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Finance

Singapore Exchange tightens audit rules for listed companies

Bourse says oversight role for accounting watchdog will protect investors

The SGX Centre in Singapore: The city-state's stock exchange regulator is tightening rules for auditors at locally listed companies in hopes of reducing accounting and governance missteps.

SINGAPORE -- The Singapore Exchange has tightened rules for listed companies appointing auditors, as it tries to prevent a repeat of recent corporate governance lapses in the city-state.

From January 2022, companies that have their main public listing in Singapore will need to have an auditor registered with the Accounting and Corporate Regulatory Authority, which oversees business entities in the country.

Audits for such companies will, in effect, be subject to ACRA's oversight, SGX said on Tuesday. Companies from developed markets such as Hong Kong, Japan, the U.S. and the U.K. that have a secondary listing in Singapore can continue appointing auditors from their respective jurisdictions.

"We expect the quality of the market and investor protection to improve as a result. Our collaboration with the relevant authorities and bodies towards greater trust and confidence in our markets will continue," said Tan Boon Gin, chief executive of SGX RegCo, the Singapore bourse's regulatory arm.

SGX RegCo's powers will also be expanded to include requiring the appointment of a second auditor "in exceptional circumstances," the bourse said on Tuesday.

This can be done in cases where RegCo believes that possible misstatements in a company's financial disclosures are pervasive and yet not evidenced by the incumbent auditor's opinion.

The moves come after Singapore's reputation as a financial hub took a hit following high-profile cases of companies running into trouble as a result of poor accountability or management practices, prompting criticism of corporate governance standards at companies listed in the city-state.

In recent years, missteps have plagued a number of public and private companies in the country. Singapore water treatment specialist Hyflux ran up heavy debts and had to be taken over by a court-appointed judicial manager in November after being unable to find a white knight to help it restructure.

Commodities giant Noble Group, whose shares were suspended on the Singapore stock exchange, has also been in the spotlight for its complex accounting.

Last year Lim Oon Kuin, the billionaire founder of privately held oil trader Hin Leong, admitted that he had directed his company's finance department not to disclose $800 million worth of trading losses. The company is facing action from creditors, and like Hyflux, has been placed under judicial management.

In a study published by retail investors lobby group Securities Investors Association Singapore and the Centre of Governance, Institution and Organisations at the National University of Singapore Business School in October, SGX-listed companies were deemed less transparent than their peers in Thailand and Malaysia when it came to corporate governance issues. The report's authors noted that business leaders in the city-state were more reluctant to disclose company information.

SGX's announcement on Tuesday came after a public consultation.

At an auditing seminar on Tuesday held after the bourse announced its tightened rules, RegCo's Tan stressed that the powers to appoint a second auditor will only be used in exceptional circumstances, after all other tools have been exhausted.

"When we consulted on this power, investors overwhelmingly supported it, because as they pointed out, the very possibility of a second auditor being appointed, in and by itself, can change behavior for the better."

Lee Fook Chiew, CEO of the Institute of Singapore Chartered Accountants, which seeks to develop the accountancy profession in the city-state, welcomed the tightened rules. "An auditor plays a crucial role. The auditor can give credence to the financial position of a company. Conversely, the auditor can also flag out hot-button issues. Requiring Singapore-regulated auditors to opine on financial statements improves comparability of audits and promotes greater accountability," Lee said.

SGX also said it would apply higher standards on property valuers of Singapore-listed companies, by requiring such valuers to have at least five years of relevant practical experience in valuing real estate in a similar industry and area as the property to be valued.

In addition, the valuer of properties in the city-state must be a member of the Singapore Institute of Surveyors and Valuers, the country's largest group of real estate professionals.

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