ACC306:Advanced Assurance and Attestation CASE COMPANY The case company is OTS Holdings Ltd (OTS/Company/Group), a food manufacturing group specializing in ready-to-eat and ready-to-cook meat products. It was listed on the Singapore Exchange (SGX) in June 2021 and is audited by RSM Chio Lim LLP(RSM). A short company backgro

ACC306:Advanced Assurance and Attestation


The case company is OTS Holdings Ltd (OTS/Company/Group), a food manufacturing group specializing in ready-to-eat and ready-to-cook meat products. It was listed on the Singapore Exchange (SGX) in June 2021 and is audited by RSM Chio Lim LLP(RSM).

A short company background for OTS is provided below. However, to complete this GBAwell, you are expected to research for relevant additional information about OTS and audit considerations relating to the ongoing pandemic situation in OTS’ markets.

The OTS Initial Public Offering (IPO) document dated 8 June 2021 is provided on Canvas for your reference. You will find additional relevant and detailed information in the sections:

  • “Risk factors”(pp46-73);
  • “Management’sdiscussionandanalysisofresultsofoperationsandfinancialposition”(pp100-125);
  • “General information on our group” (pp133-185);
  • “Prospects, business strategies, and future plans”(pp186-195).

Company background

Source: OTS IPO document dated8 June 2021

OTS is one of the largest meat product manufacturing companies in Singapore. It was established in 1993, and its experienced management team still includes family members of the original founders. The company year-end in June 30.

The Group specializes in ready-to-eat and ready-to-cook meat products. It has two separate facilities (for halal and non-halal food products) that can each manage and process up to four product categories – chilled, frozen, dried, and shelf-stable ready-to-eat and ready-to-cook meat products.

OTS holds trademarks for several strong brands that have become household names over thepast20years. More recently, the Group entered the halal food market with a retail brand and a foodservice brand. There are currently more than 1,100 distinct products over 13 main product types under OTS’s six house brands. It also produces seasonal food products for the Chinese NewYear and Christmas festive periods, both under its brand s and as a contract manufacturer. Generally, higher sales are recorded in the period from December to February, due to higher sales for the festive periods.

Revenue& Profitfor financial years2018–2020 & firsthalf year 2020& 2021

Full-year to Half-year to










Revenue 23.9 26.3 34.5 14.6 21.1
Cost of sales 18.5 19.6 24.3 10.5 14.5
gross profit 5.4 6.7 10.2 4.2 6.7
Profit for period 1.4 1.6 3.6 0.8 2.9

 OTS did not experience any material disruptions during and after the Circuit Breaker in Singapore from April to June 2020, as food manufacturing services are considered essential in nature. Its cost of sales comprise:

  • Raw material costs–the cost of meat and poultry products, flour, eggs, spices, vegetables, and packaging materials;
  • Direct labor costs – wages and salaries of employees directly involved in the production process;
  • Manufacturing overheads – depreciation, repair, and maintenance of plant and equipment, fuel, utilities, outsourcing fees charged by a third-party contract manufacturer and miscellaneous operating expenses;
  • The purchase cost of third-party food products is related to its distribution business.

Othercostschargedinarrivingatprofitfortheperiodcomprise: other income/gains and losses, the share of results of its joint venture, marketing and distribution costs, administrative expenses, finance costs, and tax.

OTS has established various distribution channels including supermarkets, convenience stores, provisions shops, restaurants, hotels, and e-commerce. Its key markets are in Singapore and Malaysia, but the Group’s products are sold in more than 25 countries, including Brunei, Myanmar, India, and the European Union.

Revenuebybusiness segments









Moderntrade(majorsupermarkets) 35.9 32.2 31.7 24.7
General trade (convenience stores, provision shops, wholesalers) 34.1 37.2 40.8 48.7
Food services (hotels, restaurants, hawker centers, food courts, caterers, F&Bstores) 22.1 22.0 17.7 15.3
Other(exports,e-commerce) 7.9 8.6 9.8 11.3
Total $23.9m $26.3m $34.5m $21.1m

Revenue by geographical segments











Singapore 21.8 22.9 25.5 11.7 12.3
Malaysia 1.4 2.4 7.4 2.3 7.5
Others 0.7 1.0 1.6 0.6 1.3
Total 23.9 26.3 34.5 14.6 21.1

 The Group’s manufacturing facilities are technology-driven, using ERP (first implemented in2003, with subsequent upgrades and improvements) to connect all aspects of the production process to track and monitor purchasing through production, inventory, and sales. OTS also has a dedicated in-house R&D team to create better products by responding to market trends and customer tastes and using technology to enhance recipes as well as increase production efficiency and product quality.

Industry overview and prospects

In Singapore, expenditure on food constitutes more than 20% of the total monthly average household expenditure. The country currently imports more than 90%of its food supply.

Following the pandemic in 2020, Singapore has adopted a strategy to achieve food security that includes:

  • diversifying food sources;
  • optimizing local food production, with the goal to produce30%offood supplyby2030;
  • The national strategy favors OTS, as scanned food products have a longers shelf life than fresh or frozen food. However, its manpower costs are expected to rise due to a reduction in the supply/quota of foreign employees that Singapore companies are permitted to employ, as well as various travel restrictions due to the pandemic.

On a global basis, demand for OTS food products will be affected by:

  • significant increase in the global Muslim population;
  • increasing demand for plant-based products as sustainable protein alternatives.


  • strengthen its presence on e-commerce platforms and its own website;
  • introduce plant-based food products;
  • expand in Malaysia, Indonesia, and the Philippines.


The OTS group has been audited by RSM for several years. However,its new listed status from June 2021 has affected the audit risks for the financial statement audit engagement.

Assume you are the RSM audit manager for the OTS engagement.

As of 31 March 2021, prepare the audit planning memo(APM) for the OTS engagement for the audit engagement partner to review.APM should document the following matters:

  • Analyze the risks that OTS faces and the expected impacts on the financial statements for the year ending June 30, 2021, to evaluate the most significant risk of material misstatement (RMM) in each of the following business processes: revenue, inventory management, and financial management.

APM should be:

  • addressed to the audit partner;
  • written using the appropriate technical and professional terms;
  • initialed and dated by the audit manager;

In preparing the memo, you are expected to reference applicable materials taken from the following sources:

1. Information on OTS’ risks, strategy, operations, and financial results, as disclosed in its IPO document dated 8 June 2021;

2. ACRA’s Audit Practice Bulletin (APB)No.1 of 2020, which outlines the key audit considerations arising fromCovid-19;

3. ISCA’s Covid 19FAQs(Auditing) , which address how to deal with issues that auditors would face due to the pandemic restrictions and circumstances.

The IPO document is available on Canvas. The ACR AAP Band ISCA FAQs are availableat