Auditor Regulatory Reform
Auditors play the role of a key gatekeeper in assuring the integrity and accuracy of the financial reports of listed entities and entities seeking to be listed in Hong Kong. It is important that there is a robust regulatory regime to safeguard the investing public and reinforce Hong Kong’s status as an international financial centre. A reform has been conducted to enhance the independence of the regulatory regime from the audit profession so as to strengthen investor protection and ensure that the regime aligns with the international trend.
Our Ongoing Work
In 2006, the Financial Reporting Council (FRC) was established as an independent regulatory body to investigate possible auditing and reporting irregularities of auditors of listed entities, and enquire into possible non-compliance with accounting requirements of listed entities in Hong Kong.
In order to further enhance the independence of the regulatory regime for auditors of listed entities from the audit profession so as to enhance investor protection and ensure that the regime is benchmarked against the international standard and practice, a legislative amendment exercise was conducted and accordingly a new auditor regulatory regime commenced operation on 1 October 2019. Under the new regime, the FRC has become an independent oversight body regulating auditors of public interest entities (PIE) with responsibilities for the inspection, investigation and disciplinary functions with regard to these auditors. The FRC also exercises independent oversight over the Hong Kong Institute of Certified Public Accountants’ statutory functions of registration, setting requirements for continuing professional development, and setting standards on professional ethics, auditing and assurance in respect of PIE auditors.
The Government has injected a seed capital of $400 million into the FRC in 2019 to help it migrate to the new regulatory regime. In accordance with the “user pay” principle, the FRC will start collecting levies from sellers and purchasers in securities transactions, PIEs and PIE auditors from 1 January 2022.
The Government will review the effectiveness of the implementation of the new regime.
For More Information
For more information, please visit the following websites/linked documents:
Financial Reporting Council
Financial Reporting Council Ordinance