Hong Kong’s accounting regulator promises to get tough to root out audit failures

The Financial Reporting Council (FRC) received 159 ‘pursuable complaints’ about potential audit failures between April and December, up from 36 in the same period of 2020

The expanded role of the FRC can help strengthen the confidence of investors, says chairman of the Hong Kong Institute of Securities Dealers

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Financial Reporting Council chairman Kelvin Wong. Photo: K. Y. Cheng

Published: 3:08pm, 3 Jan 2022Updated: 4:47pm, 3 Jan 2022

Hong Kong’s auditing regulator, the Financial Reporting Council (FRC), will conduct more investigations and introduce more measures to enhance quality in the market, its chairman said.

The FRC, which has gained more power as a result of several law changes in the past two years, received a whopping 159 “pursuable complaints” about potential accounting failures between April and December last year, compared with only 36 in the same period of 2020.

It started 15 new investigations into auditing irregularities in that period, the same as in 2020. It completed seven cases last year, compared with three the year before.

It has also made 11 inquiries into listed companies about their accounting practices, the first time it has made such inquiries to make sure their books are clean.

“In 2021, we initiated investigations into cases which are of high public interest, and cooperated with other regulators whenever possible in order to protect public interests and to protect public trust in the status of Hong Kong [as an international financial centre],” said Kelvin Wong Tin-yau, chairman of the FRC in an interview with the Post.

Wong said the increasing number of complaints was a result of public awareness of the role of the FRC, which took over all the powers of investigation and regulation previously held by the Hong Kong Institute of Certified Accountants.

The reforms have brought the FRC – originally set up by the government as an independent audit regulator – into line with international norms.