Audit committees making progress: Study

The performance of audit committees (AC) at Singapore-listed companies has improved, thereby enhancing the governance and oversight of corporate reporting, a study by the Singapore Institute of Technology found.

The survey of 650 listed companies comprising 1,539 people serving as AC chairmen and members was commissioned by the Accounting and Corporate Regulatory Authority, Institute of Singapore Chartered Accountants, Singapore Exchange (SGX) Regulation and Singapore Institute of Directors.

Among the key findings was that the proportions of AC chairmen and members who held four or more AC positions have dropped to 4 per cent and 1 per cent, respectively, from 5 per cent and 2 per cent when the study was last conducted in 2015.

Holding fewer AC positions allows individuals to dedicate time to discharge their oversight role.

The number of executive directors in ACs dropped to 24 last year, from 38 in 2015, which is a sign of progress given that standards in the Singapore Code of Corporate Governance recommends all AC members to be non-executive.

Gender diversity of the committees also improved, with the proportion of women directors rising to 11 per cent - from 8 per cent in 2015.

Some 90 per cent of survey respondents said that issues covered by ACs had expanded to include areas such as risk management and cyber security.

About 78 per cent of the respondents also indicated that ensuring the integrity of financial reporting had required 10 per cent to 50 per cent more time due to the Covid-19 pandemic.

The study also revealed some areas where improvement is needed.

It showed that 33 per cent of chairmen and 26 per cent of members have served in the same committee for more than 10 years.

That may need to change.

Under new SGX listing rules that will come into effect from Jan 1 next year, directors who have served more than nine years will be deemed non-independent, unless their appointments have been approved via a two-tier voting process of shareholders.

A version of this article appeared in the print edition of The Straits Times on January 13, 2021, with the headline 'Audit committees making progress: Study'. Print Edition | Subscribe