Internal control review, social duty lacking at HK companies
Hong Kong companies, especially H-share firms, are lagging behind their British counterparts in corporate governance practices such as internal control reviews and corporate social responsibility, according to a study conducted by international accounting firm Grant Thornton.
The study on 187 constituent stocks of the Hang Seng Composite Index, made in September, shows that only 24 per cent of these companies have internal control checks every year, much lower than in Britain, where 98 per cent of FTSE350 companies make annual reviews which include internal audits on financial statements and on fraud prevention and risk management measures.
The blue-chip Hang Seng Index is better off with 61 per cent of the companies having internal control reviews while only 11 per cent of H-share companies conduct internal control checks. Britain made it mandatory for companies to have internal control reviews two years ago while Hong Kong only introduced a similar rule this year, said Patrick Rozario, principal and head of business risk services at Grant Thornton.
'It shows us that Hong Kong listed companies have to cover a lot of ground to catch up with international standards, particularly where over 40 per cent have not yet set up an internal audit function,' Mr Rozario said.
The study also shows most Hong Kong-listed companies do not have a proper structure to carry out their social responsibility and to protect the environment.
None of the H-share firms, only 2 per cent of the composite index companies and 11 per cent of Hang Seng Index stocks have such a structure in place.