Investors want Greater Transparency and Disclosure in Financial Reporting

– Survey of Retail and Institutional Investors shows investors place a premium on audited financial statements and want more engagement with board and management

 Singapore, 25 August 2016 – Retail and institutional investors in Singapore have re-affirmed the value of statutory audits and are increasingly demanding that companies produce high quality financial reports. These were some of the key findings in a first of its kind study that surveyed Singapore investors’ views about financial reporting and audits. The study’s findings were presented at the Singapore Accountancy Convention today. Jointly organised by the Accounting and Corporate Regulatory Authority (ACRA) and the Institute of Singapore Chartered Accountants (ISCA), the event was attended by over 900 delegates. Recognising that increased investor activism contributes significantly towards the vibrancy and confidence in Singapore’s capital markets, this year’s convention focuses on meeting investors’ needs and strengthening their confidence in financial reporting and audits.

2. The study jointly commissioned by ACRA and ISCA, was conducted by the NUS Business School, with some 200 institutional and retail investors. The following key findings were revealed in the study:

1. Investors rated financial statements as the most important source for making investment decisions, as compared to sources such as company announcements, one-to-one meetings with investors and analyst reports.  Companies should therefore ensure their financial reporting is of high quality and focus on providing high quality disclosures that are useful, sufficient and understandable to investors.
2. Investors re-affirmed the value of audited financial statements. The study indicated that close to five times more investors expressed confidence in audited financial statements as compared to non-audited financial information. Some 90% of the institutional investors also indicated that a modified audit opinion (i.e., qualified, adverse or disclaimer) will affect their investment decisions. Investors also indicated they are more likely to engage auditors when the enhanced auditor reporting standards takes effect from 2017. Under the enhanced reporting standards, auditors must highlight significant accounting issues as key audit matters (KAMs)[1] in their audit reports.
3. Investors also sought greater transparency and improved interaction with audit committees, including having audit committees explain their basis for auditor selection. Over 80% of retail and close to 90% of institutional investors surveyed want audit committees to use ACRA’s newly introduced audit quality indicators (AQIs)[2] framework when evaluating appointment of auditors.
4. When assessing the quality of corporate governance, investors tend to focus on directors’ experience, remuneration and independence, and the company’s internal controls and risk management policies. Over 90% of investors surveyed also felt it was the responsibility of directors to ensure financial statements complied with accounting standards.  

3. Commenting on the study, Mr Kenneth Yap, Chief Executive of ACRA said: “Companies should develop a culture of disclosure by default and engage investors early and in a timely fashion. Audit committees are urged to openly address key financial concerns and respond to key audit matters raised by auditors in the new reporting format”.

 4. Mr Lee Fook Chiew, Chief Executive Officer of ISCA, said: “As the survey results have shown, investors place a premium on audited financial statements, underscoring the value of audit in upholding financial reporting quality. The enhanced auditor reporting standards will further meet investors’ needs for quality financial information.  Having the standards is just one part of the equation. Public accountants, who play a key role in maintaining audit quality, must continue to uphold professional standards and preserve the integrity of financial reporting.”

5.  Said Prof Mak Yuen Teen, Associate Professor of NUS Business School “The survey supports the importance of regulatory programmes and other initiatives to improve financial reporting and audit quality, and ACRA’s efforts in this regard have contributed significantly to the trust that local and international investors have in the quality of financial reporting and audit especially for Singapore-incorporated companies. High quality financial reporting and audit are critical to good corporate governance and I would urge all stakeholders, including directors, investors, auditors and regulators, to continue to play an active role in raising standards of financial reporting, audit and corporate governance in Singapore."

6. The survey findings have given new impetus to an on-going joint collaboration between ACRA, ISCA and the Securities Investors Association (Singapore) (SIAS) to equip retail investors with key information for investment decision making. A joint ACRA-ISCA-SIAS guide to be published by early 2017 will help retail investors capitalise on new auditing developments such as mandatory KAMs disclosures in auditors’ reports to be issued from next year onwards, to deepen their understanding of a company’s financials and engagement with company directors, auditors and management. 

Attachments:

Annex 1: Key Points from the Investor Perception Study

Full Report: Into the Minds of Investors

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For media enquiries, please contact:

Karen Lee

Senior Manager, Corporate Communications

Accounting and Corporate Regulatory Authority

DID: 6325 6738

Email: karen_lee@acra.gov.sg  

Betsy Tan

Senior Manager, Communications

Institute of Singapore Chartered Accountants

DID: 6597 5608

Email: betsy.tan@isca.org.sg

 About ACRA

The Accounting and Corporate Regulatory Authority (ACRA) is the national regulator of business entities, public accountants and corporate service providers in Singapore. ACRA also facilitates the development of business entities and the public accountancy profession. As a regulator and facilitator, ACRA constantly strives to provide a responsive and trusted regulatory environment for businesses, public accountants and corporate service providers and make Singapore the best and trusted place for doing business. ACRA’s role is to achieve synergies between the monitoring of corporate compliance with disclosure requirements and regulation of public accountants performing statutory audit. ACRA’s goal is to make good corporate governance, quality corporate financial reporting and high quality audit the hallmarks of our financial and corporate sectors.

For more information, please visit: www.acra.gov.sg.

 About ISCA

The Institute of Singapore Chartered Accountants (ISCA) is the national accountancy body of Singapore. ISCA’s vision is to be a globally recognised professional accountancy body, bringing value to our members, the profession and wider community. There are over 30,000 ISCA members making their stride in businesses across industries in Singapore and around the world.

Established in 1963, ISCA is an advocate of the interests of the profession. Possessing a Global Mindset, with Asian Insights, ISCA leverages its regional expertise, knowledge, and networks with diverse stakeholders to contribute towards Singapore’s transformation into a global accountancy hub.

ISCA is the Administrator of the Singapore QP and the Designated Entity to confer the Chartered Accountant of Singapore - CA (Singapore) - designation.

ISCA is an Associate of Chartered Accountants Worldwide – supporting, developing and promoting over 325,000 Chartered Accountants in more than 180 countries around the world.

For more information, visit www.isca.org.sg.