05 February 2019

Singapore targets audit and compliance rules

SGX to propose second audit on listed companies if questionable, compliance and audit concerns targeted rather than a general cost.

Companies listed in Singapore can expect to come under greater scrutiny from auditors following one of the biggest overhauls of accountancy oversight in the republic.

Second audit

The move may see the Singapore Exchange Regulation (SGX RegCo) ordering a second audit on listed companies with clean audits if something does not appear all correct. SGX RegCo's ceo Tan Boon Gin said, ‘SGX will be proposing a new power to require the appointment of a second auditor, on top of the existing statutory auditor, but only in exceptional circumstances.’ He explained, ‘this will complement SGX's current power to require the appointment of a special auditor, who will typically only look into specific area, whereas the second auditor will jointly sign off on the year-end audit together with the first auditor.’ Key audit matters are a very important part of Singapore's disclosure based regime as they provide transparency to investors on any areas of concern arising from a company's audit, Mr Tan said. He added the measures will be very targeted, ‘they don't impose general compliance costs on companies across the board, but only on companies with issues and investors have a real concern. Then you would expect us to be more interventionist.’

Hardcoding

Mr Tan is leading SGX's strategy to be more robust in its role as a gatekeeper for listed companies. He explained, ‘there have been clean audit reports over the years and yet if you still suspect something is amiss, that's when this is most useful to us. Whereas if we knew exactly which area to focus on, we just appoint special auditor to look into that area.’ He said the intention is to hardcode this into the listing rules after consulting the market. The collapse of the Noble Group is cited as an example of a troubled company given a clean bill of health for three years before its substantial write-down, despite SGX having put the auditor on notice for three key audit matters.  SGX has already met the audit committees and auditors of about 15 listed companies, to highlight issues it is concerned about based on the regulator's review.