Hong Kong’s accountancy sector needs to add talent

A free flow of information is one of the pillars of Hong Kong’s standing as a regional and global financial hub. But the information needs to be accurate, objective and trustworthy if it is to sustain investor and public confidence.

Financial reporting is a case in point. It is reassuring to hear from the city’s accounting watchdog that the work of the six big firms, benchmarked by more than 100 corporate audit clients each, is generally good – presumably less than perfect.

That assessment from Janey Lai, head of inspection at the Accounting and Financial Reporting Council, suggests the regulator is not easily satisfied; nor should it be, given that the city’s reputation is at stake.

It certainly found reason for concern in the work of medium and small accounting firms, accusing them of malpractices that could imperil the city’s status as a financial centre.

These firms show a “disappointing” tendency to cut corners, failure to learn once deficiencies are found, and an “unacceptable” attitude that compromises audit quality. This could have a severe impact on public confidence in the quality of financial reporting.

It should be remembered that the 3,000-odd listed companies in Hong Kong include legacy stocks from the past at the bottom end of the market, which is where the problems are. It needs to be cleaned up.