SGX tightens auditing of listed companies, raises property valuation standards

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

SGX tightens auditing of listed companies, raises property valuation standards

Ovais Subhani

SINGAPORE – Almost all companies listed on the Singapore Exchange (SGX) 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 on Tuesday (Jan 12), about 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 become effective Feb 12.

Mr Tan Boon Gin, chief executive officer 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.

SGX RegCO 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, 2022.

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, 2021, SGX RegCo said.

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 will exercise such powers only in exceptional circumstances – for example, where it believes that possible misstatements in the financial statements are pervasive and yet not evidenced by the incumbent auditor’s opinion, and such concerns cannot be addressed by a special auditor, the regulator said in a statement.

Other existing regulatory tools that SGX RegCo can utilise include the issuance of public queries and notices of compliance to address concerns raised relating to the company’s financial reporting.

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SGX RegCo said it may direct the appointment of a second auditor if the market still has not obtained sufficient assurance on the areas of concern after the use of these tools.

In a separate statement, Acra CEO Ong Khiaw Hong said: “SGX’s new requirement for listed issuers to appoint an auditor registered with Acra would ensure that the audit comes within Acra’s audit oversight regime, which is yet another step towards greater market assurance and investor confidence in the broader financial ecosystem.”

Mr Lee Fook Chiew, CEO of the Institute of Singapore Chartered Accountants, said an auditor plays a crucial role in giving credence to the financial position of a company or flagging hot-button issues.

“Requiring Singapore-regulated auditors to opine on financial statements improves comparability of audits and promotes greater accountability,” he said.

To enhance the quality of property valuation, SGX RegCo said it will require property valuers 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), while the valuer of overseas properties must be a member of, or authorised by, a relevant professional body or authority.

 

The valuer should be independent of the issuer, and cannot be a sole practitioner or have an adverse compliance track record, SGX RegCo said.

Mr Teo Li Kim, director of the SISV, said that SGX’s new rules on valuations will boost the quality of valuation reports and the professional conduct of valuers.

“This will further strengthen the interest and confidence in our property, Reit (real estate investment trust) and business trust sectors,” he said in a statement.

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.

Summary property valuation reports will be required for significant transactions such as at initial public offering for property investment firms or developers, business trusts or Reits, or in an interested person transaction involving the purchase or sale of property.

SGX RegCo will prescribe the minimum content to be disclosed in such summary property valuation reports.

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