Updated on April 19, 2020 at 8.55 am by adding the following: The “Interim Update” from PwC mentions the expanded scope of the review directed by SGX Regco in their NOC issued on May 13, 2019, but makes no reference about reporting solely to SGX Regco.
By Mak Yuen Teen
On March 19, 2019, Best World International appointed PricewaterhouseCoopers Consulting (Singapore) Pte Ltd (PwC) to review its business and accounting practices following issues raised by a Business Times article on February 18, 2019. The company said that the independent reviewer will report directly to its Audit Committee (AC) and SGX Regco. Best World’s AC is chaired by Mr Lee Sen Choon, who has been an independent director on Best World’s board since May 2004. Therefore, he would have been on the board and involved in overseeing the company’s business and accounting practices, which have become the subject of the serious issues and allegations raised about Best World. An independent reviewer reporting to an AC under such circumstances risks becoming a case of “ownself checking ownself”.
On April 23, 2019, Best World was hit by another report, this time by short seller Bonitas Research. A third salvo was then fired by Valliant Varriors on May 9, 2019. SGX Regco stepped in and issued a Notice of Compliance (NOC) on May 13, 2019. I thought the NOC was one of the best I have seen – as previous NOCs in similar circumstances have left the board or the AC determining the scope of the review and the reporting of the findings, making them rather farcical in some cases.
The NOC directed the company to expand the scope of the independent review in accordance with SGX Regco’s directions. The expanded scope looked to cover the critical issues. Very importantly, the NOC said that the company was “to direct PwC to report solely to SGX Regco on the scope and all findings pursuant to its independent review”. That’s a gold standard NOC.
Presumably, the company would comply with this direction and SGX Regco would have put in place a mechanism to be directly updated about the findings of the review and to receive the report.
On March 22, just over a year after the company announced the appointment of PwC as independent reviewer and more than 10 months after the issue of the NOC, the company issued a long-awaited update which includes a six-page summary issued “By Order of the Board” under the name of the AC chairman, and a nine-page “Interim Update” from PwC.
The summary from the board said that “a full report will be issued by the Independent Accountant to the Audit Committee and SGX Regco after it has completed its work”. It also said that “the company will continue to work with the auditors and legal advisors on the matters raised in the Interim Update”. There is no sign that PwC is reporting “solely to SGX Regco”. This seems to contradict the NOC that PwC is supposed to report solely to SGX Regco. The “Interim Update” from PwC mentions the expanded scope of the review directed by SGX Regco in their NOC issued on May 13, 2019 but makes no reference about reporting solely to SGX Regco. It does not look like gold standard anymore.
So is PwC reporting solely to the SGX Regco or is it instead now reporting to the AC, which is not in accordance with the NOC? If it is the latter, then the independent review may not achieve its objectives of getting to the bottom of the issues raised.
