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Hong Kong to end decade-long mutual accounting recognition pact in December after rejecting US demand to waive local experience rule

  • Such agreement will expire at the end of this year and will not be renewed, the HKICPA says
  • The breakup came at a sensitive time when US and China has separate dispute over audit inspection that may lead to 273 US listed mainland companies to delist at the end of 2023

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View of Hong Kong skyline from The Peak on Hong Kong Island on 17 May 2022. Photo: K. Y. Cheng
Enoch Yiu

Hong Kong and the United States will end the mutual recognition of audit work done by each other’s professional accountants because of a dispute over the admissibility of overseas experience, adding another wrinkle to a fraught relationship.

The mutual recognition agreement with the US International Qualifications Appraisal Board (IQAB), first signed in 2011 and renewed in 2020, will no longer be effective when it expires on December 31, according to a statement by the Hong Kong Institute of Certified Accountants (HKICPA), the city’s accounting guild, with 45,000 members.

“The institute and IQAB could not come to an agreement” over the recognition of experience obtained in the US towards meeting the one-year local experience requirement for overseas-trained accountants to practise in Hong Kong, “and therefore could not proceed on the renewal of the mutual recognition agreement,” the HKICPA said.

“It is important for overseas accountants to have local experience as there are a lot of differences in the laws and taxation regulations between Hong Kong and the US,” said Edmund Wong Chun-sek, a ­practising director at Patrick Wong CPA, who also represents the accountancy constituency in the city’s legislature.

The 2011 agreement, subject to renewals every three years, allowed Hong Kong’s certified accountants to practise in the US without requiring another round of qualifications, and vice versa.

The HKICPA has similar accords with 12 accounting bodies, including Australia, New Zealand, Scotland, South Africa, Canada, Ireland and Zimbabwe. The IQAB’s mutual recognition agreements cover seven accounting bodies besides Hong Kong: South Africa, Australia, New Zealand, Canada, Ireland, Mexico and Scotland, according to its website. It did not respond to a request by the Post for comment.

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