Logistics and transportation companies operate in a fast-moving environment involving freight, warehousing, delivery, fleet management, customs processes, subcontractors and cross-border transactions. Their financial statements may include large volumes of sales and purchases, vehicle and equipment assets, lease liabilities, fuel costs, customer deposits, freight accruals and claims for damaged or delayed goods.
An independent audit examines a company’s financial statements and supporting records. It can give directors, shareholders, lenders, investors and other stakeholders greater confidence in the financial information.
Koh & Lim Audit PAC provides audit services for logistics and transportation companies in Singapore. We work with freight forwarders, transport operators, courier businesses, warehouse operators, distribution companies, fleet owners and other businesses involved in moving or storing goods.
Independent audit services for logistics businesses
An audit involves gathering evidence to assess whether a company’s financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework and relevant requirements.
The audit needs of a logistics business depend on how it earns revenue, whether it owns or leases vehicles, whether it uses subcontracted carriers, and how it handles goods on behalf of customers. A freight forwarder may have different accounting considerations from a fleet operator, courier company or warehouse provider.
Our audit approach begins with understanding the company’s services, systems, contracts and reporting requirements. We plan audit procedures based on the business and the areas of the financial statements that require attention. We also communicate information needs clearly so the finance and operations teams can prepare relevant records.
Why logistics and transportation companies may need an audit
A Singapore company may need an audit to meet statutory requirements, comply with financing terms, satisfy its parent company’s reporting instructions or provide assurance requested by shareholders, investors or business partners. A lender may also require audited financial statements as a condition of a loan or financing facility.
Some companies may qualify for an audit exemption, subject to the applicable criteria and their circumstances. ACRA provides guidance on the small company audit exemption framework. Companies should check whether they qualify rather than assume that private ownership or a small workforce automatically means an audit is not required. www.acra.gov.sg
Directors remain responsible for the company’s financial reporting. ACRA states that companies that are not audit exempt must present audited financial statements. www.acra.gov.sg The accounting standards that apply depend on the company and its circumstances. www.acra.gov.sg
An audit may also be required under a group reporting policy, shareholder agreement or commercial arrangement. Logistics businesses should review their financing documents and customer or group requirements for audit deadlines and reporting conditions.
Understanding logistics and transportation operations
Logistics businesses may earn income from freight forwarding, delivery, warehousing, transport, distribution, customs clearance, packing, handling and supply chain management. Some provide several services under one customer contract, while others charge separately for each activity.
During the audit, we may consider how the company:
- Records freight, delivery, storage and handling revenue
- Tracks jobs, shipments and proof of delivery
- Separates revenue from amounts collected for third parties
- Records fuel, tolls, repairs and vehicle operating costs
- Accounts for subcontracted carriers and service providers
- Tracks goods held or transported on behalf of customers
- Records vehicles, warehouse equipment and leases
- Estimates freight, claims and supplier costs at year-end
- Manages customer balances and transport-related disputes
- Reconciles operational systems with accounting records
Clear links between operational records and accounting entries can help a company monitor shipment profitability, delivery costs, fleet use and customer performance.
Freight, delivery and service revenue
Logistics revenue may be charged per shipment, delivery, container, kilometre, pallet, storage period or service contract. The timing of revenue recognition depends on the contract terms and the applicable financial reporting framework.
The audit may involve reviewing customer contracts, rate schedules, shipment records, delivery orders, proof of delivery, warehouse records and invoices. These documents can help assess whether the service was provided and whether the amount was recorded in the right period.
Some customers are billed only after a shipment is delivered or a service milestone is completed. In other arrangements, the company may bill at the time of booking, dispatch or receipt of goods. The company should maintain records that show what service was performed and when the contractual requirements were met.
Cut-off can be important for shipments that cross the financial year-end. A shipment may be collected before year-end but delivered later, or a warehouse service may cover a period extending into the next financial year. The company should apply its accounting policy consistently and retain evidence to support the period in which revenue is recorded.
Principal, agent and third-party charges
Freight forwarders and logistics providers may arrange services performed by airlines, shipping lines, hauliers, customs brokers or other service providers. The company’s role in each arrangement can affect how it records revenue and related costs.
In some contracts, the logistics company may be responsible for delivering an integrated service to its customer. In other arrangements, it may arrange a service on the customer’s behalf and earn a fee or commission. The accounting treatment depends on the contract terms and the company’s responsibilities.
The audit may review customer and supplier contracts, invoices, booking documents and shipment records to understand the company’s role. Management should be able to explain whether amounts billed to customers represent the company’s own revenue or amounts collected and paid to other parties.
Where a customer pays an advance or deposit, the company should track the related obligation and determine when it becomes revenue. When the company pays suppliers before charging the customer, it should maintain records that connect the payment to the relevant shipment or contract.
Freight, fuel and subcontractor costs
Logistics companies may incur costs for fuel, tolls, port charges, freight, driver wages, repairs, loading, storage and subcontracted transport. These costs can vary with shipment volume, route, distance and service requirements.
The audit may examine supplier invoices, fuel card statements, vehicle logs, toll records, driver timesheets, subcontractor claims and shipment documents. These records help assess whether expenses are complete, supported and recorded in the appropriate period.
Subcontracted carriers may submit invoices after completing a delivery or transport service. The company should identify services received before year-end even when the invoice has not yet arrived. Operational records, delivery confirmations and purchase order data can help management estimate and record outstanding costs.
Where fuel, freight or subcontractor costs are allocated across shipments, the company should apply a consistent method and retain supporting calculations. This can help management assess job margins and explain material changes in gross profit.
Vehicles, fleet assets and equipment
Transport operators may own or lease trucks, vans, buses, forklifts, trailers and other equipment. The audit may examine the fixed asset register, purchases, disposals, depreciation, asset locations and evidence of use.
The company should keep records showing when each significant vehicle or piece of equipment was acquired, placed into service and disposed of. Maintenance histories, vehicle listings and insurance records can help support the asset register.
Where vehicles or equipment are leased, the company may need to apply the relevant lease accounting requirements. The audit may review lease agreements, payment schedules, renewal options and management’s accounting calculations.
If a vehicle is damaged, idle, no longer roadworthy or no longer used in the business, management may need to consider whether the related asset balance should be reviewed. Fleet records should also be checked for disposals or vehicles that have been written off but remain on the accounting register.
Warehouses, goods in transit and customer property
Warehouse operators may store goods owned by customers, while transport companies may carry goods that remain the customer’s property. The company should distinguish customer-owned goods from its own inventory and maintain records that support the quantities and locations held.
The audit may consider warehouse management reports, goods received records, dispatch notes, stock movement data and customer confirmations. Where the company has custody of goods, clear procedures can help identify what has been received, stored, moved or released.
Some logistics businesses also hold their own consumables, packaging, spare parts or resale goods. These should be identified separately from goods held on behalf of customers. If the company has inventory at third-party locations, it should maintain appropriate supporting records.
Goods in transit may require attention around year-end. Shipping documents, delivery terms, dispatch records and customer confirmations can help establish whether goods belong to the company or a customer and how related transactions should be recorded.
Trade receivables, claims and customer disputes
Logistics companies may have many customer accounts and a high volume of invoices. The audit may review customer ageing reports, payment history, disputed invoices, credit notes and receipts after year-end to assess whether receivables are supported and recoverable.
Disputes may arise from delayed deliveries, damaged goods, inaccurate weight or volume calculations, service failures or extra charges. The company should maintain a record of significant disputes and assess whether they could affect the amount due from the customer or create a liability.
Claims for damaged or lost goods may involve customers, insurers, carriers and subcontractors. The audit may review claim documentation, insurance correspondence, settlement offers and payments received or made. Management should assess whether a receivable, provision or disclosure is appropriate based on the facts and applicable accounting requirements.
A company should also review credit notes issued after year-end. If a credit note relates to a service or delivery before the reporting date, it may affect the financial statements for that period.
Foreign currency and cross-border activity
Logistics businesses commonly transact with overseas customers, shipping lines, airlines, suppliers and subcontractors. Transactions may be denominated in several currencies and settled at different exchange rates.
The audit may examine foreign currency sales, purchases, bank accounts and year-end receivable or payable balances. We may review exchange rates used, settlement records and calculations of foreign currency gains or losses.
Where a company has overseas subsidiaries or branches, group reporting may involve intercompany balances, overseas financial statements and consolidation adjustments. Management should maintain clear reconciliations between related entities and retain supporting documents for material cross-border transactions.
Loans, cash flow and financing
Transport and logistics businesses may need financing to purchase vehicles, equipment, warehouse space or working capital. The audit may review loan agreements, interest charges, security arrangements, repayment schedules and any borrowing covenants.
Cash flow can be affected by fuel prices, vehicle repairs, customer payment terms, shipment volumes and supplier settlement terms. Management should monitor cash balances and financing needs, particularly where revenue is concentrated among a few large customers or depends on seasonal demand.
If the company faces persistent losses, overdue receivables, rising operating costs or difficulty refinancing, directors may need to consider the effect on the company’s financial position and its ability to continue operating. These matters may also affect financial statement disclosures.
Audit preparation for logistics and transportation companies
Preparing key records before the audit begins can help the engagement proceed efficiently. Companies may find it useful to organise:
- The trial balance and draft financial statements
- Bank statements and reconciliations
- Revenue reports by customer, route, shipment or service
- Customer contracts and pricing schedules
- Shipment records, delivery orders and proof of delivery
- Supplier statements and subcontractor invoices
- Freight, fuel, toll and vehicle cost schedules
- Fleet asset and lease registers
- Warehouse records and goods-in-transit reports
- Receivable ageing, claims and dispute schedules
- Loan agreements, security documents and covenant calculations
- Details of guarantees, commitments and significant incidents
A staff member who can coordinate audit requests and explain operational systems can help reduce delays. Management should also prepare explanations for unusual changes in shipment volumes, fuel costs, gross margins, claims and customer balances.
Our audit process
Our audit process begins with understanding the company’s services, operational systems, customer contracts and reporting timetable. We discuss significant developments during the year, such as new routes, fleet changes, major customer contracts, warehouse expansions or acquisitions.
We then plan the engagement and agree on the information needed. Audit procedures may include testing transactions, reviewing operational reports, examining contracts, confirming balances and assessing financial statement estimates and disclosures.
At the end of the audit, we discuss significant findings and proposed adjustments with management. We issue the appropriate auditor’s report based on the audit evidence obtained and the applicable professional requirements.
The timing of an audit depends on the readiness of the records, the number of locations, the company’s transaction volume and how quickly outstanding questions are resolved. Early preparation is especially helpful for businesses with several warehouses, overseas operations or a group reporting deadline.
Choosing an auditor for a logistics company
When choosing an auditor, a logistics or transportation company may want to consider whether the audit team will take time to understand its services, shipment records, fleet arrangements and subcontractor relationships. Clear communication and an agreed timetable can also help the finance and operations teams prepare.
An audit does not replace management’s responsibility for accurate records, fleet controls, customer service processes or operational safety. It is an independent examination of the financial statements based on the evidence available.
Audit services for logistics and transportation companies in Singapore
Koh & Lim Audit PAC provides audit services for logistics and transportation companies in Singapore, including freight forwarders, transport operators, couriers, warehouse providers, fleet owners and distribution businesses. We aim to understand each company’s operations and conduct the audit with professionalism and care.
Whether your company needs an audit for statutory compliance, group reporting, financing or stakeholder requirements, we can discuss the engagement scope and the records needed to begin. Contact Koh & Lim Audit PAC to arrange a discussion about audit services for your logistics or transportation company in Singapore.