Audit watchdog overhaul will still leave Hong Kong trailing, says chief regulator

Hong Kong’s biggest overhaul of accountancy regulation in a decade will still leave the city trailing the international standards of other major financial centres, according to the head of the auditing watchdog.

Paul Winkelmann, chief executive of the Financial Reporting Council (FRC), said the proposed new laws being considered will only put Hong Kong on a par with places like Botswana and Albania.

Because of the lack of an independent auditor watchdog, Hong Kong has until now not met the standards of either the International Forum of Independent Audit Regulations (IFIAR) or the European Commission (EC) regulatory equivalence – recognition that a country’s auditing regime as being equivalent the European Union’s own framework.

The changes, which would give the FRC greater independence and power, would still only qualify it for recognition by IFIAR, said Winkelmann.

“Even if the existing bill that the government proposed earlier this year is passed in the Legislative Council, we could only get membership of the IFIAR,” he said. The discussion of the bill will continue on Tuesday.

“Do we really want Hong Kong to join the list of 16 economies only meeting one but not the other?” Winkelmann said, pointing to a list of countries that includes Botswana, Gibraltar and Albania.

“Or do we want to join the 45 jurisdictions having recognition from both IFIAR and the EC, such as Luxembourg, Singapore, the United Kingdom and the United States?”