAS within 5 months after the close of the financial year. | FAR, Chapter 7 |
Why it's Tested:
Tests your memory of the long-term reporting deadline for confirming the firm's minimum capital (S$150k/S$300k) is met.
II. Audit of ILP Sub-Funds (MAS Notice 307)
This is one of the hardest compliance traps, as it outlines two mandatory methods for auditing the complex structure of Investment-Linked Policy (ILP) funds.
| Rule / Concept | The Two Mandatory Audit Methods | Coherent Rule (The Deadline/Figure) |
|---|---|---|
| Audit Method 1 (Financial Statements) | Audit on the financial statements of each ILP sub-fund. | Audit period: 12 months. |
| Audit Method 2 (Internal Controls) | Audit on the internal controls and processes of the ILP sub-funds. | Inaugural Audit Deadline: Completed not later than 3 months after the sub-fund's year-end (for the first time only). |
| Terminated/Matured Fund Audit | For ILP sub-funds that are terminated or matured, an audit certificate must be completed. | Must be completed within 6 months after termination/maturity and sent to MAS within 30 days of completion. |
III. Audit of Sales Quality (The MAS 'Methods' Trap)
This topic is frequently tested in a 'Which method is being described?' format. It's where the MAS outlines how it assesses the quality of advice provided by financial adviser representatives.
| Method Name | Compliance Function (The Coherent Principle) | Source |
|---|---|---|
| Method 1: Independent Sales Audit (ISA) Unit | Internal Audit: The firm's internal unit samples transactions after the sale to check compliance and assigns the Balanced Scorecard (BSC) grade (e.g., checks for proper Fact Find/Disclosure). | FAA-N20 (BSC Framework) |
| Method 2: Mystery Shopping | External Audit: A third-party tester poses as a client to assess the representative's actual ethical conduct, suitability process, and disclosure before and during the sale. | FAA-G14 (Remuneration Framework) |
| Method 3: Supervisory Review | Managerial Audit: The representative's direct manager reviews a sample of advice documents and may conduct call-backs with high-risk clients. | FAA-G08 (Supervision Guidelines) |
| Method 4: Client Feedback (Complaints) | Reactive Audit: Formal recording and analysis of client complaints and customer feedback (FDO 4/5). | GFA-G06 (Fair Dealing Outcomes) |