The announcement this month by the Secretary for Financial Services and the Treasury about further changes to the regulatory regime for our profession came as a surprise. The proposals will have significant impacts on our profession and the Institute’s operations.
The Institute has long advocated for enhancing Hong Kong’s regulatory regime, in a measured and considered manner, after consultations and assessment of all its impacts. The transfer of regulatory functions relating to public interest entity (PIE) auditors to the Financial Reporting Council (FRC) in October 2019, and the new oversight arrangements for the Institute’s operations across a range of areas, strengthened the regulatory regime, benefitting Hong Kong’s status as an international financial centre. We therefore believe that there are still a number of areas that need to be clarified regarding the rationale for further changes to the regulatory regime.
The proposals represent a fundamental change in the regulatory landscape of the accounting profession and will affect the business community, especially our members. Any changes should be undertaken after thorough consultation with stakeholders to gauge their views and assess the implications of the reform.
The government should provide more information, notably about the transitional arrangements and period. The Institute wishes for the continued smooth regulation of the profession, and hopes the government and the FRC will consider knowledge transfer and experience sharing, and setting up a tripartite task force to oversee the transition. Changes should also be implemented in stages to ensure the effectiveness of the reforms can be properly assessed.
The Institute researched the regulatory systems in a number of jurisdictions, including other major international financial centres to determine how the proposals fit in with international practices.
“The Institute wishes for the continued smooth regulation of the profession, and hopes the government and the FRC will consider knowledge transfer and experience sharing, and setting up a tripartite task force to oversee the transition.”
There is no one approach, although generally the focus is on the regulation of PIE auditors. Other jurisdictions have introduced independent regulation of PIE auditors in the last 20 years, but regulatory models for the whole of the accounting profession vary between jurisdictions. The regulatory models developed and applied in individual jurisdictions reflect legal and constitutional systems and structures that affect the organization of the profession, and are also influenced by other factors including statutory audit requirements that vary from place to place.
In some jurisdictions, professional bodies retain, or have been delegated, certain responsibilities in the regulation of non-PIE auditors and generally oversee the professional conduct of non-practising members. While in other jurisdictions, all functions of the professional bodies come under the oversight of a government appointed authority.
To facilitate discussion and feedback collection, the Institute has arranged two members’ forums on the proposals. The first, on 28 June, saw representatives of the Financial Services and the Treasury Bureau introducing the proposals, and their rationale behind the changes and take questions from members viewing the webinar. The second forum will take place on 6 July, where representatives from the FRC will explain their roles if the changes go through. Recordings of both forums will be uploaded and made available via the Institute’s website.
As well as these two forums, the Institute is preparing an online survey to collect feedback. More information on the survey will be available soon.
Raymond Cheng FCPA (practising)