A contractor walked into my office with audited accounts that looked neat and clean.

On audited accounts, the accounting policy looked fine.
“Revenue is recognised when services are performed and the right to receive payment is established.”

Standard line. Nothing alarming.

But the moment I opened the file, I froze.

But when we started work,
the numbers told a different story.
Revenue was treated like trading sales.
As if they were selling Milo tins in a sundry shop.

Revenue was recognised on billing.
Not project progress.
Not costs incurred.
Just invoice = revenue.

For a contractor for big number,
this is not just wrong.
It’s a disaster.

And here’s the painful truth : contractors cannot recognise revenue this way.

What the accounting standards say :
Contractor revenue must follow percentage-of-completion.

If you build 40% of the project,
you recognise 40% of the revenue.
Simple.

If the outcome cannot be measured reliably, you only recognise costs that are recoverable.

Anything billed ahead of work is a contract liability.
Anything earned but not billed is a contract asset.

This is basic.
Every accountant knows it.
Every auditor knows it.

So why was this signed off like a trading company?

Back to the ex-auditor,
when management insists on billing basis,
the auditor only has two options …
Convince management to change.
Or qualify the audit report.

But in this case?
The report was clean.
No qualification.
Nothing.

This is not an academic debate.
It has real consequences.

Financial statements are misstated on timing difference.

And worst of all.
IRB can walk in, launch a tax audit, and ask:
“Why is your revenue recognised on billing instead of project progress?”
How to defend that?
Very difficult.

I kept asking myself.
How could an ex-auditor treat contractor revenue like Milo or sayur sales?

This is not a small difference in judgment.
This is a fundamental mistake.

The painful reminder I learn from this lesson :
Never accept an engagement without checking compliance with the laws and standards.
Never assume prior year audited accounts are correct just because they look neat.

Because sometimes,
what looks clean outside hides a storm inside.

And when IRB comes knocking,
it’s too late to say,
“I didn’t know.”

PS : Authored by Mr Koh Teck Peng, the group principal, in his personal LinkedIn post.