Marine and offshore companies operate across complex project, vessel and supply chain environments. Their activities may involve vessel ownership or chartering, offshore support, ship repair, marine engineering, equipment supply, port services, subsea work and offshore construction.
These businesses can have long contracts, substantial equipment costs, work performed in multiple locations and transactions in several currencies. Their financial statements may include charter income, project revenue, vessel assets, dry-docking costs, contract balances, claims, foreign currency transactions and estimates of future project costs.
An independent audit examines a company’s financial statements and supporting records. It can provide directors, shareholders, lenders, investors and other stakeholders with greater confidence in the financial information.
Koh & Lim Audit PAC provides audit services for marine and offshore companies in Singapore. We work with vessel operators, marine contractors, offshore service providers, ship repair businesses, equipment suppliers, ship managers and other companies supporting the maritime and offshore sectors.
Independent audit services for marine and offshore 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 marine or offshore company depend on its activities. A vessel operator may have significant vessel assets, charter income and operating costs. A marine engineering contractor may focus on project accounting, work in progress and subcontractor costs. A ship repair company may have customer deposits, repair jobs in progress and claims relating to delays or defects.
Our audit approach begins with understanding the company’s business model, project portfolio, contracts and financial reporting needs. We plan audit procedures around the company’s circumstances and discuss the records required with management.
Why marine and offshore companies may need an audit
A Singapore company may need an audit to meet statutory requirements, comply with a loan or charter agreement, satisfy a parent company’s reporting instructions or provide assurance requested by shareholders, investors or other stakeholders. Banks and other financiers may require audited financial statements when assessing a vessel purchase, working capital facility or refinancing.
Some companies may qualify for an audit exemption, depending on the applicable criteria and their circumstances. ACRA provides guidance on the small company audit exemption framework. Companies should confirm whether they qualify rather than assume that private ownership or a small workforce automatically removes the audit requirement. www.acra.gov.sg
Directors remain responsible for financial reporting. ACRA states that companies that are not audit exempt must present audited financial statements. www.acra.gov.sg The accounting standards applicable to a company depend on its circumstances. www.acra.gov.sg
An audit may also be required by a group reporting policy, shareholder agreement, financing arrangement or customer contract. Marine and offshore businesses should review these documents for reporting deadlines and audit requirements.
Understanding marine and offshore operations
Marine and offshore businesses may earn revenue from vessel chartering, offshore support, ship management, repair and maintenance, marine construction, equipment supply, engineering services or port operations. Some companies provide a complete service package, while others supply labour, equipment or technical services under separate contracts.
During an audit, we may consider how the company:
- Records vessel charter, project or service revenue
- Tracks work performed and milestones achieved
- Accounts for vessel purchases, upgrades and disposals
- Records dry-docking, repair and maintenance costs
- Monitors project costs against approved budgets
- Accounts for subcontractors, crew and port expenses
- Records claims, variations, demurrage and disputed amounts
- Tracks equipment and inventory held at different locations
- Manages foreign currency balances and overseas transactions
- Reconciles operational records with accounting records
Clear records linking contracts, work performed, costs and invoices help management monitor project performance and support the financial statements.
Charter revenue and vessel operations
Vessel operators may earn income from time charters, voyage charters, bareboat arrangements or other operating agreements. The revenue terms may include fixed rates, hire periods, mobilisation charges, fuel arrangements, off-hire provisions or performance conditions.
The audit may involve reviewing charter agreements, invoices, vessel logs, daily reports, delivery and redelivery records, customer confirmations and receipts after year-end. These documents help assess whether revenue was recorded in the correct period and in line with the contract terms.
The company should maintain records of the charter period, vessel availability, off-hire time and any adjustments to the agreed rate. If a vessel is unavailable because of maintenance, repairs or operational issues, management should assess whether this affects revenue, receivables or related disclosures.
For voyage-based arrangements, the audit may consider the relevant voyage records, customer contracts, shipping documents and evidence of service completion. Where the agreement includes several services or performance conditions, management should document how it has assessed the accounting treatment under the applicable financial reporting framework.
Offshore project revenue and work in progress
Offshore and marine engineering projects can span several reporting periods. The company may provide design, installation, fabrication, subsea work, inspection, maintenance or commissioning services under a single contract.
Revenue recognition depends on the contract terms and applicable accounting requirements. During the audit, we may review signed contracts, approved variations, project schedules, progress reports, customer certificates, timesheets and invoices. The evidence helps assess what work was performed, whether milestones were achieved and whether revenue and costs were recorded in the appropriate period.
Work in progress may include labour, materials, vessel time, equipment and subcontractor charges relating to projects that are not yet complete. The audit may examine how these costs are assigned to projects and whether they remain recoverable.
Project estimates should be updated when circumstances change. Weather delays, vessel downtime, equipment failures, changes in scope, cost increases or customer disputes may affect the expected total cost and profitability of a contract. Management should maintain current forecasts and consider whether a loss or other adjustment needs to be recognised under the applicable framework.
Variations, claims and demurrage
Marine and offshore contracts may change after work has started. A customer may request additional services, modify technical requirements, extend a project or change a vessel’s deployment. Contractors may also submit claims for delays, standby time, additional work or cost increases.
The audit may include reviewing variation orders, project correspondence, meeting records, daily reports, claim submissions and customer approvals. A claim submitted to a customer is not automatically an accepted or recoverable amount. The company should distinguish between approved variations, claims awaiting assessment and disputed balances.
Demurrage, off-hire and standby charges may also affect reported revenue or costs. Management should retain records supporting the relevant time periods, contractual basis and calculations. These may include vessel logs, port records, operational reports and customer correspondence.
If a claim remains unresolved at year-end, management should assess the accounting treatment based on the available evidence and applicable requirements. Clear documentation helps the audit team understand the basis for any amount recorded.
Vessel assets, equipment and dry-docking
Vessels, offshore support equipment, cranes, subsea tools, engines and marine systems can represent major assets. The audit may examine vessel purchase documents, registration records, asset registers, depreciation policies, upgrade costs and disposals.
The company should maintain records showing the cost, ownership, location and operational status of each significant asset. Where equipment is transferred between vessels, projects or locations, asset records should be updated.
Dry-docking, major repairs and vessel upgrades may involve substantial costs. The accounting treatment depends on the nature of the work, the company’s policy and the applicable reporting framework. The audit may review invoices, work scopes, technical reports, maintenance schedules and management’s assessment of whether costs should be expensed or capitalised.
If a vessel is laid up, damaged, sold or no longer expected to generate the anticipated benefits, management may need to consider whether its carrying amount should be reviewed. Operating forecasts, utilisation plans, charter prospects and subsequent events may provide relevant evidence.
Crew, subcontractors and operating costs
Marine and offshore companies may incur crew costs, marine fuel, port charges, insurance, vessel maintenance, catering, travel, mobilisation and demobilisation expenses. Contractors and subcontractors may provide engineering, diving, inspection, transport or specialist technical services.
The audit may examine payroll records, crew schedules, service agreements, subcontractor invoices, timesheets, purchase orders and operational reports. These records help assess whether costs are supported, complete and recorded in the correct period.
Services received before year-end may not be invoiced until later. The company should review project records, supplier statements and subsequent invoices to identify costs that relate to the reporting period. For larger projects, cost reports and project forecasts may help identify unbilled subcontractor work or missing accruals.
Where costs are shared across vessels or projects, management should apply a consistent allocation method and maintain supporting calculations. This helps provide reliable project margin information and supports the financial statement amounts.
Inventory, spares and equipment held at different locations
Marine companies may hold spare parts, fuel, consumables, safety equipment and technical components at a vessel, warehouse, port or third-party location. The company should maintain records showing the quantity, ownership and location of material items.
The audit may include reviewing inventory listings, stocktake records, purchase documents, vessel stores reports and confirmations from third-party warehouses. The company should distinguish its own stock from customer-owned equipment or items held on consignment.
Spare parts may become obsolete because a vessel is upgraded, a system is replaced or a manufacturer discontinues a component. Management should review ageing and usage records and consider whether an adjustment is required for items that are damaged or no longer expected to be used.
Where equipment is deployed offshore or held at remote sites, clear movement records can help reconcile stock and equipment between locations. These records may include dispatch notes, stores requisitions, transfer documents and usage reports.
Foreign currency and international transactions
Marine and offshore businesses often transact with overseas customers, suppliers, shipyards, ports and subcontractors. Contracts may be denominated in currencies other than Singapore dollars, and vessels or projects may operate across several jurisdictions.
The audit may review foreign currency invoices, bank accounts, receivable and payable balances, exchange rates and related gains or losses. The company should maintain consistent records showing transaction dates, currencies, rates used and settlement amounts.
For companies with overseas branches or subsidiaries, group reporting may include intercompany balances, consolidation adjustments and overseas financial information. Management should reconcile material intercompany transactions and retain supporting documents for significant cross-border arrangements.
Borrowings, leases and financing arrangements
Marine and offshore businesses may use bank loans, asset financing, lease arrangements or shareholder funding to acquire vessels and equipment. The audit may include reviewing loan agreements, repayment schedules, interest calculations, security documents and borrowing covenants.
Management should monitor loan maturities, refinancing plans and compliance with financing terms. If a lender has set conditions relating to asset values, operating performance or financial ratios, the company should maintain schedules supporting its calculations.
Vessel or equipment leases may require specific accounting treatment. The audit may examine lease contracts, payment schedules, renewal options and management’s accounting calculations.
If the company has difficulty refinancing, experiences prolonged vessel downtime or faces significant project losses, directors may need to consider the effect on the company’s financial position and ability to continue operating. These matters may also affect financial statement disclosures.
Audit preparation for marine and offshore companies
Preparing records before the audit begins can help the engagement proceed more efficiently. Companies may find it useful to organise:
- The trial balance and draft financial statements
- Bank statements and reconciliations
- Vessel and project revenue schedules
- Charter agreements and project contracts
- Vessel logs, daily reports and customer certificates
- Project budgets, cost reports and forecasts
- Vessel, equipment and dry-docking schedules
- Crew, subcontractor and supplier records
- Inventory and spares listings by location
- Foreign currency calculations and overseas balances
- Loan, lease and security documents
- Details of claims, disputes, guarantees and commitments
A staff member who can coordinate audit requests and explain operational records can help reduce delays. Management should also prepare explanations for significant changes in vessel utilisation, project margins, maintenance costs, claims and outstanding receivables.
Our audit process
Our audit process starts with understanding the company’s activities, project portfolio, vessel arrangements, accounting systems and reporting timetable. We discuss major developments during the year, such as vessel acquisitions, new charters, project delays, refinancing or changes in operations.
We then plan the audit and agree on the information needed. Procedures may include testing transactions, examining contracts, reviewing project estimates, confirming balances and assessing financial statement 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 the audit depends on the readiness of the company’s records, the number of vessels and projects, the availability of operational information and the resolution of outstanding matters. Early planning is helpful for businesses with several projects, overseas operations or a group reporting deadline.
Choosing an auditor for a marine or offshore company
When choosing an auditor, a marine or offshore company may want to consider whether the audit team will take time to understand vessel operations, charter terms, project accounting and equipment records. Clear communication and an agreed timetable can help the finance and operations teams prepare.
An audit does not replace management’s responsibility for accurate records, operational controls, vessel maintenance or safety processes. It is an independent examination of the company’s financial statements based on the audit evidence available.
Audit services for marine and offshore companies in Singapore
Koh & Lim Audit PAC provides audit services for marine and offshore companies in Singapore, including vessel operators, offshore contractors, marine engineering businesses, ship repair companies and maritime service providers. We aim to understand each company’s activities 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 marine or offshore company in Singapore.