HK Consults On Changes To Audit Sector Regulation
by Mary Swire, Lowtax.net, Hong Kong
23 June, 2014
On June 20, Hong Kong's Government launched a three-month public consultation on proposals to enhance the regulatory regime for listed entity auditors.
"It is important for Hong Kong to sustain a robust regime for the regulation of listed entity auditors so as to safeguard the interests of the investing public and to reinforce Hong Kong's status as an international financial center and capital market," said the Secretary for Financial Services and the Treasury, Professor K C Chan.
"The Government proposes to reform the present regime which is considered by many as largely a self-regulatory regime," he added. "The initiative strives to bring Hong Kong's regime in line with international standards that the oversight of the regulation of listed entity auditors should be independent of the audit profession."
It was confirmed that the Hong Kong Institute of Certified Public Accountants (HKICPA), the Financial Reporting Council (FRC) and other relevant stakeholders have been engaged on the direction and scope of the reform since late 2011. The Government said it has taken into account their views in formulating the proposals, and has sought to minimize any burden from the changes on the audit profession.
Under the reform proposals, the FRC's regulatory remit will be expanded to oversee the regulatory regime for listed entity auditors. The HKICPA will be designated by law to perform the statutory functions of registration, the setting of continuing professional development requirements, and the setting of standards on professional ethics, auditing, and assurance with respect to listed entity auditors, under the independent oversight of the FRC.
In addition to its existing investigatory functions and powers under the Financial Reporting Council Ordinance, the FRC will be vested with inspection and disciplinary powers.
Based on the "user pays" principle, and the principle that the auditor oversight body should be operationally and financially independent, the Government also proposes that a reformed FRC will be funded by levies coming – on an equal basis – from listed entities, securities transactions, and listed entity auditors.
Comments should be forwarded by September 19, 2014. After considering these comments, the Government plans to introduce enabling legislation into the Legislative Council in 2015.A comprehensive report in our Intelligence Report series giving a country-by-country analysis of offshore investment funds, stock exchanges and trusts, with an analysis of the US QI regime, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report9.asp
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