State Board Report
Hong Kong’s Financial Reporting Commission (FRC) is set to begin market consultation to reform the city’s system of audit oversight. The effort stems back to a decision of the International Forum of Independent Audit Regulators (IFIAR) not to accept Hong Kong as a member and the findings of a Deloitte study released in October that identified areas where Hong Kong’s self-regulating system of oversight needed to be brought into compliance with IFIAR standards. Presently the Hong Kong Institute of Certified Public Accountants (HKICPA) is authorized under the Professional Accountants Ordinance as the regulatory body over the accounting profession. That gives the HKICPA the powers of registration, inspection, enforcement, standard setting and conducting continuing professional education. Deloitte’s report found this level of self regulation a major reason for its rejection by IFIAR. FRC Chairman John Poon said when the report was released in October: “The proposed reform is not to snatch the regulatory power from the hands of the HKICPA. It is to fine-tune our regulatory approach to fulfill the international requirements.”
When interviewed by the South China Morning Post in late December, HKICPA President Clement Chan Kam-Wing said: “We agree to reform our audit regulatory regime in a bid to match international practice. But we will not agree to extreme reforms that go as far as those in the United States where the accountancy body abandoned all its regulatory functions.” He stated: “We think the British or German model would be more ideal… The key is to allow independent oversight on how the HKICPA carries out these regulatory functions.”
The FRC was established in December 2006, under the Financial Reporting Council Ordinance, to investigate audit failures of listed companies. IFIAR standards call for an independent regulator that is self-funded. The HKICPA’s funding comes mainly from its members and accounting students. According to the Deloitte report there were about 60 firms in Hong Kong that were auditing listed companies and 4,200 practicing certificate holders.
- MEMBER CENTER