Accounting chief supports reform
New head of industry body supports changes to oversight role but details still to be ironed out
The first female president of Hong Kong's peak accountancy body backs reform plans to expand oversight of auditors of listed companies, but believes the industry group will continue to play an important regulatory role.
Susanna Chiu, who was elected last month to head the Hong Kong Institute of Certified Public Accountants, said she would work with the government and other parties on the reform plan.
"The reform is needed to allow Hong Kong to keep pace with the international practice," she said.
The institute set up in 1973, issues accounting licences, sets industry standards, and regulates the city's 34,000 accountants. It also conducts routine inspections of accounting firms, a role that in many advanced markets such as the United States and Britain is the province of independent bodies.
Chiu said that in her 12-month term she would work with the government on the reform proposal.
The plan is for the Financial Reporting Council to take over the institute's powers to review accounting firms that audit listed companies.
The government established the council 2006 to investigate auditing failures of listed companies.
"We will issue a consultation paper on this matter soon. We support the reform in principle but the devil is in the details so we need to work out more of the specifics," she said.
"The reform does not mean the institute will give up its role as a regulator.
"Even after the reform, the institute will remain as a regulator, overseeing the conduct of all members as well as setting standards, training and conducting the licensing examination."
Chiu said she would also continue to lobby the government to cap the liability that a company would face in the event of an audit failure.
She said the liability cap was necessary because auditors faced a higher responsibility for audit failures. In July, legislators passed a new law making accountants criminally liable for not reporting audit problems.
The legislation brought Hong Kong into line with Britain.
"In line with our professional ethics, all accountants need to act as gatekeepers of companies they work for. They need to report any malpractice or problems in the course of their work," she said.
But unlike Britain, Hong Kong does not yet have a cap on the liability an auditor faces if they are sued by investors or creditors over audit failures.
Separately, she said the accountancy sector would be cautious in recruiting this year in light of the drop in the number of initial public offerings.
"Many accounting firms hired aggressively in previous years but they are likely to be more cautious this year as we have seen the number of IPOs decrease," she said.
"Accounting firms are likely to diversify their business to cut down their reliance on the listing business.
"They would hope to expand other business lines into areas including taxation, consultancy services and risk management."