Hong Kong lobby to raise fears over proposed ban on local accountants working in mainland

Treasury chief will raise concerns over ban on city's accountants with the finance ministry

PUBLISHED : Thursday, 29 May, 2014, 1:29am
UPDATED : Thursday, 29 May, 2014, 10:00am

Hong Kong officials will meet Ministry of Finance officers early next month to discuss a controversial proposal that would ban local accountants from working across the border.

"There are concerns over the proposed audit reforms. We will meet with the MOF officials to express our views on the implications for the Hong Kong accounting sector and the stock market," Professor Chan Ka-keung, secretary for financial services and the treasury, said.

Chan said he had been working with the Hong Kong Institute of Certified Public Accountants, the Securities and Futures Commission and the stock exchange to present their concerns to the Ministry of Finance in Hong Kong early next month.

"A key issue is that under the Hong Kong listing rules, Hong Kong accountants are responsible for signing the books. But according to the MOF's proposals, they would not be allowed to do the audit by themselves," Chan said. "We would like the Ministry of Finance to clarify how this would work."

The new rules were first reported by the South China Morning Post last Monday. They have shaken local accountants because they would force international accounting firms to team up with one of the 100 mainland accounting firms to audit mainland companies listing in places such as Hong Kong and the US.

The new rules would also prohibit international accounting firms from sending their Hong Kong staff to the mainland under temporary licences. They would have to get their mainland partners' staff to do the job.

This could spell trouble for Hong Kong accountants as it would lead global firms to sharply scale down the hiring of the professionals in the city.

The lawmaker for the financial services sector, Christopher Cheung Wah-fung, said the reforms would dent the confidence of international investors.

"International accountants know the major concerns of international investors," he said. "They act as the gatekeepers for investors. It would shake investors' confidence if Hong Kong accountants were banned from the mainland."

Analysts believe the change is in response to recent court rulings and international regulators who are pressing to have access to accountants' papers in their investigations.

They point to a decision by the Court of First Instance last week that rejected Ernst & Young's plea that it could not give the SFC the auditors' working papers on mainland listing candidate Standard Water as they constituted a "state secret".

The MOF's new rules require accountants to strictly follow state secret rules that ban auditors' working notes from leaving the country.

"Overseas regulators only want the papers to investigate problematic companies," Cheung said. "China wants to encourage more overseas investors to trade in mainland stocks through the proposed through-train scheme to be started in October. The MOF's new rules would not help."

Despite concerns, Chan has ruled out a delay of the scheme, which will allow investors in Hong Kong and on the mainland to cross-trade stocks listed in Hong Kong and Shanghai.