Speech for ICPAS Annual Dinner 2004 by Minister of State for Finance, Mrs Lim Hwee Hua, at Hotel Intercontinental Singapore, 15 October 200418 Oct 2004
Mr Tan Boen Eng, President of the Institute of Certified Public Accountants of Singapore,
Distinguished guests, Ladies and Gentlemen,
I am happy to join you here this evening at the Institute's Annual Dinner.
ICPAS has an important role to play in Singapore's corporate landscape
2. The Institute of Certified Public Accountants of Singapore is today the only professional body in Singapore that assesses the qualifications of our public accountants. Its mission is "to develop, support and enhance the integrity, status and interests of the accountancy profession in Singapore". In doing so, the Institute plays a pivotal role in improving Singapore's overall corporate landscape and helping make Singapore a great place for business.
Maintaining high integrity and quality in accounting standards
3. The high-profile corporate failures in the US and elsewhere in recent years have placed the accounting profession and industry under close scrutiny. In a disclosure-based regulatory regime, good financial reporting through clear and reliable accounting standards and policies are essential for the effective functioning of capital markets and the productive allocation of economic resources. Unsound accounting standards or practices may mislead investors and threaten the credibility and quality of capital markets.
4. Good accounting standards must be applied with consistency, dedication and discipline. The accounting profession must have a strong sense of responsibility to investors, other corporate stakeholders and the public at large, so that it maintains its independence of judgement. ICPAS has a key role to play in this, by upholding the integrity and independence of the accounting profession. This is especially important for a small country like Singapore, where credibility, integrity and trust in our system of corporate governance is key to our position as a leading business hub and to the continued growth of our economy.
5. In this regard, there have been calls from some quarters for Singapore to legislate a ''Whistle-blowing'' Act. Today, there are already measures in place to guard against corporate fraud. For example, auditors are required under the Companies Act to report directly to the Minister for Finance should they discover a possible fraud or act of dishonesty by officers or employees of a public company. The Accounting and Regulatory Authority of Singapore (ACRA), the Monetary Authority of Singapore and the Commercial Affairs Department also regularly get complaints and tip-offs on possible fraud cases. These are seriously investigated.
6. I am glad to note that some Singapore companies are taking proactive steps to further strengthen their corporate governance structures. A good example is Keppel Corporation, which should be commended for establishing a ''whistle-blowing'' mechanism. While the Government encourages such initiatives, whether to mandate such best practices in law has to be carefully studied. The starting point is to ask whether our current arrangements for investigating fraud are adequate. ACRA is currently reviewing the need for whistle-blowing legislation in Singapore. Such legislation has been implemented in some countries but the jury is still out on whether it has achieved the desired benefits.
High Accounting Standards
7. As Singapore seeks to attract and establish global businesses and investments, our accounting standards have to be: (a) internationally recognised; and (b) responsive and relevant to a rapidly changing business environment. To maintain our global competitiveness, we must keep pace, or we will be left behind.
8. Thus, companies in Singapore are required to follow the Financial Reporting Standards (FRSs), which are modelled closely after the International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS). The Singapore FRSs are prescribed by the Council on Corporate Disclosure and Governance (CCDG).
9. ICPAS has rendered invaluable support to the CCDG. This includes the issuing of exposure drafts on new accounting proposals and reviewing and making recommendations to the CCDG. The Institute has also helped to promote greater public awareness and garnered feedback on proposals through public consultations, surveys, seminars and dialogues. Thus the CCDG and the Institute worked together on the public consultation on `Accounting for Employee Stock Options' last year and the recent seminar on 'Preliminary Views on Accounting Standards for Small and Medium-sized Entities'.
10. I look forward to the Institute's continued active involvement in promoting high quality accounting standards for good financial reporting through close collaborations with CCDG and other relevant agencies.
11. Let me now touch on the broader issue of corporate governance in Singapore and some of the recent changes and on-going reviews.
Review of the Code of Corporate Governance
12. The Code of Corporate Governance came into effect in 2003 through the Singapore Exchange as a non-mandatory best practices guide for listed companies.
13. In May this year, the CCDG, with the support of the Ministry of Finance, announced its plans to review the Code of Corporate Governance. The review is intended to introduce improvements to the Code, taking into account international developments and feedback received since the inception of the Code. The CCDG intends to seek public views before submitting its recommendations to the Ministry of Finance by the first half of year 2005.
14. It is good that the CCDG is taking the initiative to keep up with international developments in improving corporate governance practices. At the same time, we should be aware that changes to the existing corporate governance framework could lead to additional compliance costs for companies. Thus, we should be careful not to introduce too many and too frequent changes, and seek to strike a balance between introducing refinements and increasing the compliance burden.
15. A reasonable approach would be to consider a fundamental review of the Code every few years, while interim reviews could be done on a smaller scale to keep the Code up to date, note new developments on corporate governance around the world, and especially seek to remove or modify provisions which may be onerous to businesses or unhelpful in the Singapore context. The Institute should actively provide its views and feedback to the CCDG during the upcoming public consultation on the Code.
16. A reasonable approach would be to consider a fundamental review of the Code every few years, while interim reviews could be done on a smaller scale to keep the Code up to date, note new developments on corporate governance around the world, and especially seek to remove or modify provisions which may be onerous to businesses or unhelpful in the Singapore context. The Institute should actively provide its views and feedback to the CCDG during the upcoming public consultation on the Code.
Review of the Companies Act
17. Another on-going review is that of the Companies Act. The Ministry of Finance recently initiated a public consultation exercise to seek comments on the proposed Companies (Amendment) Bill. The changes proposed in the Bill include abolition of the concept of par value and authorised share capital, liberalising the giving of financial assistance to third parties in acquiring a company's shares, reforming the share buyback regime, and introduction of treasury shares. These would have significant impact on the accounting treatment of shares in the capital maintenance regime.
18. The public consultation on the draft Bill ended on 2 0 September 2004. I would like to take this opportunity to thank the Institute for providing valuable comments and insights through its active participation in the consultation exercise.
19. Moving forward, the Institute must continue to keep pace with international best practices and standards, and at the same time stay anchored to its core values of integrity and independence. I congratulate ICPAS on its role in promoting high professional and disclosure standards and good corporate governance practices. We should all work together to make Singapore "Best for Business".
20. I wish you an enjoyable evening of good food and company. Thank you.