With an eye on global technology IPOs, Hong Kong kicks off its biggest auditor reform in decade

The Hong Kong government has kicked off the city’s biggest auditing regulatory reform in a decade, with the aim of positioning Hong Kong as a hub for technology initial public offerings.

Under the Financial Reporting Council (Amendment) Bill 2018, which the government gazetted on Friday and is to be presented before lawmakers on Wednesday, the Financial Reporting Council will be empowered to inspect, investigate, as well as discipline auditors in more than 2,000 listed companies.

The council will take over these additional powers from the industry body, the Hong Kong Institute of Certified Public Accountants. When the council was set up by the government in 2007 it only handled investigations, while other regulatory functions were carried out by the institute. Under the reform, the institute loses all regulatory powers over auditors of listed companies to the council.

“The Bill will enhance the existing regulatory regime for auditors of listed entities, allowing them to be independent from the audit profession, thereby providing better protection to investors. This is crucial to strengthening Hong Kong’s status as an international financial centre and capital market,” said James Lau, the secretary for financial services and the treasury.

“Benchmarking against international standards and practice, the new regime will also enable Hong Kong to be eligible for joining the International Forum of Independent Audit Regulators, which is an important forum for international cooperation on the regulation of auditors,” he said.

The auditor regulatory reform comes at the same time as Hong Kong Exchanges and Clearing, which operates the city’s bourse – the third largest in Asia – is also carrying out its largest reform in three decades, to allow dual-class shareholding companies and large biotech firms without revenue to list as Hong Kong competes with the United States for more technology listings.