3E Accounting Featured on TODAYonline and malaymail on the New Listing Rules by SGX
At the beginning of the year, SGX is tightening the auditing of listed companies with new rules. On top of the year-end audits, the two new rules aim to increase thoroughness of the audits of listed companies. The introduction of new rules came after the recent news on the near-collapse of Singapore-listed Noble Group, the then Asia’s biggest commodity trader, which has recently completed an S$4.7 billion (US$3.5 billion) debt restructuring exercise. The company’s shares plummeted after the accounting scandal lost 99% of its market value after an accounting scandal – it lost 90% of its market value. Market observers criticised SGX for not doing enough to protect people who have invested in the embattled commodities firm.
Mr Lawrence Chai, the managing director of 3E Accounting firm, highlighted that the new rules (by SGX) will help to increase the audit’s quality and ensure the integrity of listed companies. SGX’s involvement will pave way for easier communication between auditors and clients – it is sometimes hard to inform clients that further checks are required because the clients may think that the auditors just want to make more money.
What Are The Two New Rules
1. The SGX is seeking the power to request a listed company to appoint a second auditor, on top of the existing one, in “exceptional circumstances”.
According to SGX Regulation chief executive officer Tan Boon Gin the appointment of second auditor is the move to complement SGX’s current power to require the appointment of a special auditor while the second auditor will jointly sign off on the year-end audit together with the first auditor.
2. The SGX will propose a change in the listing rules to require all listed companies to appoint a Singapore-based auditor.
What Has Been Done by SGX Before The Recent New Rules
The new rules on audit requirement are not something new by SGX. SGX started to be more proactive since December 2018 – it has met with the audit committees and external auditors of 15 listed companies and highlighted to them areas of concern according to SGX RegCo’s review of the companies. As such, auditors will have to address the matters raised/flagged by SGX in the company’s annual report. In addition to this, the SGX has also begun to play a proactive role by asking audit committees to change their terms of reference where they are not to its satisfaction. In other words, auditors have to take the initiative to flag/disclose areas of concern and cannot hide behind the terms of reference. SGX has also required some of the special auditors to report directly or even exclusively to them.
What Is Coming Up Next
SGX is planning to increase valuation standards in Singapore. SGX inked the agreement with the Institute of Valuers and Appraisers of Singapore so that it may approach the Institute for advice on valuation concerns of listed companies or those applying to be listed, as and when needed.
The SGX’s proactive oversight on the auditing issues will be the important cog that raises awareness among the management and board members of listed companies to focus on improving their controls and processes.