Under the agreed mechanism, the SEB has assisted the AFRC in obtaining audit working papers of PIE auditors located on the Mainland (AWP-C) for inspection in Hong Kong. This marks a major milestone in the regulatory collaboration between the two regulators since their memorandum of understanding was signed in May 2019. Both parties will evaluate the agreed mechanism from time to time to ensure it runs smoothly and efficiently.
It is the statutory duty of the AFRC, as the independent regulator of the accounting profession of Hong Kong, to uphold the financial reporting quality of listed entities and the quality of their audits so as to protect investors’ interests. Inspection of listed entity audits is critically important as the capital markets of Hong Kong and the Mainland become increasingly connected, and accounting firms continue to expand their practices across the border.
The consensus and the agreed mechanism are a testament to the strategic intent between the SEB and the AFRC to collaborate seamlessly to ensure audit quality. The arrangement not only facilitates AFRC’s inspection of engagements involving AWP-C but also sends a strong message to PIE auditors that their audit engagements are subject to the AFRC’s quality review no matter where they keep their audit working papers.
In an official statement, the AFRC noted that it is “grateful for the staunch support from the SEB and looks forward to expanding and expediting their mutual cooperation to enhance the financial reporting quality and audit quality in furtherance of the public interest”.
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