Wednesday 4 March 2009

Many audit committee members lack qualifications

Too few audit committee members for listed companies have formal qualifications or experience, says the Institute of Certified Public Accountants of Singapore (ICPAS). It fears this may affect Singapore’s goal to become a global financial centre.

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Guanyu said...

Many audit committee members lack qualifications

By Michelle Tay
4 March 2009

Too few audit committee members for listed companies have formal qualifications or experience, says the Institute of Certified Public Accountants of Singapore (ICPAS). It fears this may affect Singapore’s goal to become a global financial centre.

A study of 675 companies listed on the Singapore Exchange (SGX) and 1,400 audit committee (AC) members - commissioned by ICPAS - shows that only 14 per cent of AC members here have formal educational training in accounting and finance.

Dr Ernest Kan, chairman of the ICPAS corporate governance committee, thinks that ‘ideally, this figure should be 100 per cent’.

Qualifications, however, are just one of several criteria, said the Monetary Authority of Singapore, the SGX and the Accounting and Corporate Regulatory Authority.

Responding to ICPAS’ stand, they said: ‘In appointing directors as audit committee members, companies should review and determine their directors’ suitability not just based on qualifications, but also on relevant expertise, experience and character.’

They noted that the study shows about 90 per cent of ACs of SGX-listed companies have at least one member who is financially trained.

ICPAS, however, wants more AC members to have formal qualifications and experience as financial transactions are becoming more sophisticated. Without this, AC members will not be able to best perform their duties, such as competently assessing companies’ ‘fair value assets’.

Associate Professor Ho Yew Kee, vice-dean of finance and administration at the National University of Singapore Business School, said the problem lies in the Code of Corporate Governance, which does not clearly define formal qualifications and experience. Currently, it only recommends that AC members have expertise, such as knowing the general application of accounting principles.

In contrast, the Hong Kong Exchange expects ACs to possess expertise ‘through experience as a public accountant or auditor, or as a chief financial officer, controller, or principal accounting officer of a public company’.

While ICPAS is not asking for a regulatory regime on corporate governance, it wants the current principles in the code ‘enhanced and refined’.

Said Dr Kan: ‘Our message is, if the point is to enhance the whole corporate governance process, then it’s important to get the right people to do the job.’