Audit Committee Members Should Be Formally Trained in Accounting and Finance (Singapore)
In the light of
the increasing sophistication of financial transactions and the growing
complexities of the globalised marketplace, more members of the Audit Committees
(ACs) of listed companies in Singapore should possess formal accounting and
financial qualifications and experience, according to a study on the Profile of
Audit Committees of Listed Companies in Singapore 2009, commissioned by the
Corporate Governance Committee of the Institute of Certified Public Accountants
of Singapore (ICPAS). (Download full report below)
Looking at the
educational background of AC members, only fourteen per cent of the members of
ACs are formally trained in accountancy and finance. If an education in Business
Administration is included, this percentage rises to 37 per cent. From the
experience perspective, 26 per cent of the members of ACs have accountancy and
finance as their major full-time experiences. If experience as senior management
is included, this percentage goes up to 76 percent. Further, only 46 per cent of
the companies have two or more financially-trained members in the AC.
Given the depth of
one's business and industry knowledge and experience, the Institute acknowledges
that directors who are not formally accounting and finance-trained might
possibly be as qualified as those who are formally accounting and
finance-trained. However, as a strong advocate of best corporate governance
practices, the Institute firmly believes that possessing a formal qualification
in accounting and finance should be considered as a pre-requisite for at least
one member of AC in a listed company.
The survey finds
that the Companies Act and the Code of Corporate Governance (CG Code) have been
effective in bringing forth structural changes to the composition of ACs of
listed companies in Singapore. Most companies complied with the corporate
governance guidelines. The regulators have also proactively taken steps to
provide additional practical guidance for audit committees as demonstrated by
the issuance of a Guidebook for Audit Committees in Singapore by the Audit
Committee Guidance Committee (ACGC) in October 2008. The Guidebook was developed
with extensive industry input, sought through dialogue sessions, focus groups
and a survey of audit committee members. The ACGC had placed emphasis on
addressing key areas of concern identified during its consultations so as to
provide practical guidance. These areas of concern include risk management,
fraud, internal controls and the composition of the audit committee. The best
practices are also targeted at audit committee members from various types of
companies and all levels of experience.
According to the
findings, ACs met more than three times a year on average. The median number of
members in the AC is three, which is the minimum suggested membership size by
the CG Code. In fact, only five companies (one per cent of the sample) have ACs
with less than three members. There are no significant differences between firms
of different market capitalisation and those listed on the Catalist in terms of
size of the AC.
The survey also
finds that on average, nineteen per cent of the members of ACs have been with
the company for one year or less. In addition, more than fifty per cent of the
members of ACs are associated with the companies for five years or less. It is
encouraging to note that most of the recent members of ACs are
financially-trained. This suggests that the CG Code is having its impact on the
companies’ choice of recent AC appointees.
"While the
companies are making headway in fortifying their audit committees, there are
still areas that need to be remedied especially in the ongoing training and
orientation of audit committee members. To stay in line with best practice and
to keep up to date with developments particularly in the compliance, regulatory
and accounting arenas, it is critically important that audit committee members
have adequate training with respect to financial reporting standards and in
general finance matters," commented Dr Ernest Kan, Vice-President of ICPAS and
Chairman of its Corporate Governance Committee.
Find the full report, here.
(http://www.icpas.org.sg/includes/download.asp?id=3038)
Source: http://www.icpas.org.sg/