SingPost taps PwC as special auditor, provoking more questions

SingPost taps PwC as special auditor, provoking more questions

SINGAPORE - Nearly four weeks after announcing it would appoint a special auditor to investigate its corporate governance issues, Singapore Post has finally named its chosen firm: PricewaterhouseCoopers (PwC).

But questions are being asked about the decision, particularly about how it came to pass given PwC's known longstanding relationship with SingPost as its external auditor ever since the group listed on the Singapore Exchange (SGX) in 2003.

SingPost picked PwC without asking for proposals from any audit firms, its audit committee chairman Soo Nam Chow revealed in a conference call on Tuesday evening after the group announced the appointment in an SGX filing. He also said that a separate corporate governance review was underway and SingPost expects to name an independent consultant for that within four weeks.

Mr Soo told reporters over the phone that the board had wanted to "address the matter" of the corporate governance special audit "in the most expeditious way", and decided on PwC on the basis that the consultancy would be able to undertake the special audit "quickly and do it well". The board expects that PwC can carry out the investigation in a "professional and objective" manner, he said.

Its choice of special auditor comes nearly a month after the group said on Dec 23 that it would commission a corporate governance probe, which Mr Soo said was partly due to the holiday season.

It had admitted on Dec 22 that it had made an "administrative oversight" in a July 2014 deal disclosure, by not having properly disclosed board director Keith Tay's interest in its acquisition of FS Mackenzie. Mr Tay, who has been on SingPost's board since 1998, is also a director and shareholder of Stirling Coleman, which SingPost said had been the "arranger" for the purchase.

SingPost said in its bourse filing that the special audit will investigate issues surrounding Mr Tay's interest in SingPost's acquisition of stakes in three companies: Famous Holdings, FS Mackenzie, and Famous Pacific Shipping (NZ) Ltd. That includes how there came to be no disclosure of Mr Tay's interest when SingPost disclosed its purchases in FS Mackenzie and Famous Pacific; and whether Mr Tay was required to, and did, recuse himself from deliberations on the three purchases.

Market observers raised questions on Tuesday about how SingPost's decision might appear to stakeholders, pointing out that PwC has had a long relationship with the group as its external auditor.

"Even if there's a Chinese wall . . . I don't think it's appropriate," said corporate governance specialist Mak Yuen Teen, who is a SingPost shareholder.

Gibson Dunn partner Robson Lee added: "From the optical perspective, the board could have selected another firm of auditors to conduct the special audit. This is to pre-empt any unnecessary public disquiet that will only serve to aggravate the concerns of the market."

David Gerald, president of Securities Investors Association (Singapore) (SIAS), said: "For the comfort of shareholders, it would have been better if the auditor had been another firm. Even if it's a second-tier firm, we would have been happier."

SIAS met top officials from SingPost, including board chairman Lim Ho Kee and outgoing CEO Wolfgang Baier, on Tuesday afternoon to relay to SingPost a list of questions about corporate governance. SingPost told SIAS it would respond to these "in due course", SIAS said in a press release on Tuesday.

Defending SingPost's choice of PwC, Mr Soo told BT that though the board "didn't ask for proposals", it had internally evaluated multiple firms including auditors outside the Big Four. "We were satisfied with our own internal evaluations . . . The board did not think it was necessary to call for RFP (request for proposal). Calling RFP would take another two weeks, maybe three."

Out of the Big Four auditors, the board ruled out KPMG because SingPost had already outsourced some internal audit-related work to it. "They're involved in a lot of internal processes . . . internal audit, risk management. If they really want to, of course, they can do a China wall . . . but it's a perceptional issue."

As for the other two (Deloitte and EY), he said one was already the auditor for Stirling Coleman and the other was directly involved in providing due diligence for two of the three acquisitions the probe will focus on. It also considered second-tier firms but "we thought that the Big Four would carry a better reputation".

Though PwC has been SingPost's external auditor for "quite a long time", Mr Soo said, "at SingPost, management has been changing . . . so both teams, internally and the auditors, there have been new people . . . We would not develop such a close relationship to impair or raise questions of independence. The relationship is not as close as what you all may think. Even at directors' level . . . my relationship (with PwC) is entirely new - they were my competitors previously! So I don't even know them."

SingPost said in its statement that it expects PwC's investigation to be done in about a month. Its shares rose S$0.025 to S$1.52 on Tuesday before the announcement.

This article was first published on JAN 20, 2016.
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