What is an SPC (Special Purpose Company) Audit? How to Use a Certified Public Accountant

A special purpose company (SPC) is a legal entity established to achieve a specific business purpose. It is mainly used as a corporate form specialized for a specific business purpose, such as real estate projects, securitization, asset liquidation, and project finance.

These businesses aim to improve the efficiency of risk management and fundraising, but the operation of an SPC requires unique audits and accounting procedures.

The Importance of SPC Audits

Since SPCs are operated based on a specific purpose, their financial status and transactions differ in many ways from those of ordinary companies and require specialized audits. SPC audits are conducted for the following purposes:

Ensuring transparency

Since SPCs operate businesses in line with specific objectives, it is important for them to provide transparent financial reports to investors and other stakeholders. Through audits, we verify the reliability of financial statements and provide reassurance to investors and financial institutions.

Verifying legal compliance

SPCs often operate under complex legal requirements and contracts, and audits can help ensure these are properly adhered to and minimise risk.

Strengthening risk management

The role of certified public accountants

In an SPC audit, certified public accountants not only verify financial statements, but also support the soundness of the company in various ways. Their main roles are as follows:

Financial statement audit

A certified public accountant will verify that the financial statements provided by the SPC are accurate and reliable, including verifying that the contents of the income statement and balance sheet are properly stated in accordance with legal standards.

Internal Control Assessment

The operation of an SPC requires proper internal control. Certified public accountants evaluate whether the internal control system is sound and check whether there is any fraud or incorrect accounting practices. This will improve the efficiency of the SPC's operation and reduce risks.

Asset liquidation and securitization support

Since SPCs often securitize assets or liquidate assets for specific purposes, certified public accountants always check whether the process is being carried out properly. In addition, asset valuation and risk analysis are also important roles.

Legal Compliance Support

Certified public accountants play an important role in checking whether SPCs comply with relevant laws and regulations, especially as legal requirements regarding securitization and asset liquidation are complex, and ensuring that operations are conducted in accordance with the law.

Investor reporting

Reports that SPCs provide to investors (e.g. annual reports and audit reports) require accurate financial data. Certified public accountants ensure that these reports are transparent and reliable, providing investors with reliable information.

Benefits of SPC audits

There are many benefits to undergoing an SPC audit.

• Increased transparency and trust
  By undergoing an audit, the SPC's financial statements will be made reliable, providing reassurance to investors and financial institutions.
• Strengthening risk management
  This will improve internal controls and strengthen measures to prevent fraud, leading to long-term risk reduction.
• Ensuring legal compliance
  Ensure that your SPC's operations comply with legal requirements and reduce the risk of breaching the law.
• Asset due diligence
  Proper asset valuation helps investors and other interested parties avoid misunderstandings about asset value.

Points to consider when choosing a certified public accountant

When requesting an SPC audit, it is very important to choose a reliable certified public accountant. If you do not choose the right certified public accountant, it may affect the quality of the audit and ultimately pose a risk to the operation of the SPC. So, how should you choose a certified public accountant? Please refer to the following points.

Choose a Certified Public Accountant with Experience in SPC Audits

SPC audits are different from general corporate audits and require special knowledge and experience. It is important to choose a CPA who understands the characteristics of SPCs, such as asset securitization, project finance, and risk management, and has experience in similar audits in the past. This will ensure that the audit goes smoothly and that you receive professional advice.

Value transparency and authenticity

The results of the audit are directly related to the reliability of the SPC. Certified public accountants are required to accurately evaluate financial statements and internal control systems and prepare highly transparent reports. Choose a certified public accountant who can demonstrate reliability to investors and stakeholders without raising doubts about the audit results.

Familiar with legal knowledge and the latest regulations

The operation of an SPC involves many legal regulations. In particular, regarding securitization and asset liquidation, it is necessary to comply with regulations from the Financial Services Agency and tax authorities. Certified public accountants are required to be familiar with the latest laws and regulations and have the ability to ensure legal compliance.

Ability to manage risk

In auditing SPCs, the perspective of risk management is extremely important. Certified public accountants are required to be able to identify risks that may be present in the operation of SPCs and propose effective risk management measures. If risk assessment is not carried out properly, it may cause future trouble, so be sure to choose a certified public accountant with excellent risk management capabilities.

Communication skills and flexibility

The audit process needs to proceed smoothly and quickly. Therefore, it is important to choose a CPA who can respond flexibly and communicate appropriately when problems arise. By choosing a CPA who can explain the audit results in an easy-to-understand manner and can respond quickly, the audit can be carried out efficiently.

summary

SPC audits play a very important role in supporting the operation of special purpose companies. Choosing the right certified public accountant will help the operation of the SPC proceed smoothly and maintain the trust of investors and stakeholders.