Hong Kong government to pay towards audit reform

The Hong Kong government has agreed to provide HK$300 million in seed money for expanding the Financial Reporting Council (FRC) as part of Hong Kong’s audit regulatory reform, the South China Morning Post reported this month. The money will enable the FRC, to triple its staff to inspect, investigate and discipline auditors in more than 2,000 listed companies, said FRC Chairman Kelvin Wong. He said he expected lawmakers to vote in March for reforms that would see the FRC become a fully empowered regulator overseeing all auditors of listed companies in the second half of 2019. The Hong Kong Institute of CPAs was the initiator of the audit regulatory reform before handing it over to the government in 2012 to prepare for public consultation and legislation.

Hong Kong listing rules threat to CG, says report

A joint report by the Asian Corporate Governance Associa- tion (ACGA) and brokerage CLSA released this month said that “the introduction of dual-class shares in Hong Kong and Singapore highlights a threat to that fundamental driver [of better corporate governance].” It also said that while a belief “in the value of transparency and accountability remains largely intact, the third principle, fairness, has come under fire.” Hong Kong’s listing rules changed in April to allow companies with dual-class shares to list, giving founders and key management stronger voting rights than other shareholders. The biennial report comprises a market-ranking survey carried out by ACGA on macro corporate governance quality in Asia-Pacific. It ranked Hong Kong second in the region.

BDO U.K. and Moore Stephens to merge

BDO in the United Kingdom will merge with smaller firm Moore Stephens, in a move that will create the U.K.’s new fifth largest accounting firm by revenue. BDO confirmed last month that it expects the merger to take place as early as spring next year. The deal will bring the new firm’s annual turnover to £590 million taking over Grant Thornton, which recorded revenues of £500 million in the U.K. last year, The Times in London reported. BDO, however, will still be significantly behind fourth-place KPMG, which had around £2 billion in revenues in 2017 in the U.K.

U.K. Big Four face radical shake-up

Two reports released this month in the United Kingdom revealed proposals to promote more competition and toughen up supervision of the audit market, dominated by the Big Four. The plans reportedly marks the most ambitious attempt yet to reform the accounting profession in Britain. The report by the Competition and Markets Authority (CMA) revealed the interim findings of its audit market review. It proposed putting the Big Four’s audit and advisory services into separate operating entities. It also proposed that audits of the U.K.’s biggest companies should be carried out by two firms, one of which should be from outside the Big Four. New laws would be needed to implement the CMA proposals. The other report, commissioned by Chairman of Legal and General Group plc John Kingman, who led a review into the Financial Reporting Council (FRC) said the audit regulator should be replaced by a new watchdog with new management, stronger powers and a clearer remit to serve consumers. Calls for the new regulator were welcomed by both the FRC, which has come under intense scrutiny this year, and the government, which has pledged to implement Kingman’s recommendations.