A former partner or director of the company's existing auditing firm or auditing corporation should not act as a member of the company's AC: (a) within a period of 12 months commencing on the date of his ceasing to be a partner of the auditing firm or director of the auditing corporation; and in any case (b) for as long as he has any financial interest in the auditing firm or auditing corporation.
A. Explanation

This Guideline sets out the restrictions on former audit partners from functioning as AC members.

Because the AC plays a critical role in ensuring the integrity of the financial statements through its oversight of the company’s financial reporting process, internal control system and audit function, it is important that its members are independent in both mind and appearance.

Where a former partner of the company’s external auditor becomes a director of the company, he may face the following potential conflicts of interest:

  • A threat of self-review, where the director reviews the scope and results of a previous external audit that he performed in his capacity as the external auditor. This scenario potentially impairs his judgment and ability to perform an objective review.
  • A threat of self-interest, where the director with a vested interest may benefit by influencing the re-appointment, remuneration and terms of engagement of the external auditors.
  • A threat of familiarity, where the director with a long or close relationship with the external auditor may be too sympathetic to the interests or too uncritically accepting of the work of the audit firm.

Any of the above may affect the director’s actual and perceived objectivity in the exercise of his judgement, and his duty to act in the company’s best interest. As such, the Guideline requires that as long as the former partner of the external auditor still has a financial interest in his former firm, or only left less than a year ago, he should not be a member of the AC.


B. SGX Disclosure Guide
  • Nil.


C. Related Rules and Regulations
  • Nil.


D. CG Guides
  • AC Guide 1.4: Independence and Objectivity [AC Composition].
  • AC Guide Case Study 1B-2: Former EA Partner as an AC Member [AC Composition].


E. Related Articles
  • Nil.


eGuide to CG Code
Board Matters
Principle 1
Guideline 1.1
Guideline 1.2
Guideline 1.3
Guideline 1.4
Guideline 1.5
Guideline 1.6
Guideline 1.7
Principle 2
Guideline 2.1
Guideline 2.2
Guideline 2.3
Guideline 2.4
Guideline 2.5
Guideline 2.6
Guideline 2.7
Guideline 2.8
Principle 3
Guideline 3.1
Guideline 3.2
Guideline 3.3
Guideline 3.4
Principle 4
Guideline 4.1
Guideline 4.2
Guideline 4.3
Guideline 4.4
Guideline 4.5
Guideline 4.6
Guideline 4.7
Principle 5
Guideline 5.1
Guideline 5.2
Guideline 5.3
Principle 6
Guideline 6.1
Guideline 6.2
Guideline 6.3
Guideline 6.4
Guideline 6.5
Remuneration Matters
Principle 7
Guideline 7.1
Guideline 7.2
Guideline 7.3
Guideline 7.4
Principle 8
Guideline 8.1
Guideline 8.2
Guideline 8.3
Guideline 8.4
Principle 9
Guideline 9.1
Guideline 9.2
Guideline 9.3
Guideline 9.4
Guideline 9.5
Guideline 9.6
Accountability and Audit
Principle 10
Guideline 10.1
Guideline 10.2
Guideline 10.3
Principle 11
Guideline 11.1
Guideline 11.2
Guideline 11.3
Guideline 11.4
Principle 12
Guideline 12.1
Guideline 12.2
Guideline 12.3
Guideline 12.4
Guideline 12.5
Guideline 12.6
Guideline 12.7
Guideline 12.8
Guideline 12.9
Principle 13
Guideline 13.1
Guideline 13.2
Guideline 13.3
Guideline 13.4
Guideline 13.5
Shareholder Rights and Responsibilities
Principle 14
Guideline 14.1
Guideline 14.2
Guideline 14.3
Principle 15
Guideline 15.1
Guideline 15.2
Guideline 15.3
Guideline 15.4
Guideline 15.5
Principle 16
Guideline 16.1
Guideline 16.2
Guideline 16.3
Guideline 16.4
Guideline 16.5
eGuide Glossary
Disclosure of CG arrangements
The Role of Shareholders

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