CATEGORY: NEWS AND ANNOUNCEMENTS, PRESS RELEASES
- Key findings from the fourth study
on the profile of audit committees in Singapore
Singapore, 12 January
2021 – The latest study on audit committees (ACs) found that
listed companies in Singapore have made progress in adopting corporate
governance best practices. To build on the progress made, the study also
highlighted areas for further improvement.
Background
2. Audit committees play an important role in ensuring the integrity of
companies’ financial reporting. By adopting the best practices in corporate
governance, the ACs will enhance the governance and oversight of the company’s
corporate reporting function.
3. The Accounting and Corporate Regulatory Authority (ACRA), the Institute of
Singapore Chartered Accountants (ISCA), Singapore Exchange Regulation (SGX
RegCo) and Singapore Institute of Directors (SID) have commissioned the
Singapore Institute of Technology (SIT) to conduct a study on the profile of
ACs of listed companies in Singapore. There were similar studies
conducted in 2009, 2011 and 2015.
4. The 2020 study covers the ACs of 650 listed companies in Singapore
comprising 1,539 individuals serving as AC chairmen and members. Led by
Professor Ho Yew Kee, the study team gathered data from the annual reports
published by the companies for 2019 and information provided by DC Frontiers
Pte Ltd. The study team also surveyed 126 respondents and held focus group
discussions and conducted individual interviews to gain further insights on the
role of ACs.
Key Findings
5. The 2020 study presents an improvement in companies’ practices to raise the
effectiveness of ACs. Some areas would benefit from further strengthening. The
key findings include:
a. The
proportions of AC chairmen and members who held four or more AC positions have
dropped to 4% and 1% respectively, as compared to 5% and 2% when the study was
last conducted in 2015. A majority
of 1,539 unique individuals who served in ACs sat on one AC, either as a
chairman (76%) or a member (84%). Holding fewer AC positions allows individuals
to dedicate time to discharge their oversight role;
b.
The
number of executive directors in ACs had dropped to 24 in 2020, from 38 in 2015
study. This represents progress towards the
standard under the Singapore Code of Corporate Governance (2018) (the CG Code)
which recommends for all AC members to be non-executive;
c.
The
proportion of women directors in ACs increased to 11% in 2020 from 8% in 2015. While gender is one aspect of diversity, listed companies are also
encouraged to consider other characteristics such as experience, age and social
background to enhance board/AC diversity in line with the principles of the CG
Code;
d.
33%
of AC chairmen and 26% of AC members have served in the same ACs for more than
10 years, increasing from 21% and 18% in the previous study in 2015. To strengthen the diversity and independence of their boards, from 1
January 2022, directors who have served more than nine years will be deemed as
non-independent under the SGX Listing Rules, unless their appointments have
been approved via a two-tier voting process of shareholders. Listed companies
are encouraged to start preparing for the new requirements now;
e.
94%
of the companies have at least one financially-trained member in their
ACs, comparable to the previous study in
2015. The CG Code recommends at least two members, including the AC Chairman,
to be financially-trained;
f.
A
vast majority (98%) of the ACs had the requisite of minimum three AC members, same as the previous study in 2015. The Companies Act and CG Code
require at least three members in the AC;
g.
Almost
half (48%) of the survey respondents ranked
“going concern and liquidity” as their top concern, alongside impairment of
asset values and internal controls. Their areas of concern are consistent with
ACRA’s guidance on the proposed areas of review by directors for 2020
financial statements; and
h.
90%
of the survey respondents said that issues covered by ACs had expanded over
time, to include areas such as risk
management and cybersecurity. 78% of the survey respondents also indicated that
ensuring the integrity of the financial reporting had required 10% to 50% more
time due to the COVID-19 pandemic.
6.
The findings in the report are encouraging as they show that ACs are stepping
up their game. Together with the new listing rules on the appointment of a
second auditor and the mandating of Singapore-registered auditors, this will
support the effective functioning of Singapore’s capital market and further
enhance confidence and trust.
7. The 2020 study on the profile of audit committees of listed companies in
Singapore is available for download via ACRA, ISCA, SGX, SID and SIT
websites.
ACCOUNTING AND CORPORATE REGULATORY AUTHORITY
INSTITUTE OF SINGAPORE CHARTERED ACCOUNTANTS
SINGAPORE EXCHANGE REGULATIONS
SINGAPORE INSTITUTE OF DIRECTORS
12 JANUARY 2021
Document for download:
Annex A: A study on the profile of audit committees of listed companies in Singapore (PDF, 6.3MB)
2021/01/12