(Hong Kong, 19 January 2018) In response to the gazetting today of the Financial Reporting Council (Amendment) Bill 2018, Mr. Eric Tong, President of HKICPA, makes the following statements:

HKICPA was an early advocate for an independent regulator of listed company auditors in Hong Kong, therefore we are keen to see the completion of this exercise. An independent regulatory body under the new regime will strengthen Hong Kong's reputation as an international financial and capital market.

HKICPA, in the best public interest, initiated discussions on development of a suitable, independent model for Hong Kong. Over 10 years ago, at the suggestion of the HKICPA, the Government established the Financial Reporting Council to take up investigation of listed company audits. Since then, we saw international models have continued to move to higher degree of independence. A few years ago, HKICPA restarted its work in developing a more independent regulatory model. Later, the Government took the lead and developed the appropriate legislation to reform the FRC.

We have worked very closely with the Government and the FRC to ensure the model being proposed are in line with international benchmarks and will be effective and fair. We have raised comments regarding structure, composition and operational features of the system. We are pleased the bill has broadly addressed our concerns.

In particular, we are pleased to see that there will be provisions to require the FRC to establish and publish guidelines on sanction determination and application, and to separate the functions of inspection and investigation from discipline. We will continue to closely work with all parties for their implementation under the new regime.

However, some of our concerns remain, including the important issues of governance, oversight powers, funding, sanctioning and regulation of non-Hong Kong auditors.

As a matter of principle, the success of FRC hinges on having sufficient persons with relevant, practical and up-to-date auditing skills and experience. This includes the FRC Council itself, inspection and investigation teams, disciplinary tribunals and independent case assessors and appeal panels. We will welcome this pre-requisite to be put in place upon implementation.

While the bill provides for the FRC to issue directives to HKICPA to take specific actions, we believe due process should be in place for the FRC to follow regarding how the FRC will exercise its oversight powers. Directing HKICPA to take specific action should not be exercised by the FRC without following a due process that is no less robust than the HKICPA's existing processes such as public consultation.

On funding, HKICPA feels that the proposed $90 million annual budget, a three-fold increase, requires further substantiation. Judging from our own experience in regulation, inspection and discipline, the figure seems very high considering the number of PIE auditors under the purview of FRC. The Government needs to be more forthcoming and transparent with the funding parties, to ensure everybody is comfortable that their respective contribution is reasonable and fair.

A number of our member firms continue to have concern over the maximum penalty of $10 million, which they believe will impose an undue financial burden on smaller firms.

Last but not least, it is not clear how non-Hong Kong auditors will be regulated. It seems that FRC will rely on regulatory cooperation agreements with the corresponding overseas regulators in regulating non-Hong Kong auditors, but there are no specific details as to what criteria the FRC will use before placing such reliance. We believe the bill should explicitly spell out that the FRC will have the ultimate responsibility and power to directly regulate non-Hong Kong auditors, even though regulatory cooperation agreements are in place. We are concerned that to rely on overseas regulators will not be sufficient to protect the interests of investors in Hong Kong.

HKICPA will keep on pursuing these issues during the legislative process to ensure the new regime will put in place independence, expertise and stewardship in the FRC for it to play its role in enhancing the international status of Hong Kong.

 

香港會計師公會回應《2018 年財務匯報局（修訂）條例草案》

（香港，二零一八年一月十九日） 就《2018 年財務匯報局（修訂）條例草案》今日刊憲，香港會計師公會會長唐業銓先生作出以下回應：

香港會計師公會（「公會」）於早年已率先倡議在香港設立上市公司核數師的獨立監管機構，因此我們殷切期望有關制度能得以落實。在新制度之下的獨立監管機構將可鞏固香港國際金融及資本市場的地位。

公會以維護公眾最佳利益為前提，展開關於設立一個適合香港的獨立制度的討論。十多年前，政府接納公會建議，成立財務匯報局，接掌調查上市公司的審核工作。自此，就公會所見，國際間逐漸採用高度獨立的監管模式。數年前，公會再次推動在香港設立更獨立的監管制度。其後，政府開始進行相應立法工作，改革財務匯報局。

公會一直與政府及財務匯報局緊密合作，確保建議的制度符合國際標準，而且運作方式公平有效。我們曾就建議制度的架構、組成及運作模式多方面提出意見。我們樂見草案已大致回應了我們的關注。

當中，我們歡迎政府規定財務匯報局須制訂及發出有關處分裁決及執行的指引，並將查察及調查的功能與紀律處分分開處理。我們將與各方密切合作，確保在新制度下這些措施有效實施。

然而，我們關注的若干議題仍未獲得充分解決，包括管治、監管權力、財政安排、紀律處分及對非本港核數師監管等重要範疇。

原則上，財務匯報局的成功有賴足夠具有相關核數技能、熟悉實際運作、掌握最新行情及經驗豐富的人才。除了財務匯報局成員本身，亦包括其查察及調查人員、紀律審裁處、獨立個案評估人員及上訴委員等。公會要求政府充分落實這些先決條件。

草案訂明財務匯報局可向香港會計師公會發出執行特定行動的指令，公會認為須制訂適當程序讓財務匯報局依從，說明財務匯報局將如何執行監察權力。財務匯報局應根據適當程序方可發出特定行動指令，而該等程序必須如公會現行程序一樣周全，例如進行公眾諮詢。

在財政方面，公會認為建議的 9,000 萬港元年度經常開支預算既為目前的三倍，必須具更充分理據支持。根據公會在監管、查察及紀律處分方面的經驗，以財務匯報局監管的公眾利益實體核數師數目而言，有關開支預算數額非常高昂。政府對提供經費的各方須更加開誠佈公及提高透明度，確保各方認同各自的出資比率公平合理。

公會若干會計師事務所會員對 1,000 萬港元的最高處分仍然很關注，認為會對規模較小的事務所構成過度的財政負擔。

此外，草案對非本港核數師的監管方式不夠清晰。財務匯報局似乎將須依靠與相關境外監管機構簽訂合作協議以監管非本港核數師，但草案對相關監管合作的基礎並無具體說明。公會認為草案應明確列明，即使有簽訂相關監管合作協議，財務匯報局將有最終職責及權力直接監管非本港核數師。我們關注到單依靠境外監管機構，不足以保障本港投資者的利益。

公會將在相關立法程序中積極跟進和爭取上述關注事宜，確保在新制度下財務匯報局具獨立性、足夠專業知識及良好管理，以充分發揮其提升香港國際地位的角色。