Groundbreaking financial reporting standards have further sharpened Hong Kong’s competitive edge
	Patricia McBride, HKICPA Executive Director, is proud of Hong Kong's unblemished financial reputation

Hong Kong has ramped up the quality of its already stringent financial reporting by introducing a groundbreaking programme covering the provision of audit services.

Multinational companies (MNCs) operating in Hong Kong will be major beneficiaries of the Hong Kong Institute of Certified Public Accountants (HKICPA) initiative, as they can be sure of a quality audit. The move further improves the transparency of the audit process, sharpening Hong Kong's competitive edge in the global financial market.

"We take pride in operating on world's best practice so that the audited financial statements of Hong Kong companies support their international activities and enable them to properly communicate with their shareholders," said Patricia McBride, Executive Director of HKICPA, the local accountancy regulator. "MNCs will benefit most from Hong Kong's international financial reporting standards as they are able to do their worldwide reporting on the same platform, regardless of the countries in which they operate."
 
Corporate ‘cleanskin'

This latest initiative puts Hong Kong at the cutting edge of world standards in auditing. It further strengthens Hong Kong's reputation as a "cleanskin" (meaning free of corporate scandals), and makes the city a more attractive place to do business, Ms McBride said.

Other regional regulatory bodies were "watching (Hong Kong) with interest", she added.

The quality control programme applies to all audit firms conducting audits in Hong Kong. Ms McBride said the programme goes beyond merely requiring compliance with international financial reporting standards. "This is an overlay which for the first time monitors the way auditors manage their business."

Hong Kong has long been a regional leader in its provision of world-class accountancy services. "We've been at the forefront in international convergence, and we've also worked very hard to make it work on the ground," Ms McBride said.

"It is important for Hong Kong that everything in the financial reporting supply chain is premium quality – hence we have world-class trained auditors, and top class regulators in the Securities and Futures Commission and Hong Kong Exchanges and Clearing. All the parties have to play their part so investors get what they need."

Self-review process

Under the new programme, HKICPA will require all audit firms to complete a self-review questionnaire covering issues such as company ethics, quality of staff, quantity of staff, training procedures, etc.  Audit firms that indicate a high-risk profile will then be considered for a site visit.

The measures were part of an ongoing practice review to maintain high standards in Hong Kong's accountancy industry, with more benchmarks due to be revealed throughout the year, Ms McBride said.

They go hand-in-hand with the powers of the newly established Financial Reporting Council, an independent body tasked with investigating irregularities committed by auditors of listed companies.

"While the institute will continue to regulate our members and keep our investigatory power over the audits of non-listed companies, the Financial Reporting Council will have the added authority to investigate complaints concerning standards of financial reporting and audits of listed companies," Ms McBride said.

Regional leader

"This combined force strengthens our whole approach to ensuring quality financial statements. I've had other regulators approach (Hong Kong) and say, we know what we need to do, can we copy you?"

Hong Kong's rigorous corporate regime is also credited with helping the city establish itself as the premier capital formation centre for the Chinese mainland. In 2006, Chinese mega-listings led by the Industrial and Commercial Bank of China, the biggest float in history, saw Hong Kong Stock Exchange surpass New York as the world's second biggest market for IPOs (initial public offerings), after London.

Many of these mainland enterprises sought listings in Hong Kong not solely for the purpose of fund raising, but also for enhancing their corporate governance standards by complying with Hong Kong's international standard listing requirements.

"Hong Kong as an international financial centre is an attractive place (for companies) to list," Ms McBride said. "Our job is to get that infrastructure as right and transparent as possible, without interfering with business or imposing additional burdens on auditors."

Related link
Hong Kong Institute of Certified Public Accountants (HKICPA)