It is my privilege to introduce to you our new identity as the Accounting and Financial Reporting Council (AFRC). Our new name heralds the implementation of the further reform of the regulatory regime and transforms us to be the independent regulator of the accounting profession in Hong Kong.
Dr Kelvin Wong, SBS, JP Chairman
Our new status builds on the initial reform of the regime in 2019, which gave us the power to regulate auditors of listed entities. The further reform extends our regulatory power to the auditors of all entities in Hong Kong and gives us the power to regulate all accounting professionals. It also vests in us the power to license practising accountants and to register their firms and corporate practices as practice units and as auditors of listed entities. The Oversight Policy and Governance Department has been renamed the Policy Registration and Oversight Department to reflect the significant increase in our registration and licensing functions.
In addition, our oversight function has been extended to include the performance of all continuing self-regulatory functions of the Hong Kong Institute of Certified Public Accountants (“HKICPA”). These are significant and primarily relate to qualification of professional accountants and the setting of their professional standards and requirements for continuing professional development.
These changes further align the regulatory regime in Hong Kong with the international practices of our major trading partners with respect to independent regulation of the accounting profession. A robust independent regulatory regime is essential for maintaining and reinforcing Hong Kong’s status as an international financial centre and business hub. This also facilitates the long-term sustainable development of the accounting profession. Furthermore, practice units that audit listed entities and non-listed entities will be regulated solely by the AFRC.
As the independent regulator of the profession, we will spearhead and lead the accounting profession to constantly raise the level of quality of professional accountants, and thus protect the public interest. Our purpose is to shape a competitive environment that will nurture and promote the success of the profession. This pivotal role not only enhances the quality of financial reporting but in turn reinforces our pursuit of promoting the healthy development of the profession and Hong Kong’s position as a competitive international financial centre.
As a financial regulator, we intend our regulatory actions to create positive ripple effects in the business environment that will bring benefits to the accounting profession, to the economy and to Hong Kong. These ripple effects are visually reflected in the letter ‘F’ of our new logo.
The governance of the AFRC will continue to be led by the existing Board, which is independent of the profession and is composed of the Chairman, 10 other Non-Executive Directors and the CEO. A new statutory Advisory Committee was formed on 29 July 2022 by the HKSAR Government to provide advice on matters of policy in relation to any of AFRC’s objectives and functions. Six committees established by the Board will provide advice and assistance to the Board in overseeing the functions of the AFRC:
- the Inspection Committee;
- the Investigation Committee;
- the Policy Registration and Oversight Committee;
- the Discipline Committee;
- the Finance and Corporate Affairs Committee; and
- the Compensation and Nomination Committee.
Our Committee structure mirrors our departmental structure and provides a sound oversight mechanism to ensure the effective discharge of responsibilities and accountability of the AFRC to the public. The Discipline Committee was established in August 2022 as the Discipline Department will soon begin to handle cases. The remits of all the Committees are expanded in line with our broader regulatory functions. The Oversight, Policy and Governance Committee has been renamed the Policy, Registration and Oversight Committee consistent with the renaming of the respective Department.
Looking ahead, the AFRC will exercise the full spectrum of our regulatory powers, the positive and significant effects of which will ripple through the profession, the capital markets and Hong Kong. We look forward to the continued support of all of our regulatees and stakeholders to extend and multiply the ripple effects of the AFRC’s regulatory actions to uphold the quality of financial reporting and promote the long term sustainable development of the accounting profession.