New | HKICPA fears audit reform proposals will make regulator 'too powerful'

The Hong Kong Institute of Certified Public Accountants (HKICPA) has expressed reservations about two major audit reform proposals.

The government has just completed a consultation on handing more of the HKICPA's powers to the Financial Reporting Council (FRC) to add teeth to the regulator. The FRC in 2006 took over the power of investigating audit failures of listed companies but the HKICPA continues to license and set standards for the 38,000 accountants in the city.

Currently the FRC passes on the findings of its investigations to the HKICPA for the latter to decide on disciplinary action. This arrangement is seen as contrary to the international trend of allowing non-accounting bodies to play a greater role in audit regulation.

In the third quarter, the government completed a consultation process to allow the FRC to take over from the HKICPA the roles of practice review and setting of disciplinary action.

"We are not opposed to the reform but we fear the FRC would become too powerful if it is doing both the investigation and setting disciplinary action," Ho said, adding that it would be better to let a committee formed by independent members decide on the disciplinary action for errant auditors.

He said the current reform does not put emphasis on the quality of financial statements of listed companies. "It would be better for the stock exchange to require all listed companies to hire at least one qualified accountant to handle the financial statements to improve their quality and enhance transparency."