Accounting and Financial Reporting Council (AFRC)

#AFRC participated in the ESG seminar titled “Enhancing the creditability of ESG disclosure through internal control and independent assurance” co-organised by HKiNEDA and PwC on 31 October.   During the event, our representative underscored the significant impact of the evolving regulatory landscape on sustainability reporting. With the growing needs, the AFRC has developed a sustainability assurance regime aimed at bolstering our sustainability reporting capabilities.   To ensure high-quality sustainability reporting, the AFRC noted the importance of establishing robust data collection processes, improving analytical capabilities, and implementing comprehensive internal controls and governance frameworks. Additionally, independent sustainability assurance from credible providers plays a pivotal role in building trust and confidence among investors and other stakeholders while improving ESG ratings.   #AFRC #ESG #SustainabilityReporting #SustainabilityAssurance

Last week, Accounting and Financial Reporting Council (AFRC) CEO Ms. Janey Lai, alongside with our colleagues from the Policy, Registration and Oversight and the Corporate and Public Affairs departments, met with officials from Qianhai Authority as well as Shenzhen Finance Bureau to discuss ways to deepen collaboration between the accounting professions in Hong Kong and Mainland China. Facilitated by the Financial Services and the Treasury Bureau, the meeting addressed the opportunities and challenges currently faced by our industry and identified ways to harmonise standards for smoother cross-border operations in hope to pave the way for a more connected and robust accounting community.                                                                                                      #AFRC #CrossborderCollaboration #AccountingProfession #ProfessionalDevelopment

Accounting and Financial Reporting Council (AFRC) remains dedicated to enhancing the credibility of financial reporting in Hong Kong, and one of the persistent concerns within the profession is the issue of “bogus CPAs.”      While the AFRC has not identified any reported cases of such individuals, there is growing evidence of quality issues. Some unscrupulous practicing accountants are taking on large volumes of audit projects through intermediaries, indiscriminately signing audit reports and grossly disregarding audit quality and professional standards.    To address this pressing issue, the AFRC, in collaboration with the Financial Services and Treasury Bureau, the Inland Revenue Department, and Hong Kong Institute of Certified Public Accountants (HKICPA), is implementing the following measures:     (1) Amend the Hong Kong Standards on Auditing to require all persons issuing audit reports to show their practicing certificate number in audit reports; and    (2) Require companies established in Hong Kong to include the practicing certificate number of the person who issued their audit report in their profits tax returns.     The AFRC has provided guidance on how members of the public can stay alert and file their complaints.      To verify the qualifications of individuals or firms, the public can check the registers of certified public accountants and CPA firms on the AFRC website: [Find a CPA (Practising)] https://lnkd.in/eVmPyEw5 [Find a CPA Firm/Corporate Practice] https://lnkd.in/eSY3mD8t   Given that the AFRC has no power to regulate unqualified individuals providing audit services, such instances should be reported directly to the Police for more expeditious follow up;   Complaints regarding suspicious activities or misconduct by accountants can be lodged online via the AFRC website: [File a Complaint] https://lnkd.in/eqNaG2Q5   #AFRC #AuditQuality #StandardsonAuditing  

The Accounting and Financial Reporting Council (AFRC) welcomes the strategies in the Chief Executive’s Policy Address to maintain the city's development momentum and self-renewal. The address highlights significant opportunities for the accounting profession amidst ongoing financial reforms, focusing on deepening the capital market and enhancing the green finance ecosystem.   Dr Kelvin Wong, Chairman of the AFRC remarked, “To support the Hong Kong SAR government’s initiatives, we will continue to focus on upholding the quality of corporate reporting, including the reliability of sustainability information through independent assurance, to contribute to Hong Kong's development as a global green finance hub.”    Ms Janey Lai, CEO of the AFRC added, “The Government’s initiative in driving the integrated development of education, technology and talent will help promote Hong Kong as an international hub for high-calibre talents. The AFRC remains steadfast in its commitment to collaborate with industry stakeholders to build a robust accounting workforce and contribute to the overall success of Hong Kong.”    #Accounting #AccountingProfession #GreenFinance #PolicyAddress #PolicyAddress2024  

The Accounting and Financial Reporting Council (AFRC) has published its Audit Focus for 2024 year-end audits, providing guidance for auditors to navigate the heightened risks in financial reporting and auditing amid uncertain economic conditions. The Audit Focus emphasises key areas to pay attention to and urges auditors to: -      Develop an understanding of the entity’s business and IT environment -      Identify, assess and respond to assessed risks arising from the current economic environment -      Set and reinforce the ethical culture within the audit firm -      Address potential issues related to auditor changes by listed issuers -      Ensure sufficient and timely involvement of the engagement partner and the engagement quality reviewer in the audit process This Audit Focus also outlines key milestones and essential actions for auditors, management and audit committees of listed entities during different phases to enhance transparency and allow for early identification and resolution of significant issues. Read our full Audit Focus here: https://lnkd.in/gj6hhGQB #AFRC #AuditFocus #AuditQuality 

AFRC Briefing Sessions on the Report on the Analysis of the Public Interest Entity Audit Market in Hong Kong and Roundtable Discussion on Audit Quality and Climate-integrated Audits in Hong Kong In September 2024, the Accounting and Financial Reporting Council (AFRC) conducted five briefing sessions with professional bodies including The Society of Chinese Accountants and Auditors, The Hong Kong Association of Registered Public Interest Entity Auditors, CPA Australia, ACCA Hong Kong , and The Hong Kong Chartered Governance Institute. We communicated our research findings and provided actionable recommendations to promote financial reporting and audit quality to over 860 participants, highlighting that: - Auditors should ensure the allocation of sufficient staff resources and adequate partner supervision in audit engagements; - Auditors should actively communicate and demonstrate the value of a quality audit and adjust their competitive strategy from price-based to audit quality-based; - Audit committees should assert their role in audit fee negotiation and ensure that audit fees are agreed at a level that allows auditors to devote sufficient time and appropriate resources to conduct a quality audit; and - Audit committees should thoroughly evaluate auditor independence and ensure that the auditor does not intend to rely on non-assurance services to subsidise the costs of the audit. The briefing sessions garnered lively interactions, with participants providing positive feedback on the insights gained on the analysis of the public interest entity audit market, and practical recommendations to improve audit quality and address the issue of stagnant audit fees. #AFRC #AuditQuality #PublicInterestEntity Click here for the full version of the Report on the Analysis of the Public Interest Entity Audit Market in Hong Kong: https://lnkd.in/gqP9GAfQ The AFRC will be conducting a briefing session on the two reports with the Hong Kong Securities and Investment Institute on Wednesday, 16 Oct 2024 (12:30PM - 1:30PM). To register for the briefing session, click this link: https://lnkd.in/g4KcXCKQ

AFRC participated in the CPA Australia ESG Forum 2024 on 26 September , and an #AFRC representative spoke at the forum to discuss the regulatory developments influencing sustainability reporting practices both in Hong Kong and other parts of the world, emphasising the need for Hong Kong companies to enhance their sustainability reporting capabilities to maintain the region’s competitive edge as a green finance hub. The unique expertise of accounting professionals in navigating regulatory requirements, collecting and analysing data, and establishing internal controls is crucial. This positions them well to assist companies throughout their sustainability reporting journeys. The AFRC underscores the importance of external sustainability assurance in enhancing the credibility and reliability of sustainability reporting. In this regard, the AFRC is committed to driving the development of a sustainability assurance regulatory regime. #AFRC #ESG #SustainabilityAssurance #SustainabilityReporting

On 20 September 2024, AFRC Chairman Dr Kelvin Wong gave a speech at The Hong Kong Chartered Governance Institute's 14th Biennial Corporate Governance Conference on the topic of "Emerging International Regulatory Concerns Hong Kong Needs to Address". Dr Wong spoke about emerging regulatory issues affecting the region, including an ageing population, political competition, fiscal imbalances, technology innovation, environmental concerns and their implications to market development and regulation. Dr Wong called for a "Governance Reboot" to ensure that governance models are fit-for-purpose and are responding effectively to these issues. Afterall, the bottom line of investors is performance but not conformance of governance. He added that governance failures should raise questions not only about the roles of auditors but also other key players, including chairpersons, CEOs, audit committees, bankers, and brokers. Dr Wong also raised concerns about audit firms “racing to the bottom” by offering unreasonably low audit fees and abusing the use of disclaimed opinions. To address these issues, Dr Wong emphasized that enhanced regulatory collaboration between regulators and the key stakeholders of the financial ecology is needed to ensure better oversight and accountability in the financial sector.

AFRC Briefing Sessions on 2023 Annual Inspection Report On 13 and 20 September, the AFRC hosted two impactful briefing sessions for PIE auditors and non-PIE auditors respectively. Over 100 firm leaders, including managing partners and quality control system responsible persons attended the briefings.  This year marks our first invitation to non-PIE auditors for our briefing sessions, following the AFRC's expansion of the inspection scope to include them. This initiative offers an opportunity to deepen their understanding of our regulatory expectations. These sessions focused on the vital role of leadership in upholding audit quality and fostering a culture of continuous improvement. Key highlights included: ·      Inspection Results & Recommendations: Insights into our 2023 inspection findings and strategies for enhancing audit quality. ·      Leadership Expectations: Emphasis on the importance of cultivating a culture of compliance and transparent communication with audit committees. Ms Eva Lau, Acting Head of Inspection, stated, “We expect firms’ leadership teams to cultivate a culture of compliance, commit to continuous quality improvement, and maintain transparent communication with key stakeholders particularly, audit committee, about financial reporting and audit quality.” In the closing remarks from Ms Janey Lai, CEO of the AFRC, “The AFRC welcomes the high rate of participation of firm leaders in the briefing sessions, as it reflects their commitment and accountability to enhancing audit quality. To promote effective regulation, sound corporate governance and sustainable market development, the AFRC will continue to engage directly with the accounting profession.” Participant Feedback: “The insights shared were invaluable; it’s clear that leadership plays a crucial role in driving quality.” — Managing Partner of PIE auditor “I appreciated the emphasis on continuous improvement; it’s a reminder that we must always strive for excellence.” — Quality Control System Responsible Person of PIE auditor “Engaging directly with the AFRC in this briefing session has motivated us to enhance our audit practices.” — Managing Partner of non-PIE practice unit Thank you to all who participated! Your commitment to audit quality strengthens confidence in Hong Kong's capital market. 💪📊 #AuditQuality #AFRC #Leadership #ContinuousImprovement

The #AFRC met with the General Union of Hong Kong Accounting Professionals and Staff (the Union) on 17 September to foster ongoing and constructive dialogue with the accounting sector.   During the meeting, the AFRC and the Union discussed various topics, including the importance of signing of audits by licensed practitioners complying with professional standards, the phenomenon of undercutting audit fees that may compromise quality, and the necessity of upskilling and development of the accounting profession.