For a decade, audit firm KPMG had stamped Hyflux's annual reports with a clean bill of health, attesting to the water treatment company's ability to continue to operate.
But with the company now facing the possibility of liquidation after a scuppered restructuring deal on Thursday, its shareholders and investors are asking why auditors failed to flag the risk of Hyflux spiralling into heavy debt.
This might well be a key question on the minds of Singapore's accounting and auditing regulator, which told The Straits Times that it is monitoring the Hyflux quagmire closely.
The Accounting and Corporate Regulatory Authority (Acra), which enforces Singapore's strict auditing and accounting laws and standards, said in a statement that it will also "assess if further action is warranted". The Acra spokesman did not elaborate further.
Acra's statement came a day before the restructuring agreement between Hyflux and SM Investments collapsed on Thursday, with both parties laying the blame on the other side for the demise of the $530 million deal.
As a result, the scheme meetings that were supposed to be held yesterday were also cancelled, and the day passed without any pronouncements from either side.
Acra now joins a trio of financial regulators - including the Monetary Authority of Singapore and the Singapore Exchange - which have publicly said they are keeping a close watch on affairs.
Corporate governance experts believe the accounting and auditing issue is likely to centre on Hyflux's 2017 books, which the company released in March last year and carry the unqualified opinion of the auditors. It had slipped into the red for the first time in 2017 since its listing in 2001.
Yet two months later in May, Hyflux shocked investors when it filed for bankruptcy protection.
Its financial statements were prepared on the basis of going concern - an accounting method that assumes the company will remain solvent and operational indefinitely until proven otherwise.
According to Singapore's auditing standards, auditors are duty-bound to question this assumption, assessing any risks to the company's ability to stay afloat and avoid bankruptcy. They are also required to remain alert to any events or conditions that show otherwise.
Hyflux, in response to queries from the Securities Investors Association (Singapore) in February, told the watchdog there were no events to cast significant doubt on the assumption of going concern.
National University of Singapore associate professor of accounting Mak Yuen Teen said that if auditors had given an adverse opinion, ordinary shareholders and creditors could have chosen to get out earlier.
He noted that there were no separate audited statements for the group's loss-making subsidiary Tuaspring for 2017.
Instead, Tuaspring's 2016 audited figures were used by Hyflux in its latest replies to investors, with no mention on what happened to the 2017 statement. This was unusual considering the importance of Tuaspring to the group, said Prof Mak.
The Tuaspring integrated water and power project is the largest asset on Hyflux's balance sheets, and the group had stated its intention to partially divest the plant in 2016. The subsidiary had appointed KPMG as its auditor since 2011.
Hyflux had also relied on external valuers to arrive at its $1.4 billion valuation of Tuaspring in 2011, 2013 and 2016, but this was later written down by more than $900 million last year.
In Hyflux's annual report for the 2016 financial year, auditors had been aware of an independent external consultant hired by Hyflux to perform a Singapore power market study on the power plant.
The KPMG audit report that year stated that it had reviewed the methodology used and analysed the assumptions, which include details such as future electricity prices, plant utilisation and discount rates.
Prof Mak said that while auditors do not carry out valuations directly, it is their duty to provide robust oversight and question the third parties too. "It is often the case here that auditors do not challenge assumptions enough," he added.
Others pointed out that the $500 million perpetual securities - bonds with no maturity dates - issued by Hyflux are recorded as equity instead of debt in its books.
Such a practice is allowed under current accounting rules, and could have the effect of improving the group's debt-to-equity ratios and give an impression of recovery.
One investor, who did not want to be named, asked if auditors had probed this aspect in determining Hyflux's financial health, considering that the company had been generating negative cashflow for consecutive years.
KPMG, which had audited Hyflux since 2008, declined comment, citing client confidentiality.