28 January 2021
On 12 January 2021, Singapore Exchange Regulation (“SGX RegCo”) announced that it will amend the Listing Rules to enhance requirements on auditors and valuers in their dealings with listed companies, and standards governing valuation reports. The changes will take effect on 12 February 2021.
The changes follow a public consultation conducted in 2020. A response addressing some of the feedback received was also released on 12 January 2021.
Some of the key changes to the Listing Rules are set out as follows.
Regulatory regime for conduct of auditors
All primary-listed issuers will be required to appoint an auditor registered with the Accounting and Corporate Regulatory Authority (“ACRA”) to conduct their statutory audits. Audits performed for all primary-listed issuers will now effectively be subject to ACRA’s regulatory oversight.
Secondary-listed issuers from developed markets may continue to use auditors from their own jurisdictions. For all other secondary-listed issuers, SGX RegCo will assess whether appointment of an auditor that is registered with ACRA is required on a case-by-case basis.
Powers to direct appointment of additional auditor
Currently, SGX RegCo may exercise administrative powers to require issuers to appoint independent professionals and special auditors for specified purposes. SGX RegCo will expand its administrative powers to include requiring the appointment of a second auditor. SGX RegCo states that it will exercise such powers only in exceptional circumstances, such as 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.
SGX RegCo will consider the appropriate tools to deal with the specific circumstances. Other existing regulatory tools that SGX RegCo may utilise include the issuance of public queries and Notices of Compliance to address concerns raised relating to the company’s financials. SGX RegCo 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.
Qualifications of property valuer
The Listing Rules will be amended to require property valuers to have at least five years of relevant practical experience in valuing properties in a similar industry and area as the property to be valued. The valuer of properties located in Singapore 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. In addition, the valuer must be independent of the issuer, and cannot be a sole practitioner or have an adverse compliance track record.
Standards for property valuation reporting
Valuations for properties located in Singapore should be prepared in accordance with SISV Standards. 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 IPO 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.
Interim financial statements
In addition to the above changes, SGX RegCo also clarified that all issuers must prepare their interim financial statements in accordance with the relevant accounting standards. The clarification arises from concerns that several issuers have not been doing so. The Institute of Singapore Chartered Accountants (ISCA) will be releasing guidance to help issuers to prepare their interim financial statements in accordance with the relevant accounting standards and the Listing Rules.
Implementation of changes
The Listing Rule changes are effective 12 February 2021. Existing issuers must appoint an auditor in accordance with the revised Listing Rules, for their financial year beginning on or after 1 January 2022. The Listing Rule amendments on accounting standards for interim financial statements will take effect for issuers’ financial statements for their interim financial periods ending on or after
30 June 2021.
The following materials are available on the Singapore Exchange website www.sgx.com: