Hong Kong audit regulator in talks with Beijing’s Ministry of Finance about granting it access to working papers of mainland Chinese companies, chairman says

The Financial Reporting Council is exploring ways its staff might be allowed to inspect the audit papers of companies in mainland China, says Kelvin Wong

‘These inspections [would] aim at checking if audit firms have sufficient internal controls on audit quality,’ says Wong

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The FRC, which regulates the auditors of Hong Kong-listed companies, is in talks with Beijing’s Ministry of Finance (MOF) about allowing it to inspect the audit papers of mainland Chinese firms. Photo: Sam Tsang

Published: 8:30pm, 23 Jun 2022

The Financial Reporting Council (FRC), which regulates the auditors of Hong Kong-listed companies, is in talks with Beijing’s Ministry of Finance (MOF) about allowing it to inspect the audit papers of mainland Chinese firms, its chairman said.

Based on an agreement signed between the two bodies in 2019, the MOF has assisted the Financial Reporting Council in investigations of cases involving audit working papers located on the mainland.

The mainland authority has already passed the papers from seven cases to the Hong Kong watchdog to carry out its inquiries.

The two bodies are now exploring ways FRC staff could conduct cross-border inspections even in cases where there is no investigation under way.

“These inspections [would] aim at checking if audit firms have sufficient internal controls on audit quality and whether auditors have exercised adequate professional scepticism in audit to check on the numbers on the books of their clients,” Kelvin Wong Tin-yau said in a media briefing about the annual work review of the FRC on Thursday.

“This is important in ensuring the quality of the audit works of listed companies in Hong Kong.”

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