Singapore Exchange tightens auditing of listed companies

It also raises property valuation reporting standards, eligibility criteria of valuers

Almost all companies listed on the Singapore Exchange will need to appoint a local auditor approved by the Accounting and Corporate Regulatory Authority from next month.
Almost all companies listed on the Singapore Exchange will need to appoint a local auditor approved by the Accounting and Corporate Regulatory Authority from next month. ST PHOTO: LIM YAOHUI

Companies listed on the Singapore Exchange (SGX) will have to raise the bar for audits and the way they value their properties.

Almost all of them will need to appoint a local auditor approved by the Accounting and Corporate Regulatory Authority (Acra) from next month.

SGX's regulatory arm, the Singapore Exchange Regulation (SGX RegCo), made the announcement yesterday, a year after it opened a public consultation on its plans to overhaul accounting oversight.

The new rules on statutory audits will apply to all primary-listed companies.

Secondary-listed firms from developed markets may continue to appoint auditors from their home jurisdictions, while SGX RegCo will assess the requirement on a case-by-case basis for all other secondary listings.

The regulator also made some changes to qualifications needed of property valuers and standards for property valuation reporting.

All the rule changes will take effect on Feb 12.

Experts believe the changes will mainly affect foreign firms, for instance, the Indonesian plantation companies that have most of their business assets in Indonesia and a primary listing here in Singapore.

Some of them may need to switch to auditing firms that have a regional or global reach, they said.

Singapore regulators faced criticism over how effective their oversight was after a string of accounting scandals in recent years, including the 2018 bankruptcy of Hyflux and later the investigation of Noble Group, which is still ongoing.

Mr Tan Boon Gin, chief executive of SGX RegCo, said the latest rule changes will raise the standards required of auditors and property valuers in their dealings with listed companies.

"We expect the quality of the market and investor protection to improve as a result," he said.

Companies already listed are required to appoint an auditor in accordance with the revised listing rules for their financial year beginning on or after Jan 1 next year.

The amendments on accounting standards for interim financial statements will take effect for listed companies' financial statements for their interim financial periods ending on or after June 30 this year.

Currently, a company's annual accounts can be audited by a public accountant or a firm of public accountants approved by the Central Depository.

SGX RegCo can require a listed company to appoint independent professionals and special auditors for specified purposes.

Those powers will now be expanded to include requiring the appointment of a second auditor.

SGX RegCo said it will exercise such powers only in exceptional circumstances, if the areas of concern have not been addressed.

Acra chief executive Ong Khiaw Hong said that the move to appoint auditors listed with Acra "is yet another step towards greater market assurance and investor confidence in the broader financial ecosystem".

The property valuation of companies is also being tightened.

Property valuers will be required to have at least five years of relevant experience in valuing properties in a similar industry and area as the property to be valued.

Further, the valuer of Singapore properties must be a member of the Singapore Institute of Surveyors and Valuers (SISV).

The valuer of overseas properties must be a member of, or authorised by, a relevant professional body or authority.

SGX RegCo said valuations for Singapore properties should be prepared in accordance with SISV standards. Meanwhile, overseas properties must have valuations prepared in accordance with domestic standards or the International Valuation Standards.

Mr Max Loh, Singapore and Asean managing partner at Ernst & Young, said the new rules will add a layer of protection against accounting and property valuation issues that can turn into a scandal.

"But they are no panacea for everything that can go wrong," he added.

Still, by setting the minimum standards, SGX is trying to ensure consistency and some accountability for auditors' and property valuers' dealings with listed firms.

Dr Mak Yuen Teen, an associate professor of accounting at the National University of Singapore Business School, said the latest changes were much needed.

"I see too many questionable valuations done by valuers with no clear experience and a lack of transparency," he said.

Mr David Gerald, CEO and president of Securities Investors Association (Singapore), agreed that the new rules may ensure consistency and transparency in valuations.

"However, this initiative does not mean that there will not be situations where corporate governance lapses will not happen," he said.

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A version of this article appeared in the print edition of The Straits Times on January 13, 2021, with the headline Singapore Exchange tightens auditing of listed companies. Subscribe