Hong Kong likely to maintain highest fine of US$1.3 million for audit lapses at listed firms when new regulatory regime takes over in fourth quarter

Financial Reporting Council is collecting views until May 4 on the procedures and penalties it can impose on Hong Kong accountants

New rules will ‘increase the accounting profession’s accountability and strength the public’s confidence’, FRC chairman says

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Kelvin Wong Tin-yau, the chairman of the Financial Reporting Council. Photo: Xiaomei Chen

Published: 4:45pm, 9 Mar 2022

Auditors of listed companies might continue to face a maximum penalty of a HK$10 million (US$1.3 million) fine under new regulatory rules that come into force in the fourth quarter, according to a consultation paper published on Wednesday.

The Financial Reporting Council (FRC), which takes over all regulatory and disciplinary roles from the Hong Kong Institute of Certified Public Accountants (HKICPA) in the same three-month period, is collecting views until May 4 on the procedures and penalties it can impose on the more than 40,000 accountants and their firms in Hong Kong.

Under the proposal, the council will maintain the maximum penalty now impose by the HKICPA – a fine of either HK$10 million or three times the profit earned by the accountant and their firm – in case of audit failures involving listed companies. For accountants serving the private sector, the highest fine will also remain unchanged, at HK$500,000.

“The new regulatory regime for accountants in Hong Kong will … increase the accounting profession’s accountability and strength the public’s confidence,” Kelvin Wong Tin-yau, the FRC’s chairman, said during a media briefing.

Hong Kong lawmakers passed a bill in October last year to expand the regulatory and investigative powers of the FRC to cover all certified public accountants instead of just auditors of listed companies previously. The FRC will be renamed as Accounting and Financial Reporting Council when the new regulatory regime begins in the fourth quarter.