The AC comprises at least three directors, all of whom are non-executive and the majority of whom, including the AC Chairman, are independent. At least two members, including the AC Chairman, have recent and relevant accounting or related financial management expertise or experience.
A. Explanation

This Provision states that the composition of an AC should be:

  • At least three directors.
  • All members should be Non-Executive Directors (NEDs).
  • The majority should be Independent Directors (IDs).
  • The AC Chairman should be an ID.
  • At least two members, including the AC Chairman, should have recent and relevant accounting or related financial management expertise or experience.

This Provision is largely aligned with Sections 201B (2) and (3) of the Companies Act which also set specific composition requirements:

  • At least three directors.
  • The majority should not be EDs, related to an ED, or deemed to be non-independent by the Board.
  • The AC Chairman shall not be an ED, or employee of the company or related corporation (which includes companies incorporated overseas and any foreign company).

The purpose of these rules is to ensure that the AC – which plays a critical role in ensuring the integrity of the financial statements through its oversight of the company’s financial reporting process, internal controls system and audit function – is sufficiently independent from management and the company, and remains objective.

The Board relies on the AC to ensure the integrity of the financial statements and provide assurance on the processes that contribute to them. It is important that its members are suitably qualified for this task, especially in today’s changing and complex business and accounting environments.

This Provision states that at least two members, including the AC Chairman, should have recent and relevant expertise and experience in accounting and/or finance. The Board should apply its business judgement in determining the appropriate accounting and finance qualifications.

That said, the responsibility of financial reporting rests with all directors. While it is important that the AC has members who are appropriately competent in accounting and finance, all directors should be financially literate.

As a reminder of this, ACRA issued a practice direction in 2014 to emphasise the duties of directors in relation to financial reporting. Furthermore, under its Financial Reporting Surveillance Programme, formal enquiry letters concerning possible non-compliances with prescribed accounting standards may be sent to the Board requesting an explanation, supporting documents and other records as necessary.


B. Practice Guidance


C. Related Rules and Regulations
  • Section 201B(2) of the Companies Act: Audit Committees.
  • Section 201B(3) of the Companies Act: Audit Committees.
  • MR 704(8) and CR 704(7): Appointment or Cessation of Service.


D. CG Guides
  • AC Guide 1.2: Structure and Authority [AC Composition].


E. Related Articles



eGuide to CG Code
Definition of Corporate Governance
History and Structure of the Code
Role of the Board
Role of the Chair
Focus on Long Term and Sustainability
Revised Code Structure and Approach
Mandatory Principles
Provisions and Variations
Thoughtful and Meaningful Application
Board Matters
Principle 1
Provision 1.1
Provision 1.2
Provision 1.3
Provision 1.4
Provision 1.5
Provision 1.6
Provision 1.7
Principle 2
Provision 2.1
Provision 2.2
Provision 2.3
Provision 2.4
Provision 2.5
Principle 3
Provision 3.1
Provision 3.2
Provision 3.3
Principle 4
Provision 4.1
Provision 4.2
Provision 4.3
Provision 4.4
Provision 4.5
Principle 5
Provision 5.1
Provision 5.2
Provision 5.3
Remuneration Matters
Principle 6
Provision 6.1
Provision 6.2
Provision 6.3
Provision 6.4
Principle 7
Provision 7.1
Provision 7.2
Provision 7.3
Principle 8
Provision 8.1
Provision 8.2
Provision 8.3
Accountability and Audit
Principle 9
Provision 9.1
Provision 9.2
Principle 10
Provision 10.1
Provision 10.2
Provision 10.3
Provision 10.4
Provision 10.5
Shareholder Rights and Responsibilities
Principle 11
Provision 11.1
Provision 11.2
Provision 11.3
Provision 11.4
Provision 11.5
Provision 11.6
Principle 12
Provision 12.1
Provision 12.2
Provision 12.3
Managing Stakeholder Relationships
Principle 13
Provision 13.1
Provision 13.2
Provision 13.3
Practice Guidance
Board Roles and Director Duties
Board Composition and Guidance
Chairman and CEO
Board Membership
Board Performance
Procedures for Developing Remuneration Policies
Level and Mix of Remuneration
Disclosure on Remuneration
Risk Management and Internal Controls
Audit Committee
Shareholder Rights and Engagement
Engagement with Shareholders
Managing Stakeholder Relationships
eGuide Glossary

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