SGX mulls tougher auditing rules to intensify oversight

They propose to require a second auditor apart from the existing statutory for certain circumstances.

Increasing leniency in auditing has pushed the Singapore Exchange (SGX) to toughen auditing schemes of listed companies with two new proposals in the works.

First, the bourse proposed a requirement of a second auditor apart from the existing statutory auditor for “exceptional circumstances”, Singapore Exchange Regulation (SGX RegCo) CEO Tan Boon Gin revealed.

Tan noted that the proposal, when rolled out, will be complementary to the current power of the local bourse to appoint a special auditor who will typically only look into a specific area whilst the second auditor will jointly sign off on the year-end audit together with the first auditor.

Moreover, the SGX has also put forward a proposal to require all listed companies to appoint either a Singapore-based auditor or to have a Singapore-based auditor jointly sign off on the year end audit conducted by the foreign auditor for firms with significant overseas operation.

“This will increase regulatory traction, access to working papers and accountability,” Tan commented.

In a move to improve the transparency of listed firms, the executive said that they will be more active in determining the scope of the year-end statutory audit for selective companies starting from the current audit cycles. In fact, Tan said that they have already met with audit committees and auditors of about 15 companies so far.

“The purpose of these meetings is to highlight to ACs and auditors, issues that we are concerned about based on our own review of the company, what we expect the audit to cover and discuss in the Key Audit Matters of the Annual Report,” he explained. “The Key Audit Matters must also include matters that we have been constantly querying the company
about in the course of the year.

Additionally, SGX inked a memorandum of understanding (MOU) with the Singapore Accountancy Commission and the Institute of Valuers and Appraisers, Singapore (IVAS) to enhance valuation standards in Singapore. Under the agreement, SGX RegCo may seek advice on any concerns that it has on valuations reports or disclosures made by listed companies or listing applicants on valuations.

“The Singapore Accountancy Commission’s (SAC) collaboration with SGX RegCo will raise the benchmark for acceptable standards in valuation practices amongst listed companies and their
service providers,” Evan Law, chief executive, Singapore Accountancy Commission, said. “The collaboration will result in a more accurate reflection of the value in listed companies, and contribute to the development of Singapore as a leading global accountancy hub.”

In 2018, SGX teamed up with the Singapore Institute of Surveyors and Valuers to produce a guide on real estate valuation for REITs and IPOs, which they intend to incorporate into their rules.

“We expect our MOU with IVAS to result in similar developments, which will raise the overall standard of both business and real estate valuations, reporting and disclosures in
Singapore,” Tan commented.