Hong Kong accountants agree to give up some regulatory powers but won’t foot the bill

The accounting industry body in Hong Kong supports proposed government reforms to transfer more of its regulatory power over auditors to an independent regulator but rejects the idea of paying for it, according to its newly elected president.

Hong Kong Institute of Certified Public Accountants (HKICPA) president Mabel Chan Mei-bo said the institute will negotiate with the government in the next few months over the key question of who will pay for the operation of the Financial Reporting Council (FRC) after the reform is implemented.

“The HKICPA supports the government’s proposed reform to enhance independence of the regulation of auditors of listed companies in a bid to match international practices. However, we disagree with the proposal that requires the HKICPA to be one of the parties to pay for the operation of FRC,” Chan told the South China Morning Post in an interview.

“The whole purpose of this reform is to add independence to auditor regulation. If the HKICPA needs to pay for it, then it is not independent enough,” she said.

The government plans to submit a bill to the Legislative Council in mid 2017 to change the law to shift more regulatory power from the HKICPA to the FRC, with the purpose of making FRC a fully independent audit-industry regulator.

The government-appointed members of the FRC, which was established in 2007, have already taken over the investigation of audit failures from the HKICPA but the industry body still retains the duties of routine inspection and decides on the penalty if auditors are found to have breached the rules.