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For several months the Exchange has engaged in more frequent communication with listed companies, their Boards of Directors, and audit and market professionals, in response to intense financial uncertainty and economic downturn. The Exchange has taken steps to address possible risks to its listed companies and market participants as well as to uphold standards of corporate governance. This note outlines initiatives taken and the status of responses from listed companies and market professionals.
At the outset, in the 4th quarter of 2008, our objective was that corporate Boards, non-executive and executive directors, are aware of global developments and make prompt, full and precise disclosure about any material effects of these developments on their companies. Sudden changes in the operating environment could unexpectedly impact companies’ prospects. The Exchange warned of the need for heightened vigilance, that material events or trends be promptly disclosed in accordance with listing rules.
In the first few months of 2009 as financial stress deepened, attention shifted to companies’ need for refinancing and alternative sources of funds. In collaboration with the regulators, corporate finance executives and other professionals, the Exchange introduced measures to allow companies to raise more funds, more rapidly.
In March 2009, issues of veracity and governance became the focus of dialogue among the Exchange, its listed entities and their auditors. The conduct of more stringent checking and detailed validation in key risk areas such as the safeguarding of cash, impairment of accounts receivable and assessment of off-balance sheet items, were highlighted.
The Exchange has since received feedback from auditors on the areas of risk examined, in response to the Exchange’s call for greater vigilance. They have extended their audit procedures, including wider sampling of accounts receivable, and more cases of visiting banks to obtain direct source confirmation of bank balances. For example, auditors have conducted more detailed confirmation of bank balances for 80% of listed companies operating in China, without adverse findings. The remaining companies were not subject to extended validation procedures, either because the size of cash balance was immaterial or those companies had not reached the financial year end. For the latter, detailed verification will be performed in the coming months. In cases where the quantum of accounts receivable was material and posed significant risk to the company, auditors had scrutinized more closely the subsequent collectability from debtors.
The prompt response of Boards, Audit Committees, and audit professionals to examine risk areas in listed companies demonstrates the strong institutional framework and culture of corporate governance in Singapore. While business failure or wrongdoing can occur among listed companies in any market, higher standards of governance will result in more rapid discovery, prompt attention and full disclosure and transparency.
As the front-line regulator, the Exchange will continue to closely monitor compliance with its Listing Manual as well as emerging risks, introducing as appropriate, initiatives to address these risks. We are in dialogue with market professionals on ways to strengthen the practice of corporate governance for all companies listed on SGX. We will also pay particular attention to newly listed companies. Public comments on proposed new measures will be sought in due course. We will continue to work closely with MAS, ACRA, CAD and market participants to uphold high standards of corporate governance for all SGX listed companies.
