The stock exchange has proposed allowing mainland companies listed in Hong Kong to submit their accounts using cross-border audit firms and accounting standards. The move could save mainland corporations millions of dollars.
At present mainland listed-companies must use Hong Kong auditors for their annual accounts. The burden of double audits can be costly and time consuming. According to their annual reports, Industrial and Commercial Bank of China paid up to 163 million yuan (HK$185.07 million) in 2007 for its domestic and Hong Kong audits, and PetroChina spent almost 120 million yuan in 2007 for its two audits.
In a reciprocal move, Hong Kong companies listed in Shanghai or Shenzhen will be permitted to retain their Hong Kong auditors and use Hong Kong accounting and auditing standards. The proposal will abolish the existing double audit requirement for H-share firms.
The proposal is a joint effort based on input from the Financial Services and the Treasury Bureau, the Securities and Futures Commission, the Financial Reporting Council, the Hong Kong Institute of Certified Public Accountants (HKICPA), the Stock Exchange of Hong Kong, and the mainland's Ministry of Finance (MoF) and China Securities Regulatory Commission (CSRC). But it is being driven by the mainland authorities' desire to internationalise their accountancy practices, according to Jack Chow, an audit partner at KPMG China.
'The mainland has already moved to convert its accounting and auditing standards to international standards. The regulators now want to see their major accounting firms up their stakes in international capital markets,' he said.
Joint declarations in recent years between the HKICPA and the China Accounting Standards Committee have seen agreements that substantially converge the accounting standards of both jurisdictions, and financial statements prepared under mainland accounting standards are equal to financial statements prepared under Hong Kong standards.