Financial Reporting Council backs government plan to widen its oversight
The government-appointed Financial Reporting Council showed its support for a government proposal to expand its power over accountants in a bid to match international standards and to address accounting scandals.
The government-appointed Financial Reporting Council yesterday showed its support for a government proposal to expand its power over accountants in a bid to match international standards and to address accounting scandals which have flared up in the past few years.
But industry body the Hong Kong Institute of Certified Public Accountants said it will fight the measure.
In a public consultation three months ago the government proposed a law change to expand the power of the FRC to take over routine inspection and disciplining of auditors of listed companies from the HKICPA.
"The FRC is a statutory body independent of the audit profession. Our submission is prepared from a public interest perspective, having due regard to the international best practices and experience as well as our local auditor regulatory framework which have largely been covered in our published international comparative study," said John Poon, chairman of the FRC.
A study published by the FRC in October last year showed Hong Kong seriously lags behind countries such as Britain, the United States, Canada, Australia and Singapore that have an independent body to oversee auditors.
Hong Kong still allows the HKICPA to issue accounting licences, set standards, conduct routine inspections and decide how to punish accountants. It only lost its investigative powers in 2006 when the government set up the FRC to take over the job of investigating audit failures in listed companies.
The lack of an independent oversight on accountants means that Hong Kong could not join the International Forum of Independent Audit Regulators, which the proposal seeks to address.
"The independence of the FRC, both in fact and in the eyes of the public, is paramount at all times," Poon said, adding that the majority of its council would be comprised of non-accountants while its future funding would not be influenced by audit professionals.
At present, HKICPA co-finances the FRC with the government, the stock exchange and the Securities and Futures Commission.
"The reform would allow FRC to conduct inspection, investigation and disciplinary action altogether, which would make it too powerful," said Clement Chan, the president of the HKICPA.
