Transparency in accounting and auditing has been a major issue for mainland companies wanting to list overseas. However, a joint declaration between the China Auditing Standards Board and the Hong Kong Institute of Certified Public Accountants (HKICPA) shows that convergence between the two accounting jurisdictions is well on the way. Questions have been raised about whether the standard of mainland auditing firms is on par with international standards. Ever since Hong Kong Exchanges and Clearing (HKEx) allowed mainland companies to be audited by mainland auditors, critics have pointed out that a lack of supervision may leave retail investors short-changed. Even after HKEx said in April that Hong Kong-listed mainland companies that used mainland auditing standards would be annually reviewed by the city's Financial Reporting Council, critics have raised questions about the protection of retail investors. Earlier this month, the joint declaration pledged that convergence between mainland and Hong Kong auditing standards would speed up. According to a statement, the China Auditing Standards Board and the HKICPA have signed a joint commitment. 'Both parties are committed to maintaining convergence and we have established a mechanism for ongoing maintenance,' says Philip Tsai Wing-chung, president of the HKICPA, one of the signatories. Li Yong, the mainland's vice-minister of finance and president of the Chinese Institute of CPAs, was the other party to the declaration. The signing took place at the Cross-straits, Hong Kong and Macau Accounting Profession Conference 2011, organised by the HKICPA. More than 400 CPAs came together to discuss the development of the accounting profession, plus the economic and regulatory changes that impact CPAs. The joint declaration was also signed by Chen Yugui, vice-president and secretary general of the Chinese Institute of CPAs, and Winnie Cheung Chi-woon, CEO and registrar of the HKICPA. The International Auditing and Assurance Standards Board completed its comprehensive project to improve the clarity of international auditing standards in February 2009, while the HKICPA issued equivalent standards in June last year. These standards are applied to audits of financial statements for periods beginning on or after December 15, 2009. The Chinese Institute of CPAs has completed the revision of the mainland's auditing standards and achieved continuing convergence with the clarified Hong Kong standards. The revised mainland standards were released on November 1 last year and will be effective from January 1 next year. The only difference between the Hong Kong and mainland standards is an additional stipulation included in the revised mainland rules about communication between predecessor and successor auditors. This reflects specific requirements and circumstances on the mainland and does not conflict with the clarified Hong Kong standards. 'The declaration is necessary given the increasing global nature of capital markets and the desire that many companies have to raise capital in multiple jurisdictions. It is important to have a set of standards that are globally compatible,' Tsai said at the signing. The HKICPA is the only body authorised by law to register and grant practising certificates to CPAs in Hong Kong. The institute has more than 32,000 members and 15,000 registered students. Members of the institute are entitled to be described as a Certified Public Accountant and to the designation CPA.
