The Hong Kong Institute of Certified Public Accountants notes some recent media reports covering the Financial Reporting Council press briefing have made reference to the Institute's position on audit regulatory reform.
The HKICPA notes that regulation of listed entity auditors is an important part of the overall regulatory system of the Hong Kong capital market. The Institute is the initiator of the audit regulatory reform before handing it over to the government in 2012 to prepare for public consultation and legislation.
“While the Institute is in support of the general direction of the reform, the Institute considers that full details of the new regulatory systems, and the related budget, need to be developed and presented to the LegCo together with the draft legislation, so that LegCo and general public are clear how the new systems will serve the reform objectives and how much they are going to cost,” says a statement from the HKICPA.
In particular, the Institute considers that details in respect of the following key matters must be fully developed before the legislative process starts. It notes the importance of checks and balances to ensure separation of inspection/investigation and sanctioning processes.
The HKICPA also notes the importance of guidelines on determination of appropriate regulatory action or sanctions to ensure any action taken is relevant and proportionate to the identified audit deficiency.
HKICPA is also concerned about the composition of the independent oversight body to ensure it is made up of people with sufficient auditing experience and knowledge in order to make an informed judgment on the adequacy of audit work.
Another important matter pointed out by the HKICPA is the mechanism for setting, approving and monitoring the independent oversight body's budget to give comfort over the accountability and prudent financial management of the independent oversight body. In particular an indicative budget should be prepared so that LegCo and funding party will have clarity about the amounts involved before committing.