The Hong Kong Financial Reporting Council (FRC) has welcomed the government’s proposals to improve the regulatory regime of listed entity auditors which would make the FRC an independent regulator and enhance Hong Kong’s reputation as a major international financial centre.
The FRC has released it Update on Independent Audit Oversight Report which focuses on how Hong Kong through the audit regulatory reform will meet international best practice and could gain membership to the International Forum of Independent Audit Regulators (IFIAR).
In June 2015, Hong Kong’s government released the conclusions of a consultation launched the previous year on proposals to improve regulatory regime for listed entity auditors.
“We understand that the Government is preparing the amendment bill with an aim to introduce it into the Legislative Council in the 2016-17 legislative session,” the FRC said in a statement.
Under the new regulatory regime the FRC will become the independent audit regulator formed of eight members with at least two persons with knowledge of and experience in auditing of Hong Kong listed entities. And it will be responsibility for:
- Inspection of auditors of listed entities
- Investigation of auditors of listed entities (which is currently within the scope of the FRC)
- Discipline of auditors of listed entities
- Registration of listed entity auditors
- Standard-setting on professional ethics, auditing and assurance related to those working for listed entities
- Setting of continuing professional development requirements for listed entity auditors
The FRC will be funded by levies on an equal basis by three stakeholder groups: listed entity auditors, listed entities and investors.
John Poon, chairman of the FRC, said: “I am delighted to see that the proposed audit regulatory regime will be independent of the audit profession and in line with other major capital markets worldwide. Assuming that the future Council will comprise of non-practitioners only, the regime will enable Hong Kong to be eligible for membership of IFIAR and be recognised for regulatory equivalence with European Commission.”
Poon concluded: “We believe that the audit regulatory reform is in the best interests of the investing public and Hong Kong.”