The decision by Singapore Post (SingPost) to appoint PricewaterhouseCoopers (PwC), its external auditor since 2003, as a special auditor to investigate its corporate governance issues (see CargoForwarder Global issue of January 26, 2016), has prompted several financial commentators in Singapore to criticize the decision.
The criticisms focus on the long-standing relationship between PwC and SingPost, the non-audit services already provided by PwC to SingPost, the possible conflict between PwC's role as external
auditor and special auditor, and the failure of SingPost to go through a request for proposal in selecting the special auditor.
Following the publication of an open letter in Singapore's Business Times in the last week of January, which caused a 6.5% plunge of SingPost's stock to a 22-month low on January 28, the controversy further deepened with a query by the Singapore Stock Exchange (SGX) to explain the unusual trading activity.
PwC under fire
The following day, SingPost said in an SGX filing that a possible explanation was market reaction to the commentary published in the Business Times. The article, headlined "SingPost saga: Untenable for PwC to stay on as special auditor," was written by corporate governance specialist and SingPost shareholder Prof Mak Yuen Teen and investor Chew Yi Hong, who argued that it was "untenable" for PwC to continue to accept its appointment as special auditor.
In its SGX filing, the postal operator stated that it was "not aware of any information not previously announced concerning SingPost or our subsidiaries or associated companies which may explain the trading activity."
In a separate filing, the postal group also defended its decision, saying that the special audit's scope "does not in any way conflict with PwC's role as the company's external auditors . . . the performance of the special audit will not result in a self-review which would impact the external audit.”
SingPost also said that it wanted to "clear any misconception" that its acquisitions of stakes in three companies - Famous Holdings, FS Mackenzie and Famous Pacific Shipping (NZ) - were interested person transactions (IPTs).
SingPost board director, Keith Tay, is also a director at Stirling Coleman, which had acted as the arranger appointed by the seller for the Famous Holdings deal and as the financial adviser to the seller for the FS Mackenzie and Famous Pacific deals.
"But his director role at Stirling does not make the three deals IPTs as defined in SGX listing rules, SingPost claimed, pointing out: "The sellers of the stakes . . . were not interested persons of the company under the SGX listing rules."
Mak sticks to his allegations
In a reaction, Prof Mak said that he was disappointed that SingPost's board had made up its mind to stick with PwC.
"Disclosing, abstaining or even recusing does not make a conflict magically disappear," he added. "I just cannot understand why, in a market where there are so many firms that can act as adviser, the three sellers ended up with Stirling Coleman - including two sellers based in UK and New Zealand."
Nol van Fenema