Accounting firms in the city are quietly laying off people in light of auditing problems at mainland companies that are expected to hit the initial public offering market this year. One senior executive said certain medium-sized firms, including his, had started to lay off poorly performing workers amid fears the initial public offering market will slow. Accounting problems at some mainland companies in the past two months, weak market sentiment and economic growth concerns in China and the United States have raised fears many firms may defer their listing plans this year. This would reduce income sources for accounting firms that help companies go public. 'When the market is good we lack accountants, so the firm keeps the poorly performing ones to help with filing or photocopying,' the senior executive said. 'Now that the market is full of uncertainty, we expect income from IPOs to drop this year. With that expectation, we have to ask the poor performers to go.'' Another accountant at one of the Big Four firms said larger players had not laid off any workers but held back new hires. Sophia Kao, the chairman of the Financial Reporting Council, said on Wednesday the accounting regulator had placed 13 Hong Kong-listed firms on a watch list in the past two months. She did not name any company but said that most of them were small and medium-sized enterprises based on the mainland. During the corporate earnings season that ended last month, several firms surprised investors by announcing a delay in their earnings results or the resignation of their auditors, many of them Big Four accounting firms. Some companies, such as fashion clothing maker Ports Design and Daqing Dairy, are household names on the mainland and widely believed to have adhered to good business practices. Keith Pogson, the president of the Hong Kong Institute of Certified Public Accountants, said mainland firms represented 47 per cent of the global initial public offering market last year and it was inevitable that 'there are some bad apples'. But Pogson said it was good the auditors resigned from the companies when they found the books did not meet the required standard. Paul Chan Mo-po, the legislator for the accounting sector, said the resignation of auditors showed the accountants were sticking to high standards. 'It is a bigger problem if the auditors sign and approve the financial statements while they have queries,' he said. Chan said although the Big Four firms had resigned from these mainland enterprises, it did not mean there were more business opportunities for smaller accounting firms. 'All auditors, regardless of the size of accounting firms they work for, are following the same high auditing standards. If the Big Four firms resign after finding some problems with the statements, the smaller accounting firms would not accept the statement as well,'' Chan said. Mabel Chan Mei-bo, who owns an accounting firm, said mainland clients were not shifting to hire smaller accounting firms instead of the Big Four. 'Some smaller companies may like to hire small-sized accounting firms because they offer more personal services,' she said.