The Singapore Exchange Regulation (SGX RegCo) has released a new Guidance Note aimed at issuers and their audit committees, providing a comprehensive framework for the change of auditors. This move underscores SGX RegCo's commitment to maintaining high audit quality and ensuring investor confidence.

The change of auditors is a significant event for any issuer, often driven by the need to enhance corporate governance, adapt to evolving business requirements, or due to the retirement or resignation of existing auditors. The new guidance emphasizes the importance of appointing auditors with the appropriate expertise and experience to improve the quality of financial reporting and offer fresh perspectives on the audit process.

Key Provisions of the Guidance Note

1. Auditor Competency and Standards:

   • Issuers must ensure that incoming auditors are suitably qualified and adequately resourced. This includes assessing the adequacy of resources, experience, and the audit firm's track record.
   • Mainboard / Catalist Rule 712 outlines specific requirements regarding the resources, experience, and qualifications of the auditing firm and audit partner-in-charge.

2. Audit Quality Indicators (AQIs):

   • Issuers are encouraged to evaluate incoming auditors against the AQIs Disclosure Framework issued by the Accounting and Corporate Regulatory Authority (ACRA). These indicators include time spent by audit team members, years of audit experience, industry specialization, training hours, and results of inspections.
   • SGX RegCo, in consultation with ACRA, has introduced a checklist to assist issuers in evaluating incoming auditors. This checklist, which must be submitted along with the application to change auditors, covers quantitative and qualitative measures, including staff strength, professional experience, and track record.

3. Disclosure Requirements:

   • When seeking shareholders' approval for a change of auditors, issuers must disclose all relevant information in the circular to shareholders. This includes the names of the proposed incoming and outgoing audit firms and audit partners-in-charge, specific reasons for the outgoing auditors' discontinuation, and the audit committee's assessment of the incoming auditors.
   • Additional disclosures include the track record of incoming auditors, whether they will audit the company's significant foreign-incorporated subsidiaries, and any plans to appoint different audit firms for subsidiaries and associated companies.

4. Assessment Checklist:

   • The guidance note includes an assessment checklist that must be completed by issuers. Key questions in the checklist address the incoming audit firm's experience, quality control review outcomes, and the engagement team's composition and experience.

The new guidance note by SGX RegCo aims to streamline the process of changing auditors while ensuring that high standards of audit quality are maintained. By providing clear guidelines and a comprehensive assessment framework, SGX RegCo seeks to uphold investor confidence and enhance the overall corporate governance of issuers.

Find out more at SGX website: www.sgx.com

SGX RegCo: Guidance Note on Change of Auditors