Hong Kong’s Accounting and Financial Reporting Council (AFRC) has penalised Forvis Mazars (Mazars) and Grant Thornton Hong Kong for breaching audit file archiving rules.

In disciplinary decisions announced by the regulator, Mazars was publicly reprimanded and ordered to pay a penalty of HK$1.4m ($179,297).

Additionally, the company has also been directed to bear the AFRC’s investigation costs and expenses.

Grant Thornton received a higher monetary sanction, with the AFRC imposing a penalty of HK$2.32m, alongside an order to cover the regulator’s investigation costs and expenses.

The AFRC said both companies committed widespread breaches of the 60-day archiving requirement and had deficiencies in their quality control and management systems.

According to the regulator, 96 of Mazars’ engagements were left unarchived for more than a year. At Grant Thornton, 303 engagements were unarchived for over a year, including 44 that remained unarchived for more than three years.

Furthermore, Grant Thornton submitted inaccurate breach data, including in response to the AFRC’s statutory requests to verify and reconcile it. The AFRC said this unnecessarily prolonged the investigation, so it applied only a 10% reduction to the penalty.

Mazars and Grant Thornton Hong Kong admitted the lapses and have accepted the AFRC’s disciplinary action in full.

AFRC Investigation and Compliance head Denis Cheng and AFRC Discipline head Hester Leung said: “These cases are serious and of grave concern. Timely archiving of audit documentation is a fundamental duty of auditors and an essential element of audit quality.

“Firms must establish and maintain robust systems of quality management and controls, supported by sufficient and appropriate resources, to ensure due compliance with audit standards.

“Otherwise, it severely undermines the firm’s credibility and erodes public confidence in the profession.”