A1.

Pursuant to sections 3(1) and (2) of the AFRCO, a PIE is a public interest entity, which is either (a) a listed corporation listed on a recognized stock market whose listed securities comprise at least shares or stocks; or (b) a listed collective investment scheme listed on a recognized stock market.

A2.

No.  An entity with only listed debts without listed shares or stocks is not a PIE under section 3(1) of the AFRCO.

A3.

Pursuant to Part 1 of Schedule 1A of the AFRCO, a PIE engagement is an engagement carried out by an auditor that involves the preparation of:

1. 1. an auditor’s report on a PIE’s annual financial statements required by the Companies Ordinance (Cap 622), the Listing Rules or any relevant code issued by the Securities and Futures Commission;
   2. a specified report required to be included in (i) a listing document of a corporation seeking to be listed for the listing of its shares or stocks; (ii) a listing document of a listed corporation for the listing of its shares or stocks; or (iii) a listing document of a collective investment scheme seeking to be listed or a listed collective investment scheme; or
   3. an accountant’s report required under the Listing Rules to be included in a circular issued by or on behalf of a PIE for a reverse takeover or a very substantial acquisition.

A4.

A PIE auditor means a practice unit registered with the AFRC as a registered PIE auditor under Division 2 of Part 3 of the AFRCO or an overseas auditor recognized by the AFRC as a recognized PIE auditor under Division 3 of Part 3 of the AFRCO.

A5.

A registered responsible person means any of the following individuals whose name is recorded in the registered PIE auditors register as a responsible person of a registered PIE auditor:

1. 1. an engagement partner;
   2. an engagement quality control reviewer; or
   3. a quality control system responsible person.

A6.

A professional person means a CPA or practice unit.

A7.

Pursuant to section 2(1) of the AFRCO, a practice unit is any of the following:

1. 1. a CPA (practising) practising accountancy on the accountant’s own account under the accountant’s own name as registered under section 22(2) of the Professional Accountants Ordinance (Cap.50) (“PAO”);
   2. a CPA firm which is a CPA (practising) who practises accountancy on the accountant’s own account under a firm name registered under Division 2 of Part 2A of the AFRCO or a firm of CPA (practising) that practises accountancy in partnership and is registered under Division 2 of Part 2A of the AFRCO; or
   3. a corporate practice which is a company registered as a corporate practice under Division 3 of Part 2A of the AFRCO.

A8.

As provided in sections 37A and 37B of the AFRCO, FR misconduct generally refers to:

1. 1. a contravention of a provision of the AFRCO (subject to certain exceptions);
   2. a contravention of a condition imposed in relation to the registration or recognition of the PIE auditor concerned;
   3. a contravention of a requirement imposed under the AFRCO (subject to certain exceptions);
   4. an act or omission in relation to a PIE engagement that, in the AFRC’s opinion, is or is likely to be prejudicial to the interest of the investing public or the public interest; or
   5. a “practice irregularity” as defined under section 4 of the AFRCO.

A9.

As provided in section 37AA of the AFRCO, CPA misconduct generally refers to:

1. 1. a “professional irregularity” as defined under section 3B of the AFRCO, except for FR misconduct or practice irregularity committed by a PIE auditor or a registered responsible person of a registered PIE auditor as defined under section 37A or 37B of the AFRCO;
   2. punishment by the Court of First Instance for failing to comply with a requirement imposed under the AFRCO;
   3. where the professional person is a CPA, conviction of an offence under Part V of the Crimes Ordinance (Cap 200); or
   4. where the professional person is a CPA, conviction in Hong Kong or elsewhere of any offence involving dishonesty.

A10.

Examples of a “practice irregularity” include situations where a PIE auditor, registered responsible person or non-PIE auditor, in relation to a PIE engagement or non-PIE engagement:

1. 1. falsified or caused to be falsified a document;
   2. made a statement, in respect of a document, that was material and that the PIE auditor or registered responsible person knew to be false or did not believe to be true;
   3. has been negligent in the conduct of the PIE auditor’s or registered responsible person’s profession;
   4. has been guilty of professional misconduct;
   5. did or omitted to do something that would reasonably be regarded as bringing or likely to bring discredit on the PIE auditor, registered responsible person, the Hong Kong Institute of Certified Public Accountants (“HKICPA”) or the accountancy profession;
   6. failed or neglected to observe, maintain or otherwise apply a professional standard; or
   7. refused or neglected to comply with any direction lawfully given by the AFRC, or the provisions of any bylaw or rule made, or any direction lawfully given by the Council of the HKICPA.

The above examples are not exhaustive.  Please refer to section 4 of the AFRCO for a full list of matters that constitute a “practice irregularity”.

A11.

Examples of a “professional irregularity” include situations where a professional person:

1. 1. falsifies or causes to be falsified a document;
   2. makes a statement, in respect of a document, that is material and that the professional person knows to be false or does not believe to be true;
   3. fails to observe, maintain or otherwise apply a statement of professional ethics, or standard of accounting, auditing or assurance practices, issued or specified, or deemed to have been issued or specified, under section 18A of the PAO;
   4. fails to comply with an applicable AML/CTF requirement;
   5. while being a director of a corporate practice or a trust or company services provider (TCSP) licensee, or a responsible person of a limited partnership fund:
      1. causes or allows a breach of an AML/CTF requirement by the corporate practice, licensee or fund; or
      2. fails to take reasonable steps to prevent such a breach;
   6. fails, without reasonable excuse, to comply with a requirement imposed by a CPA inspector or CPA investigator;
   7. fails to comply with-
      1. any regulation made or any direction lawfully given by the AFRC; or
      2. the provisions of any bylaw or rule made or any direction lawfully given by the Council of the HKICPA;
   8. is negligent in the conduct of the professional person’s profession;
   9. is guilty of professional misconduct; or
   10. is guilty of dishonourable conduct (or, in the case of a corporate practice, does or omits to do something that, if the person were an individual CPA, would reasonably be regarded as being dishonourable conduct).

The above examples are not exhaustive.  Please refer to section 3B of the AFRCO for a full list of matters that constitute a “professional irregularity”.

A1.

Applicants are required to complete and submit the application form “Application for the Issuance of a Practising Certificate” (Form PC-1) to the AFRC, together with the application fee in the amount and way specified in the fee schedule published on the AFRC website and all necessary supporting documents.

Please refer to the AFRC’s Guide for the Issuance of Practising Certificates paragraphs 3.3.3 to 3.3.5 for details of the application procedures and supporting documents.

A2.

No. Pursuant to section 20AA(1) of the Accounting and Financial Reporting Council Ordinance (Cap. 588), only a certified public accountant (i.e. a member of the HKICPA) can apply to the AFRC for a practising certificate.

A3.

Pursuant to section 20AAL of the Accounting and Financial Reporting Council Ordinance (Cap. 588), the applicant is required to:

1. have had the following full-time approved accounting experience¹ in one or more specified offices²:
   • at least 30 months acquired after the applicant has become a member of a specified accountancy body³ or a certified public accountant; or
   • at least 4 years, and at least 1 year of that experience has been acquired after the applicant has become a member of a specified accountancy body³ or a certified public accountant; and
2. possess the local experience and knowledge of local law and practice that the Council of the HKICPA considers necessary. In respect of local experience, the Council of the HKICPA requires the applicant to have had at least 1 year of full-time approved accounting experience1 in Hong Kong within three years preceding the practising certificate application.

Notes:

¹ Approved accounting experience means the professional accountancy experience approved as sufficient practical experience by the Council of the HKICPA. Please refer to the HKICPA’s Approved Accounting Experience for Issuance of Practising Certificate on its website for the relevant requirements.

² A specified office means the office of a CPA (practising) or a person practising public accountancy in the jurisdiction of a specified accountancy body.

³ A specified accountancy body means:

• an accountancy body between which and the HKICPA there is in force an agreement of mutual or reciprocal recognition⁴ ; or 
• an accountancy body accepted by the Council of the HKICPA as described in section 24(1A) of the Professional Accountants Ordinance (Cap. 50)⁴.

⁴ The information is available on the HKICPA website (https://www.hkicpa.org.hk/en) under the heading “Recognition of overseas bodies”.

A4.

Full-time experience in public practice gained in Mainland China will not be accepted as satisfying the four-year / thirty-month approved accounting experience requirement and the one-year recent local experience requirement unless:

1. the approved accounting experience was acquired in a Mainland CPA practice that is a branch / subsidiary of or affiliated with a CPA firm or a corporate practice in Hong Kong; and
2. an official letter duly signed by the sole practitioner / practising partner / practising member director of the CPA firm or corporate practice in Hong Kong is obtained to certify that you have satisfied the prescribed criteria for recognition of such experience as specified by the Council of the HKICPA.

Please refer to the HKICPA’s Approved Accounting Experience for Issuance of Practising Certificate on its website for the prescribed criteria for recognition of Mainland China experience.

A5.

Pursuant to section 20AAL of the Accounting and Financial Reporting Council Ordinance (Cap. 588), the applicant is required to sit and pass the examinations set by the Council of the HKICPA, which include an examination in local law and taxation. Please refer to the HKICPA’s Practising Certificate Examinations on its website for the relevant requirements.

A6.

You are required to submit a fresh application to the AFRC for a practising certificate. Your application will be assessed according to requirements now in force. Please refer to the Q1 above for the application procedures.

A7.

You can be regarded as being ordinarily resident in Hong Kong for practising certificate issuance purpose if you satisfy any of the following criteria:

1. You have been present in Hong Kong for no less than 180 days during the period of 12 months preceding the date of the application;
2. You are presently residing in Hong Kong at the time of application, intend to reside in Hong Kong for the next 12 months AND:
   1. have the right of abode in Hong Kong or the right to land in Hong Kong and are not subject to any condition of stay; or
   2. have been residing in Hong Kong for a period of time; OR
3. You are working in Mainland China and continue to be a partner / director / employee of a CPA firm / corporate practice registered with the AFRC; have the right of abode in Hong Kong or the right to land in Hong Kong and are not subject to any condition of stay; AND

1. 1. continue to maintain a place of residence in Hong Kong; or
   2. the principal members of your family (spouse and/or minor children) have been present in Hong Kong for no less than 180 days during the period of 12 months preceding the date of the application.

A8.

Under section 37Q of the Accounting and Financial Reporting Council Ordinance (Cap. 588), you may apply to the Accounting and Financial Reporting Review Tribunal for a review of the decision within the specified period.

A9.

At present, there is no restriction in respect of the business sector of the full-time employment of certified public accountants (practising). However, you must commence your practice within 6 months of the effective date of the practising certificate, otherwise your practising certificate may be cancelled. Please inform the AFRC of any change in the mode of your practice within 14 days of the change by completing and submitting the notification form “Notification for Change in Particulars of a CPA (practising)” (Form PC-3), together with all necessary supporting documents.

A10.

There are no rules about the number of accounts signed by a certified public accountant (practising) for annual renewal. However, certified public accountants (practising) are required to declare in the annual renewal application that they have commenced practice within 6 months from the date they were issued the practising certificate and will continue to practise as such in the following year upon renewal of their practising certificate.

A11.

You, as a CPA (practising), must notify the AFRC of the change by completing and submitting the notification form “Notification for Change in Particulars of a CPA (Practising)” (Form PC-3) to the AFRC within 14 days of the change.

If you are practising in your own name and there is a change in the address of registered office, the notification should be accompanied by the following documents:

1. documentary evidence to prove the ownership of the property such as land search results, if you are the landlord of the registered office; or
2. a letter of consent from the landlord or leaseholder authorizing the use of his or her or its premises as your registered office and the erection of a signboard at the entrance to the office, if you are not the landlord of the registered office.

A12.

Yes, you can practise in your own name and in the name of a CPA firm at the same time. However, the number of CPA firm / corporate practice names under which you are registered as a sole practitioner, a director, a partner or an authorized signatory of a CPA firm should in no case exceed three.

Therefore, you may, in addition to practising in your own name, practise in at most three of the following mode of practice:

a. in the name of a CPA firm

b. in the name of a corporate practice; and / or

c. as an authorized signatory of a CPA firm.

A13.

At present, there is no restriction about how your name appears in your letterhead for your practice. However, in order to avoid confusion, you are advised to use your full name that is kept in the register of certified public accountants maintained by the HKICPA (“HKICPA’s register of CPAs”).

In addition, you must practise accountancy on your own account under the name that is kept in the HKICPA’s register of CPAs or otherwise you commit a professional irregularity pursuant to section 3B(2)(a)(i) of the Accounting and Financial Reporting Council Ordinance (Cap. 588).

A14.

You are required to notify the AFRC of the change of mode of practice to practise in your own name by completing and submitting the notification form “Notification for Change in Particulars of a CPA (Practising)” (Form PC-3) to the AFRC within 14 days of the change, together with the following supporting documents:

1. a specimen letterhead bearing your own name;
2. a signed “Confirmation of Erection of a Signboard” (Form PC-SB) confirming the erection of a signboard at the entrance to the registered office;
3. a copy of the Business Registration Certificate;
4. where you are the landlord of the registered office, documentary evidence to prove the ownership of the property such as land search results; and
5. where you are not the landlord of the registered office, a letter of consent from the landlord or leaseholder authorizing the use of his or her or its premises as your registered office and the erection of a signboard at the entrance to the office.

A15.

The AFRC has posted the register of certified public accountants (practising) containing the full name of each certified public accountant (practising) and the address of their registered office on our website. The register is also available for public inspection during office hours at our office.

A16.

Yes.  The AFRC and the HKICPA have agreed that as from 1 October 2022, a Fellow of the HKICPA who holds a practising certificate may continue to use the designation “Fellow of the Hong Kong Institute of Certified Public Accountants (Practising)”, the related characters “執業資深會計師” and initials “FCPA (practising)”. Please refer to the Joint Statement of the AFRC and the HKICPA for more details.

A1.

Applicants are required to complete and submit the application form “Application for the Registration of a Firm Name and Firm” (Form FIRM-1) to the AFRC, together with the application fee in the amount and way specified in the fee schedule published on the AFRC website and all necessary supporting documents.

Please refer to the AFRC’s Guide for the Registration of Firm Names and Firms paragraphs 3.3.3 to 3.3.5 for details of the application procedures and supporting documents.

A2.

A CPA firm should register its name in English as well as in Chinese, if it has or in fact uses both English and Chinese names. A CPA firm name will only be approved if it:

1. is not the same as a firm name already registered under the Accounting and Financial Reporting Council Ordinance (Cap. 588) (“AFRCO”);
2. does not, in the opinion of the AFRC, so nearly resemble a firm name already registered under the AFRCO as to be likely to cause confusion; and
3. is not, in the opinion of the AFRC, misleading, offensive or otherwise contrary to the public interest.

A CPA firm name can broadly be divided into three categories:

1. personalized name;
2. the name of an overseas / international accountancy practice registered outside Hong Kong; or
3. other non-personalized (trading) name.

In the case of categories (A) and (B) above, the AFRC will normally expect that the firm name satisfies the following additional criteria:

1. where the firm name is a personalized name:
   1. the name is sufficiently indicative of the names of the sole practitioner or full-time practising partner(s), but not any other persons; and
   2. where the applicant is a sole practitioner, the name should include the initials or other names of the sole practitioner in addition to his or her surname (e.g. “A.B. Chan & Co.” instead of “Chan & Co.”); and
2. where the firm name is the name of an overseas / international accountancy practice registered outside Hong Kong:
   1. the applicant should be properly authorized by the overseas / international accountancy practice concerned to use the name; and
   2. the overseas / international accountancy practice concerned should be duly registered under the jurisdiction of an accountancy body accepted by the AFRC (i.e. an International Federation of Accountants (“IFAC”) member).

A3.

Pursuant to section 20AAZE of the Accounting and Financial Reporting Council Ordinance (Cap. 588), all partners of a CPA firm practising accountancy in partnership need to be certified public accountants registered with the Hong Kong Institute of Certified Public Accountants (“HKICPA”); and at least two-thirds of the partners are certified public accountants (practising) registered with the AFRC. As such, you cannot register a CPA firm with individuals who are not certified public accountants registered with the HKICPA or are not certified public accountants (practising) registered with the AFRC.

A4.

Yes, if you can satisfy all issuance criteria for the issue of a practising certificate and all registration criteria for registration of a CPA firm.

Please refer to the following guides issued by the AFRC:

(a) Guide for the Issuance of Practising Certificates for details of the issuance criteria for the issue of a practising certificate; and

(b) Guide for the Registration of Firm Names and Firms for details of the registration criteria for the registration of a CPA firm.

A5.

You have to complete and submit the notification form “Notification for Change in Particulars of a CPA Firm” (Form FIRM-3) to the AFRC, together with all necessary supporting documents specified in the notification form, to obtain the AFRC’s approval on the proposed name before making the change.

If the AFRC approves the proposed name, you may proceed to change the firm name. You are required to notify the AFRC by email or letter within 14 days of the change, which should be accompanied by the following documents:

1. a copy of the Business Registration Certificate bearing the new name of the CPA firm;
2. specimen signatures of the new name of the CPA firm signed by the sole practitioner / all practising partners and authorized signatories on a separate sheet; and
3. a specimen letterhead bearing the new name of the CPA firm.

A6.

You must notify the AFRC of the change by completing and submitting the notification form “Notification for Change in Particulars of a CPA Firm” (Form FIRM-3) to the AFRC within 14 days of the change.

Where the CPA firm changes its address of registered office, the notification should be accompanied by the following documents:

1. documentary evidence to prove the ownership of the property such as land search results, if the CPA firm is the landlord of the registered office; or
2. a letter of consent from the landlord or leaseholder authorizing the use of his or her or its premises as the CPA firm’s registered office and the erection of a signboard at the entrance to the office, if the CPA firm is not the landlord of the registered office; and
3. a copy of the Business Registration Certificate bearing the new address of registered office.

A7.

No, the annual renewal fees are non-refundable.

A8.

You are required to notify the AFRC of the change in partners composition by completing and submitting the notification form “Notification for Change in Particulars of a CPA Firm” (Form FIRM-3) to the AFRC within 14 days of the change.

The notification should be accompanied by the following documents:

1. where the change is related to an admission of a practising partner who is currently practising on a part-time basis or will resign / has resigned from the present / last employment and intends to practise on a full-time basis in the name of the CPA firm, documentary evidence to prove the resignation of the practising partner from the present / last employment and that he or she will not engage in other full-time employment; or
2. where the change is related to an admission of a non-practising partner, copies of the non-practising partner’s identity document (for example, Hong Kong identity card or passport) and the certificate of registration as a certified public accountant issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

You should also ensure that your CPA firm’s partners composition complies with the following registration criteria after the change:

1. all the partners are certified public accountants registered with the HKICPA; and
2. at least two-thirds of the partners are certified public accountants (practising) registered with the AFRC.

A9.

You are required to notify the AFRC of the registration of authorized signatories by completing and submitting the notification form “Notification for Change in Particulars of a CPA Firm” (Form FIRM-3) to the AFRC within 14 days of the change.

You are also required to notify the AFRC in the same way when withdrawing such authorization. You also need to ensure that a nominated authorized signatory is a certified public accountant (practising) registered with the AFRC, who is authorized to sign on behalf of your CPA firm.

A10.

Regardless of the date of registration of your CPA firm, the registration of your CPA firm expires on 31 December of the year in which the registration takes effect.

You may apply to the AFRC for renewal of your CPA firm registration no later than 15 December of the year in which the current registration expires. The AFRC will generally accept renewal applications from 1 November of each year.

You are required to complete and submit the online application form “Renewal Application for a CPA Firm” (Form FIRM-2) through the AFRC’s Online Application System. The Online Application System can be accessed with your CPA firm’s login ID and password.

If you do not submit the renewal application to renew your current CPA firm registration, your current CPA firm registration will expire on 31 December this year and you are prohibited from issuing statutory audit reports under the name of your CPA firm from 1 January next year. If you intend to continue your practice through a CPA firm, you need to re-apply for the registration of a CPA firm by completing and submitting the application form “Application for the Registration of a Firm Name and Firm” (Form FIRM-1) to the AFRC, together with all necessary supporting documents. The respective deadline for application submission and processing time can be found in the AFRC’s Submission Deadlines.

A11.

You have to complete and submit the application form “Application for De-registration of a CPA Firm” (Form FIRM-4) to the AFRC to cancel the CPA firm registration and remove the name of the CPA firm from the AFRC’s register of CPA firms.

However, the AFRC will not process such application if it does not bear the signatures of all partners, but will notify the rest of the partnership about the application. Meanwhile, a notation “in dissolution” may be added after the firm name in the AFRC’s register of CPA firms.

A12.

No, if you intend to continue to practise as the sole practitioner or a practising partner of your CPA firm, you must renew your practising certificate.

However, if you intend to change your role from a practising partner to a non-practising partner of your CPA firm, you may consider not to renew your practising certificate with the AFRC if your CPA firm can still satisfy the following registration criteria:

(a) all the partners are certified public accountants registered with the Hong Kong Institute of Certified Public Accountants; and

(b) at least two-thirds of the partners are certified public accountants (practising) registered with the AFRC.

A13.

The AFRC has posted the register of CPA firms and corporate practices containing the full name of each CPA firm / corporate practice and the address of its registered office on our website. The register is also available for public inspection during office hours at our office.

A1.

A corporate practice is a company (within the meaning of section 2(1) of the Companies Ordinance (Cap. 622)) limited by shares registered with the AFRC as a corporate practice under Division 3 of Part 2A of the Accounting and Financial Reporting Council Ordinance (Cap. 588).

A2.

Pursuant to section 20AAZX(5) of the Accounting and Financial Reporting Council Ordinance (Cap. 588), a corporate practice applicant needs to meet the following professional indemnity requirements for its corporate practice registration application:

1. the applicant is to be or is covered by the professional indemnity insurance (“PII”) provided by an approved insurer;
2. the PII is provided:
   1. on terms specified in the "Corporate Practices (Professional Indemnity) Rules" issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”); or
   2. if the terms are not so specified, on terms that have been approved by the Council of the HKICPA; and
3. the applicant is covered by the PII at least to the extent required by the "Corporate Practices (Professional Indemnity) Rules" issued by the HKICPA.

A3.

You are required to complete and submit the application form “Application for Registration of a Corporate Practice (For Initial Approval of the Name of the Proposed Corporate Practice and Articles of Association)” (Form CP-1A) for initial approval of the proposed company name and articles of association to the AFRC, together with the application fee in the amount and way specified in the fee schedule published on the AFRC website and all necessary supporting documents.

After the initial approval is granted by the AFRC, you are required to complete and submit the application form “Application for Registration of a Corporate Practice” (Form CP-1B) to the AFRC, together with all necessary supporting documents, within three months from the date of the initial approval, and after you have registered the company with the Companies Registry and obtained the necessary professional indemnity insurance.

Please refer to the AFRC’s "Guide for the Registration of Corporate Practices" section 3.3 for details of the application procedures and supporting documents.

A4.

A corporate practice should register its name in English as well as in Chinese, if it has or in fact uses both English and Chinese names. A corporate practice name will only be approved if it:

1. is not the same as a company name already registered under the AFRCO;
2. does not, in the opinion of the AFRC, so nearly resemble a company name already registered under the AFRCO as to be likely to cause confusion; and
3. is not, in the opinion of the AFRC, misleading, offensive or otherwise contrary to the public interest.

A company name can broadly be divided into three categories:

1. personalized name;
2. the name of an overseas / international accountancy practice registered outside Hong Kong; or
3. other non-personalized (trading) name.

In the case of categories (A) and (B) above, the AFRC will normally expect that the company name satisfies the following additional criteria:

1. where the company name is a personalized name:
   1. the name is sufficiently indicative of the names of the full-time practising member directors, but not any other persons; and
   2. where the applicant has only one member, the name should include the initials or other names of the member in addition to his or her surname (e.g. “A.B. Chan Certified Public Accountants (Practising) Co. Ltd.” instead of “Chan Certified Public Accountants (Practising) Co. Ltd.”); and
2. where the company name is the name of an overseas / international accountancy practice registered outside Hong Kong:

1. 1. the applicant should be properly authorized by the overseas / international accountancy practice concerned to use the name; and
   2. the overseas / international accountancy practice concerned should be duly registered under the jurisdiction of an accountancy body accepted by the AFRC (i.e. an International Federation of Accountants (“IFAC”) member).

A5.

You are required to complete and submit the notification form “Notification for Change in Particulars of a Corporate Practice” (Form CP-3) to the AFRC with supporting documents within 14 days of the change.

Where a corporate practice changes its address of registered office, the notification should be accompanied by the following documents:

1. documentary evidence to prove the ownership of the property such as land search results, if the corporate practice is the landlord of the registered office;
2. a letter of consent from the landlord or leaseholder authorizing the use of his or her or its premises as the corporate practice’s registered office and the erection of a signboard at the entrance to the office, if the corporate practice is not the landlord of the registered office;
3. a copy of the board resolution of the corporate practice sanctioning the change of registered office;
4. a copy of Form NR1 – Notice of Change of Address of Registered Office as submitted to the Companies Registry; and
5. a copy of the Business Registration Certificate bearing the new address of registered office.

A6.

You are required to complete and submit the notification form “Notification for Change in Particulars of a Corporate Practice” (Form CP-3) to the AFRC with supporting documents within 14 days of the change to inform the AFRC of details of the outgoing practising member director.

The notification should be accompanied with the following supporting documents:

1. a copy of the stamped “Bought and Sold Note” and “Instrument of Transfer” concerning any share transfer (as may be applicable);
2. a copy of the following forms submitted to the Companies Registry (as may be applicable):

1. 1. Form ND2A – Notice of Change of Company Secretary and Director (Appointment / Cessation);
   2. Form ND4 – Notice of Resignation of Company Secretary and Director; and
   3. Form NSC1 – Return of Allotments;

A7.

Regardless of the date of registration of your corporate practice, the registration of your corporate practice expires on 31 December of the year in which the registration takes effect.

You may apply to the AFRC for renewal of your corporate practice registration no later than 15 December of the year in which the current registration expires. The AFRC will generally accept renewal applications from 1 November of each year.

You are required to complete and submit the online application form “Renewal Application for a Corporate Practice” (Form CP-2) through the AFRC’s Online Application System. The Online Application System can be accessed with your corporate practice’s login ID and password.

If you do not submit the renewal application to renew your current corporate practice registration, your current corporate practice registration will expire on 31 December this year and you are prohibited from issuing statutory audit reports under the name of your corporate practice from 1 January next year. If you intend to continue your practice through a corporate practice, you need to re-apply for the registration of a corporate practice by completing and submitting the application form “Application for Registration of a Corporate Practice (For Initial Approval of the Name of the Proposed Corporate Practice and Articles of Association)” (Form CP-1A) to the AFRC, together with all necessary supporting documents. The respective deadline for application submission and processing time can be found in the AFRC’s Submission Deadlines.

A8.

You have to complete and submit the application form “Application for De-registration of a Corporate Practice” (Form CP-4) to the AFRC to cancel the corporate practice registration and remove the name of the corporate practice from the AFRC’s register of corporate practice.

The application form should be accompanied with the following supporting documents:

1. a copy of the special resolution of the corporate practice in respect of the application; and
2. a certification issued by the insurance broker of the HKICPA PII Master Policy certifying that a run-off cover for the corporate practice has been obtained in accordance with the Corporate Practices (Professional Indemnity) Rules issued by the HKICPA.

A9.

The AFRC has posted the register of CPA firms and corporate practices containing the full name of each CPA firm / corporate practice and the address of its registered office at our website.

The register is also available for public inspection during office hours at our office.

A1.

Under the AFRCO, only a practice unit registered with the AFRC as a registered PIE auditor under Division 2 of Part 3 of the AFRCO or an overseas auditor Recognized by the AFRC as a Recognized PIE auditor under Division 3 of Part 3 of the AFRCO may carry out PIE engagements. It is an offence for any person who is not a registered or Recognized PIE auditor to undertake or carry out any PIE engagement or hold out as a registered or Recognized PIE auditor.

A2.

Only a practice unit may apply to the AFRC for registration as a registered PIE auditor.

Details registration criteria are set out in paragraph 3.2.1 of the AFRC’s "Guide for the Registration of PIE Auditors".

Applicants are required to complete and submit the application form “Application for the Registration of a PIE Auditor” (Form PIE-1) through the AFRC’s Online Application System, together with the application fee in the amount and way specified in the fee schedule published on the AFRC website.

The application form should be accompanied by the following supporting documents:

1. the “Fit and Proper Declaration Form” (Form F&P) that is completed and signed by each nominated responsible person and other partners / directors of the practice unit, including an explanation where the answer to any of the questions set out in the form is “yes”; and
2. where any nominated EQCR is not currently a CPA (practising):
   1. the “Personal Details Form for a Non-CPA (Practising) Applying for Registration as an Engagement Quality Control Reviewer (“EQCR”)” (Form PIE-EQCR) that is completed and signed by the nominated EQCR;
   2. a copy of the nominated EQCR’s identity document (for example, Hong Kong / China identity card or passport); and
   3. a copy of his or her membership certificate issued by the accountancy body of which the nominated EQCR is a current member.

A4.

No, an applicant must be registered as a practice unit first before it can apply for the registration as a registered PIE auditor.

A5.

An engagement partner (“EP”) is a partner or other person authorized by a practice unit or a registered PIE auditor to be responsible for the PIE engagements carried out by the unit or auditor.

An engagement quality control reviewer (“EQCR”) is a person authorized by a practice unit or a registered PIE auditor to oversee the engagement quality control reviews carried out in relation to the PIE engagements carried out by the unit or auditor.

A quality control system responsible person (“QCSRP”) is a person authorized by a practice unit or a registered PIE auditor to be responsible for the quality control system of the unit or auditor.

A6.

To be registered as an EP, the person must be:

(a) where the applicant is a CPA (practising) practising accountancy in his or her own name – the applicant and a CPA (practising);

(b) where the applicant is a CPA firm – the sole practitioner, a partner or an authorized signatory of the CPA firm and a CPA (practising); or

(c) where the applicant is a corporate practice – a director of the corporate practice and a CPA (practising).

A7.

To be registered as an EQCR, the person must:

1. be a certified public accountant¹ (“CPA”) or a member of an accountancy body between which and the HKICPA there is in force a recognition agreement²; and
2. possess the required competence and capabilities, and appropriate authority, to enable him or her to perform the role in compliance with the "Hong Kong Standard on Quality Management 2 Engagement Quality Reviews" issued by the HKICPA.

Note:

¹ Certified public accountant means a person registered as a certified public accountant by virtue of section 22 of the Professional Accountants Ordinance (Cap. 50).

² Please refer to the list of accountancy bodies with which there is a recognition agreement in force between the accountancy body and the HKICPA. The list is available on the HKICPA website under the heading “Recognition of overseas bodies”.

A8.

To be registered as a QCSRP, the person must be:

(a) where the applicant is a CPA (practising) practising accountancy in his or her own name – the applicant and a CPA (practising);

(b) where the applicant is a CPA firm – the sole practitioner or a partner of the CPA firm and a CPA (practising); or

(c) where the applicant is a corporate practice – a director of the corporate practice and a CPA (practising).

In addition, the nominated QCSRP also needs to be the chief executive officer or a member of the managing board of partners of the practice unit, where the chief executive officer or the managing board of partners is responsible for implementing the general strategy and general management of the business of the practice unit.

A9.

Yes. Pursuant to section 20D and 20E of the AFRCO, a person must not carry out activity as an EP or EQCR of a PIE engagement unless the person is a registered EP or EQCR of the registered PIE auditor that undertakes the PIE engagement. It is an offence for a person to carry out any activity as an EP or an EQCR of a registered PIE auditor if the person is not respectively a registered EP or registered EQCR of the auditor.

A10.

Yes. A registered PIE auditor is required to have at least one person registered for each type of responsible persons and an applicant can nominate more than one person for each type of registered responsible persons.

A11.

Yes. A person may be nominated for one or more of the three roles (i.e. EP, EQCR or QCSRP). However, as the same person cannot act as both a registered EP and a registered EQCR in relation to the same PIE engagement, the applicant must nominate at least two different persons for registration as a registered EP and/or a registered EQCR.

A12.

Yes. The registered PIE auditor needs to ensure that person meets the requirements of an EQCR as explained in Q7 above and register him or her with the AFRC as a registered EQCR.

A13.

No. The same person cannot act as both a registered EP and a registered EQCR in relation to the same PIE engagement. Therefore, if the registered PIE auditor is a CPA (practising) practising in his/ her own name or a sole practitioner of a CPA firm/ corporate practice, it must register at least one person who is not the sole practitioner as the EQCR.

A14.

The AFRC may refuse the application if it is not satisfied that the nominated responsible person is a fit and proper person to be a CPA. If the AFRC considers that the he/she has fit and proper issue(s) that should be addressed, it may grant the application subject to any condition that the AFRC considers appropriate to impose, including but not limited to the completion of training in the form of relevant CPD programmes by the responsible person(s).

A15.

The AFRC will have regard to all relevant matters when determining whether to impose or amend a condition. These may include but not limited to:

1. whether any issues of integrity, capability, competence or quality identified in past disciplinary records; if so, the nature, severity and frequency of the deficiencies; and
2. whether any issues of capability, competence or quality resulted from the continued lack of PIE engagement over a certain period of time which need to be addressed.

The AFRC will generally focus on matters that are current and relevant, in particular disciplinary records resulted in the past 5 years and any uncompleted sanctions.

A16.

A registered PIE auditor must notify the AFRC if a registered responsible person of the auditor ceases to be a responsible person of the auditor within 14 days of the change. The notification should be made by completing and submitting the notification form “Cessation of Registration of Responsible Person of a Registered Public Interest Entity (“PIE”) Auditor” (Form PIE-4) to the AFRC. A person who fails to notify the AFRC as required without reasonable excuse commits an offence.

A17.

Yes. If a registered PIE auditor proposes to add the name of a person to its list of registered responsible persons, the auditor should first apply to the AFRC. This includes the addition of a new role for an existing registered responsible person.

A registered PIE auditor applying to add the name of a person to its list of registered responsible persons is required to complete and submit the application form “Application for Registration of Additional Responsible Person of a Registered Public Interest Entity (“PIE”) Auditor” (Form PIE-3) to the AFRC, together with the following supporting documents:

1. the “Fit and Proper Declaration Form” (Form F&P) that is completed and signed by each nominated responsible person and other partners / directors of the practice unit, including an explanation where the answer to any of the questions set out in the form is “yes”; and
2. where any nominated EQCR is not currently a CPA (practising):
   1. the “Personal Details Form for a Non-CPA (Practising) Applying for Registration as an Engagement Quality Control Reviewer (“EQCR”)” (Form PIE-EQCR) that is completed and signed by the nominated EQCR;
   2. a copy of the nominated EQCR’s identity document (for example, Hong Kong / China identity card or passport); and
   3. a copy of his or her membership certificate issued by the accountancy body of which the nominated EQCR is a current member.

A18.

When determining whether a person is fit and proper to be a CPA, the AFRC will have regard to the following matters:

(a) the person’s professional qualification, knowledge, skills and experience;

(b) the person’s reputation, character, reliability and integrity;

(c) the person’s financial status and solvency;

(d) whether any disciplinary action has been taken against the person under the AFRCO or the PA Ordinance; and

(e) whether the person has been convicted of any offence in Hong Kong or elsewhere.

The list above is not exhaustive. The AFRC will consider the fit and proper status of each person on a case-by-case basis, having regard to all relevant matters.

A19.

The AFRC maintains a register of registered PIE auditors (Hong Kong PIE auditors) and recognized PIE auditors (non-Hong Kong PIE auditors) on its website.

A20.

The following information is included in the register of registered PIE auditors:

1. the full name of the auditor and each registered responsible person of the auditor;
2. the business address of the auditor;
3. the conditions imposed by the AFRC in relation to the registration of the auditor (including conditions relating to the registered responsible persons of the auditor), if any;
4. the day on which the registration of the auditor expires;
5. a record of:

• • the sanctions imposed or actions taken under Division 2 or 3 of Part 3B of the AFRCO (except a private reprimand); and 
  • the orders made under section 35 of the Professional Accountants Ordinance (Cap.50) as in force before 1 October 2022

  in relation to the auditor, or any registered responsible person of the auditor, within the last 5 years, if any.

A1.

Yes. Pursuant to section 20ZB of the AFRCO, an overseas auditor must not undertake (i.e. accept an appointment) and carry out any PIE engagement for an overseas entity unless the auditor has been recognized as a PIE auditor of that entity by the AFRC.

A2.

Yes. The requirement under section 20ZB of the AFRCO is applicable to any overseas auditor intending to accept an appointment to carry out a PIE engagement.

A3.

No. The recognition of Auditor B as a PIE auditor of Entity A takes effect in 20X1 February and expires on 31 December 20X1. Entity A does not have to re-apply for recognition if Auditor B has already been recognized as a PIE auditor for carrying out a PIE engagement for Entity A in 20X1.

If Entity A expects that the very substantial acquisition transaction could not be completed by 31 December 20X1 and/or intends the appointment of Auditor B to continue beyond 31 December 20X1 into Year 20X2, Entity A is required to apply for renewal of the recognition no earlier than 30 September 20X1, and no later than 16 November 20X1.

A4.

No. The recognition of an overseas auditor is specific to the overseas entity who makes the application for recognition. Entity Y is required to make its own application for the recognition of Auditor B as its PIE auditor.

A5.

The overseas auditor concerned should be a member of / registered with an accountancy body in the home jurisdiction that is a member of the IFAC. The name of that accountancy body should be provided in the application form. The purpose of section 20ZF(2)(b)(i) is to ensure that the overseas auditor concerned is a qualified auditor recognized by the accountancy body in the home jurisdiction to practise audit.

In the event that the overseas auditor is an audit firm / corporation and it is not a member of the accountancy body in the home jurisdiction, the eligibility criterion under section 20ZF(2)(b)(i) would normally be considered as having been fulfilled if a majority of the partners/directors of the audit firm/corporation are members of the accountancy body in the home jurisdiction that is a member of the IFAC.

A1.

An inspection covers both the firm-wide quality control system of PIE auditors and individual PIE engagements.   

The inspection procedures on the firm-wide quality control system are performed to assess the compliance of a PIE auditor’s quality control system with Hong Kong Standard on Quality Control 1 “Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements” or equivalent standards.  

Individual PIE engagements are selected for inspection to determine the effectiveness of the PIE auditor’s quality control system and compliance with applicable laws, rules and professional standards. Under section 21B of the AFRCO, the AFRC may direct an inspector to carry out an inspection in relation to the PIE engagements completed by a PIE auditor on or after 1 October 2019. In conducting an inspection of an individual PIE engagement the AFRC generally takes a risk-based approach. Accordingly, an inspector focuses on audit risks identified, the appropriateness of key judgements made in reaching a conclusion and the sufficiency and appropriateness of the evidence obtained.

Before the conclusion of the inspection visit, the inspectors will discuss and agree inspection findings with the PIE auditors and obtain initial responses from the PIE auditors.

Professional standards include;

1. any statement of professional ethics, or standard of accounting, auditing or assurance practices, issued or specified, or deemed to have been issued or specified, under section 18A of the Professional Accountants Ordinance (Cap. 50);
2. any standard on professional ethics, or accounting, auditing or assurance practices, issued or specified by –
   1. the International Accounting Standards Board;
   2. the International Auditing and Assurance Standards Board; or
   3. the International Ethics Standards Board for Accountants;
3. any standard on professional ethics, or accounting, auditing or assurance practices, specified in the Listing Rules; or
4. any standard on professional ethics, or accounting, auditing or assurance practices, comparable to that referred to in paragraph a. or b. which is allowed –
   1. by the SFC pursuant to the relevant code; or
   2. by the HKEX pursuant to the Listing Rules.

A2.

Under section 21E of the AFRCO, the AFRC may require a PIE auditor to provide the following information for determining the frequency of inspection:

• the number of PIE engagements that the PIE auditor has undertaken or carried out within a period specified by the AFRC;
• the full name of the PIEs that have appointed the PIE auditor to undertake PIE engagements; or
• any other information relating to the PIE auditor.

PIE auditors that audit more than 100 PIEs will be inspected annually. The remaining PIE auditors will be inspected at least once every three years. These PIE auditors, however, will not necessarily be visited on a strict three-year cycle as PIE auditors may be selected for an inspection ahead of the three-year cycle if there are any indications of a potential risk that needs to be addressed.

PIE auditors who are selected for inspection will be notified by the AFRC in advance.  Normally, the AFRC will issue a notification letter to the selected PIE auditor at least six weeks before its scheduled inspection.

A3.

The AFRC will notify the PIE auditor about the PIE engagements which have been selected for inspection before the scheduled inspection visit. The PIE auditor will be required to provide all audit documentation regarding the selected PIE engagements within one week of the notification.

A4.

The number of PIE engagements selected for inspection for each PIE auditor is proportionate to the number and the risk profile of its PIE audit clients and past inspection results of the PIE auditor. The AFRC may select one to several individual PIE engagements for inspection in each inspection year.

A5.

In selecting individual PIE engagements for inspection, the AFRC generally takes a risk-based approach. The inspectors will select PIE engagements for inspection having considered and assessed various risk factors. Such risk factors include but are not limited to the following:

• the nature or principal activities of the PIE
• whether the PIE has significant operations in certain emerging businesses or markets
• those industries that were severely impacted by the COVID-19 pandemic
• areas that present audit challenges and/or significant audit risks
• whether the engagement partners or engagement quality control reviewers are subject to investigation or sanction
• that the auditor’s report was issued shortly after the appointment
• the level of public interest, such as audits of listed entities with larger market capitalisation and capital market transaction engagements such as IPOs.

A6.

Depending on the size of the PIE auditor and the number and complexity of individual PIE engagements selected for inspection, the inspection visit could last for a few weeks to two months or more. An inspection may also be conducted in phases. The notification letter relating to each phase will specify each inspection visit date and anticipated duration of the inspection visit.

A7.

Depending on the size of the PIE auditor and the number and complexity of individual PIE engagements selected for inspection, the number of inspectors being assigned can range from two to six.

A8.

Yes. The audit working papers of Hong Kong audit firms located in Mainland China are subject to the AFRC’s inspection.

On 22 May 2019, the AFRC and the Supervision and Evaluation Bureau (SEB) of the Ministry of Finance of the People’s Republic of China signed a Memorandum of Understanding (MOU) on cooperation in respect of audit regulation.  

Pursuant to the MOU, the SEB and the AFRC will provide assistance to each other in respect of their audit regulatory responsibilities in relation to inspection, investigation and discipline in order to enhance regulatory efficiency. Therefore, the AFRC can make a request for assistance to the SEB in gaining access to audit working papers of Hong Kong audit firms located in the Mainland.  

In December 2020, the AFRC obtained the first audit working papers from audits conducted in the Mainland for investigation purposes, demonstrating effective cross-boundary collaboration with the SEB under the MOU.

A9.

The following information is required to be provided to the AFRC in advance of the inspection visit:

• background information of the PIE auditor
• organisation chart of the PIE auditor
• quality control manual and other documentation that demonstrates the PIE auditor’s commitment to quality
• latest internal review or monitoring report(s)
• a list of PIE engagements completed during the period specified in the AFRC’s notification letter and related information. Such information includes but is not limited to the full name and stock code of the PIE, type of PIE engagement, type of audit opinion, engagement team information including the use of components and audit fee information.
• any other information relating to the PIE auditor as requested by the AFRC

A10.

The scope of our inspections cover a firm’s system of quality control and a selection of PIE engagements.

An inspection of the system of quality control covers how that system is designed and operates in practice, and on how it impacts PIE engagements. We assess the compliance of the auditor’s system of quality control with Hong Kong Standard on Quality Control 1 “Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements” (HKSQC 1).

An inspection of the system of quality control is carried out principally through discussions with the auditor’s leadership and management, review of the required documentation to be maintained by the auditor and by evaluating and testing the auditor’s relevant policies and procedures.

An inspection of a PIE engagement is performed by assessing the auditor’s compliance with any statement on professional ethics, or standards on accounting, auditing or assurance practices, issued by the HKICPA and international bodies such as the IAASB and IESBA or specified under the Listing Rules, or comparable standards allowed by the Securities and Futures Commission or by Hong Kong Exchanges and Clearing. An engagement inspection is conducted through the review of the required documentation to be maintained by the auditor and discussions with the engagement team.

An engagement inspection does not involve the review of all the audit working papers of the selected engagement, nor is it designed to identify every weakness and/or deficiency of the selected engagement. We generally focus our attention on audit areas we believe to be of greater complexity and areas of greater significance or with a heightened risk of material misstatement to the financial statements. An inspector focuses on the appropriateness of key judgements made in reaching the conclusion and the sufficiency and appropriateness of the evidence obtained.

A11.

A finding relating to the systems of quality control represents a significant deficiency relating to the firm’s policies and procedures in complying with or applying HKSQC 1.

A finding relating to an engagement represents a significant deficiency in applying applicable professional standards that amounts to a significant deficiency on its own or that may do so in combination with other deficiencies. The significance of individual deficiencies to the quality of an audit varies widely. Our judgement on the significance of a deficiency takes into account the nature and extent of a deficiency together with the facts and circumstances giving rise to the deficiency.

During the course of our inspection, we hold frequent meetings with the engagement team and the auditor to discuss our findings. Prior to the conclusion of the inspection, we agree with the auditor factual information on the procedures performed by the auditor during the engagement to address the area of concern relating to each finding, so that the inspector can make an assessment of the severity of the finding and the overall audit quality of the engagement on a fair and accurate basis.

A12.

The quality control system of a PIE auditor will not be graded, however, individual PIE engagements which are selected for inspection will be categorised based on their inspection findings. There are four categories of audit quality that can be assigned to each individual PIE engagement. The four categories of audit quality are:

Category 1                                  Good

Category 2                                  Limited improvements required

………………………………………………………………………………………………

Category 3          ^#                       Improvements required

Category 4          ^#                       Significant improvements required

^# Indicates a less than satisfactory inspection result

It is important to note that an inspection may not involve the review of all the audit working papers of a PIE engagement nor is it designed to identify every weakness and/or deficiency of the selected PIE engagement. Accordingly, the AFRC’s inspection report should not be understood to provide any assurance on the audit work of the PIE auditor or to indicate that the financial statements of the selected PIEs are free from any inaccuracy or misrepresentation not specified in the inspection reports.

A13.

The quality rating for each engagement and the deficiencies identified in a firm’s system of quality control are compared and calibrated to inspections conducted at the same and other firms to ensure their consistency. Before being issued, each firm-wide and engagement inspection report is reviewed by the Head of Inspection or, where there is a conflict of interest, by a Deputy Head of Inspection, for quality and the appropriateness of the deficiencies identified and ratings assigned to engagements.

The Inspection Committee provides oversight of the work of the inspection function and, where requested, advises on the evaluation of individual findings, the overall audit quality rating of inspected engagements and on our assessment of deficiencies in systems of quality control.

The Inspection Committee also undertakes an ex post annual review of a sample of completed inspections and reports their findings and recommendations to the Board.

In addition, the Process Review Panel for the Accounting and Financial Reporting Council (PRP) is an independent body appointed by the Chief Executive of the HKSAR to provide an external check and balance with the aim of ensuring fairness in the AFRC’s decision making, due process, and the proper use of its regulatory powers. The panel reviews and advises the AFRC on the adequacy of its internal procedures and operational guidelines governing the actions and decisions made in the performance of its regulatory functions. Reports from the PRP are submitted to the Financial Secretary annually.

A14.

Under section 21G(2) of the AFRCO, the inspector is required to send a dated draft inspection report to (i) the PIE auditor concerned; and (ii) any other person named in the report (collectively the Relevant Persons) to give them a reasonable opportunity of being heard. 

Normally, the inspector will send a dated draft inspection report to the Relevant Persons within six weeks of the formal exit meeting with the PIE auditor. The inspector will allow a period of 21 days for the Relevant Persons to respond in writing.

On receipt of the written responses from the Relevant Persons or expiration of the period allowed for responding, the inspector may modify the report in light of any new information or contention in the responses from any Relevant Persons and turn the dated draft inspection report into an inspection report.

The inspector is required to send a copy of the inspection report to the Relevant Persons in accordance with section 21G(3) of the AFRCO.

A15.

Currently, reports on inspections of an individual engagement and an individual PIE auditor’s system of quality control will only be issued to Relevant Persons and will not be made public unless the inspection report is of public interest. However, we encourage the PIE auditor to share the information contained in the inspection report, other than the audit quality rating specified, with the relevant audit committee of the PIE.

We publish an interim and an annual inspection report to provide directional observations to auditors, audit committees and the public about the quality of financial reporting by PIEs. The reports set out our expectation that PIE auditors and audit committees take appropriate actions in response to the findings reported to improve the quality of audits in the next audit cycle.

The interim inspection report provides timely public disclosure of common findings from our inspections of audit quality control systems of PIE auditors, and a sample of their audit engagements, at the mid-point of an inspections year. The annual inspection report provides an update on our full year inspections of PIE audits and includes the audit engagement quality ratings of individual Category A firms (PIE auditors with more than 100 PIE audits), and the audit quality rating of other PIE auditors by size category.

A16.

All firms inspected are required to develop and execute a plan to remediate the deficiencies identified in our inspections of their systems of quality control and to address the root causes of significant findings and common findings identified in our inspections of the PIE engagements.

Under section 21H of the AFRCO, the AFRC may, having regard to an inspection report:

(a) decide no follow-up action is required;

(b) require the Relevant Persons to take a measure or corrective action regarding compliance with a provision of the AFRCO or a professional standard;

(c) direct an inspector to carry out a further inspection;

(d) initiate an investigation;

(e) impose a sanction on, or take an action in relation to the Relevant Persons under Division 2 or 3 of Part 3B of AFRCO; or

(f) take any other follow-up action that the AFRC considers appropriate.

A17.

Where possible misconduct as defined under sections 37A and 37B of the AFRCO is identified during the course of inspection, the inspection report may be referred to the Department of Investigation and Compliance of the AFRC for appropriate action.

Where there is sufficient evidence of misconduct on the part of a PIE auditor, for instance, where a breach of ethics is clearly identified, the inspection report may be referred to the Department of Discipline of the AFRC for consideration of sanctions.  

A18.

The PIE auditor should notify the AFRC immediately if they are not able to provide the support and resources required by the inspectors at the time specified, for example due to the absence of key personnel. The AFRC will try to accommodate a request for a change to the inspection visit date if valid and substantiated reasons have been provided.

A19.

To achieve an effective inspection, a PIE auditor may consider the following:

• Set the right tone for an inspection
• Ensure all the relevant information on the procedures performed and audit evidence obtained by the engagement team supporting the audit opinion are provided within the timeframe specified in the notification letter issued by the AFRC before the start of inspection
• Be prepared for questions on the background and significant audit risk areas of the individual PIE engagement selected for inspection
• Ensure individuals responsible for the quality control system and the individual PIE engagement selected for inspection are available to clarify issues raised by the inspectors
• Seek clarification if the requests or inquiries raised by the inspectors are unclear and be responsive to the comments raised by the inspectors
• Demonstrate commitment to audit quality even if weaknesses and/or deficiencies are identified

A1.

Starting from 1 October 2022, the date when the Accounting and Financial Reporting Council Ordinance (Cap 588) (AFRCO) became effective, the AFRC is empowered to carry out inspections in relation to a practice unit for the purpose of determining whether the practice unit has observed, maintained or applied PAO professional standards.  This adds to the inspection functions of the Financial Reporting Council (FRC) in relation to public interest entity (PIE) engagements completed by PIE auditors already existed from 1 October 2019 and passed on to the AFRC from 1 October 2022. 

A2.

Pursuant to section 20ZZB(1)(a) and (1)(b) of the AFRCO, the AFRC may specify a PAO professional standard in relation to which an inspection is to be carried out, and direct a CPA inspector to carry out an inspection in relation to a practice unit for the purpose of determining whether the practice unit has observed, maintained or applied the PAO professional standards.  PAO professional standards are any statement of professional ethics, or standard of accounting, auditing or assurance practices, issued or specified, or deemed to have been issued or specified, under section 18A of the Professional Accountants Ordinance (PAO).  They include the “Guidelines on Anti-Money Laundering and Counter-Terrorist Financing for Professional Accountants” (AML Guidelines) as included in “Code of Ethics for Professional Accountants”.

An inspection may cover inspections of the system of quality control or management and audit and assurance engagements of a practice unit. It may also cover an assessment of the practice unit’s level of compliance with the AML Guidelines (see question 3 for more details). 

A3.

Starting from 1 October 2022, the AFRC is designated as the regulatory body under the Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) Ordinance (AMLO) for the purpose of ascertaining compliance by accounting professionals with AML/CTF requirements. The AFRC will make use of its inspection powers under the AFRCO to conduct assessments of practice units’ level of compliance with the AML Guidelines under its inspection programme. 

For an overview of the legal regime of the AFRC’s powers to conduct inspections in relation to compliance with the AML/CTF requirements applicable to accounting professionals, please refer to the “Policy Statement for Inspection of Practice Units with respect to compliance with Anti-Money Laundering and Counter-Terrorist Financing Requirements" which is available on the AFRC’s website (www.afrc.org.hk).

A4.

Under the AFRCO, only a registered PIE auditor may undertake or carry out a PIE engagement (as defined in Part 3A and Part 1 of Schedule 1A of the AFRCO).  A PIE auditor is also a practice unit and is therefore subject to the AFRC's inspections under both Parts 3A and 3AA of the AFRCO.  

A5. The AFRC adopts a progressive approach to inspections of practice units and their engagements other than PIE engagements (referred to below as “Non-PIE engagements”).  The AFRC will start off its practice unit inspection programme by carrying out inspections of Non-PIE engagements of PIE auditors that audit not less than 100 PIEs (i.e. Category A PIE auditors).  The AFRC will use its own database and other tools, e.g. questionnaires, to collect information from practice units, e.g. their policies and procedures and the number and types of Non-PIE engagements, for determining the priority and frequency of inspections in future.

Practice units selected for inspection will be notified by the AFRC in advance.  Normally, the AFRC will issue a notification letter to a selected practice unit at least six weeks before its scheduled inspection.

A6.

The AFRC conducts inspection work in a way that all practice units are treated fairly and impartially. For details of the AFRC’s inspection process in relation to practice units that are not PIE auditors, please refer to the “Outline of the AFRC’s Inspection Process for Practice Units that are not PIE Auditors”, which is available on the AFRC’s website (www.afrc.org.hk).

A7.

A CPA inspector means a person appointed as a CPA inspector under section 20ZZA of the AFRCO.  A practice unit shall comply with its statutory duties and fully cooperate with the CPA inspector at all times during the inspection, including but not limited to:

(a) produce or give access to the CPA inspector any specified document in such person's possession or control that the CPA inspector has reasonable cause to believe to be relevant to the inspection;

(b) give the CPA inspector such explanation or particulars in respect of the specified document required; and

(c) give the CPA inspector all assistance in connection with the inspection that such person is reasonably able to give.

A failure on the part of a professional person without reasonable excuse to comply with a requirement imposed under section 20ZZC constitutes a professional irregularity under section 3B of the AFRCO, and may result in the imposition of disciplinary sanctions.

A8.

Pursuant to section 20ZZE of the AFRCO, the AFRC may, having regard to an inspection report in relation to a practice unit:

(a) decide no follow-up action is required;

(b) require a practice unit to take a measure or corrective action regarding compliance with a PAO professional standard;

(c) direct a CPA inspector to carry out a further inspection under Part 3AA Division 2 of the AFRCO no earlier than 6 months after the date of the direction concerned;

(d) initiate an investigation under section 20ZZH of the AFRCO; or

(e) impose a sanction on, or take an action in relation to, the practice unit or any CPA to which the inspection relates under section 37CA or 37I(1A) of the AFRCO.

A9.

A practice unit will be notified in writing if it is selected for inspection.  Inspection notification will be sent to the practice unit by email specifying the required information to be provided in advance of the onsite inspection.  The practice unit should provide the required information to AFRC by email.  A full list of information required for inspecting the practice unit's quality management system, AML Guidelines compliance and audit and assurance engagements can be found here.

A1.

If you possess information and/or evidence to suspected misconduct of an auditor or a practice unit or non-compliance in a financial report of a listed entity, you may lodge a complaint with the AFRC.

A2.

We encourage you to provide us with your name and contact details. Failure to do so may inhibit advancement of the matter in your complaint if the AFRC is unable to follow up and request further information about the allegations.

A3.

Accurate, complete information is required to properly assess allegations of misconduct or non-compliance. Therefore, the complaint should include:

(i) the name and contact information of the CPA, practice unit and its registered responsible persons, recognised PIE auditor and/or entity concerned;
(ii) a description of the alleged misconduct or non-compliance;
(iii) copies of any relevant documents or records supporting the allegations in your complaint; and
(iv) your full name and contact details.

A4.

Normally the AFRC will not disclose your complaint and your personal information without your consent or a legal obligation to do so.  However, under the AFRCO and the Personal Data (Privacy) Ordinance (Cap 486), the AFRC may, under certain circumstances, disclose your complaint or your personal information to other parties without your consent. The AFRC’s policies and practices with regard to any personal data provided by you are set out in the Privacy Policy in the AFRC’s website.

A5.

Upon receipt of your complaint, the AFRC will issue an acknowledgement if you have given us your contact details. A reference number will be given to you, which you can quote in further communications with us.

We will assess whether the matter in your complaint falls within our remit. If the matter falls outside our remit but within the remit of another authority, you would be notified. Under those circumstances, we encourage you to report the matter to the authority yourself.

The following factors will assist the AFRC when assessing complaints received - 

• Clear, concise explanation of the allegations.
• Matters involving misconduct or non-compliances with a material impact.
• Allegations that are substantiated by sufficient, appropriate evidence.

It should be noted that the AFRC would not assess matters that are vexatious, misconceived, or contain elements of bad faith. Furthermore, mathematical errors, typographical or grammatical mistakes, and/or presentation issues with minimal financial impact on the financial statements would not be considered pursuable matters.

After preliminary assessment of the complaint, we will decide how to proceed with the matter. This may include initiation of an investigation and/or enquiry or no further action.

Please note that not every complaint will lead to an investigation and/or enquiry. An investigation and/or enquiry will only be initiated when the available evidence meets the statutory threshold under the AFRCO.

A6.

You will be notified in writing if further action would not be taken on matters in your complaint that do not demonstrate material wrongdoing.

The results of investigations into misconduct by CPAs, practice units, and/or recognised PIE auditors will be made public if disciplinary actions are taken. The results of our enquiries involving non-compliance by a listed entity will be released to the public, after all related matters have been concluded.

The AFRC cannot share information gathered during the investigation and/or enquiry due to the legal requirements regarding confidentiality of our work. This approach enables us to preserve the integrity of our process and protect the persons involved against unfounded accusations.

A1.

Whistleblowing report is a report of wrongdoing or misconduct in an area under the AFRC’s remit (see Investigations and Enquiries) based on information acquired as an employee of a practice unit or a listed entity, or through working with them, or from sources close to them.

A2.

Accurate, complete information is required to properly assess allegations of misconduct or non-compliance. Therefore, the complaint should include:

(i) the name and contact information of the CPA, practice unit and its registered responsible persons, recognized PIE auditor and entity concerned;
(ii) a description of the alleged misconduct or non-compliance;
(iii) copies of any relevant documents or records supporting the allegations in your complaint; and
(iv) your full name and contact details.

A1.

The AFRC is the independent regulator for the accounting profession in Hong Kong, vest with power to investigate:

o Misconduct (including practice irregularity) committed by a PIE auditor or its registered responsible person registered with the AFRC or PIE auditor recognized by the AFRC;

o Practice irregularity of non-PIE auditor; and

o CPA misconduct (including professional irregularities) of certified public accountants registered with the Hong Kong Institute of Certified Public Accountants (HKICPA) or practice units registered with the AFRC (practice units)

A2.

We investigates all professional persons as defined in AFRCO including:

o PIE auditor
- Registered PIE auditor
- Recognized PIE auditor

o Registered responsible person of a registered PIE auditor
- An engagement partner;
- An engagement quality control reviewer; or
- A quality control system responsible person.

o Non-PIE auditor

o Professional person
- CPA
- Practice Unit (CPA (Practising), CPA firm, Corporate practice)

A3.

In relation to PIE auditors and registered responsible persons

Pursuant to section 23 of the AFRCO, the AFRC may direct an investigator to carry out an investigation in relation to a PIE auditor or registered responsible person where the AFRC:

(a) has reasonable cause to believe that a PIE auditor has carried out a PIE engagement completed on or after 1 October 2019 in a way that is not in the interest of the investing public or in the public interest;

(b) has reasonable cause to believe that a provision of the AFRCO may have been contravened by a PIE auditor or registered responsible person; or

(c) for considering whether to impose a sanction under section 37D, 37E or 37F of the AFRCO, has reason to inquire into whether a PIE auditor or registered responsible person, or a person while being such an auditor or responsible person, has or had committed a misconduct.

In relation to non-PIE auditors

Pursuant to section 23A of the AFRCO, the AFRC may direct an investigator to carry out an investigation in relation to a non-PIE auditor where the AFRC has a reasonable cause to believe that a non-PIE auditor has or had committed a practice irregularity as defined under section 4 of the AFRCO.

In relation to professional persons

Pursuant to section 20ZZH of the AFRCO, the AFRC may direct a CPA investigator to carry out an investigation in relation to a professional person where the AFRC has reason to inquire into whether a professional person, or a person while being a professional person, has committed a professional irregularity as defined under section 3B of the AFRCO.

A4.

The AFRC may, having regard to an investigation report:

(a) Close the case without further action;
(b) Take any follow-up action in accordance with the AFRCO that the AFRC considers appropriate; or
(c) Impose a sanction on, or take an action in relation to, the regulate investigated under the AFRCO.

A1.

The AFRC is entrusted with the statutory duty to provide for enquiries into non-compliances with regulatory requirements for financial reports of listed entities in Hong Kong.

A2.

Pursuant to section 40 of the AFRCO, the AFRC may initiate an enquiry if it appears to the AFRC that there is or may be a question whether or not there is a relevant non-compliance in relation to a listed entity, and the AFRC certifies in writing to that effect.

A3.

The term relevant non-compliance is defined in section 5 and Schedule 1 of the AFRCO.  For the purposes of the AFRCO generally including initiating an enquiry, there is a relevant non-compliance in relation to a listed entity if a relevant financial report, within the meaning of Part 1 of Schedule 1 of the AFRCO, has not complied with a relevant requirement, within the meaning of Part 1 of Schedule 1 of the AFRCO, that applies to the report.

A relevant requirement means an accounting requirement as to the matters or information to be included in the relevant financial report, as provided in:

(a) the relevant Ordinance or the Company Ordinance (CO) as in force at the material time (applicable for listed corporations only);
(b) the standards of accounting practices issued or specified under section 18A of the PA Ordinance, as in force at the material time;
(c) the International Financial Reporting Standards issued by the International Accounting Standards Board as in force at the material time;
(d) the Listing Rules;
(e) any generally acceptable accounting principles allowed for usage under the Listing Rules; or
(f) the relevant code (applicable for listed collective investment schemes only).

A4.

A relevant financial report means:

(a) in relation to a listed corporation,

(i) a balance sheet of the corporation and any accounts annexed to it for the purposes of sections 129C and 129G of the relevant Ordinance;
(ii) a copy of the financial statements of the corporation sent under section 430 of the CO;
(iii) the accounts of the corporation delivered under section 336 of the relevant Ordinance or section 789 of the CO;
(iv) a summary financial report of the corporation sent in compliance with section 141CA of the relevant Ordinance, sections 441 or 444 of the CO;
(v) a set of financial statements of the corporation (A) providing information on the results of the operations or cash flows of the corporation in a period of at least 3 months, (B) providing information on the state of affairs of the corporation as at the end of that period, and (C) issued, circulated, published or distributed for the purposes of the Listing Rules; or
(vi) a specified report required for a listing document issued by or on behalf of the corporation.

(b) in relation to a listed collective investment scheme,

(i) a set of financial statements of the scheme

(A) providing information on the results of the operations or cash flows of the scheme in a period of at least 3 months,

(B) providing information on the state of affairs of the scheme as at the end of that period, and

(C) issued, circulated, published or distributed for the purposes of the relevant code or the Listing Rules; or
(ii) a specified report required for a listing document issued by or on behalf of the scheme.

A5.

The AFRC may, in relation to the enquiry after taking into account the enquiry report:

(a) Close the case without further action;
(b) Suspend the enquiry for such period as the AFRC thinks fit;
(c) Secure the removal of the non-compliance in accordance with Division 4 of Part 4 of the AFRCO; or
(d) Carry out such other follow-up action in accordance with the AFRCO as the AFRC thinks fit.

A1.

The AFRC can discipline:

(a) PIE auditors registered or recognized under Part 3 of the AFRCO;

(b) registered responsible persons; and 

(c) professional persons. 

A2.

PIE auditor and registered responsible person

Disciplinary action may be taken against a PIE auditor or registered responsible person who has committed FR misconduct.  FR misconduct in this context includes:

(a) a contravention of a provision of the AFRCO;

(b) a contravention of a condition imposed in relation to the registration or recognition of the PIE auditor concerned;

(c) a contravention of a requirement imposed on a PIE auditor or registered responsible person under the AFRCO; 

(d) conduct in relation to a PIE engagement which is or is likely to be prejudicial to the interest of the investing public or the public interest; or

(e) a “practice irregularity” as defined under section 4 of the AFRCO.

Additional situations in which the AFRC may impose sanctions on registered PIE auditors and registered responsible persons generally relate to insolvency events, the conviction of an offence that impugns the fitness and properness of the relevant persons and mental incapacity.

Professional person

Disciplinary action may be taken against a professional person guilty of CPA misconduct.  CPA misconduct in this context includes situations where the professional person: 

(a) does an act or makes an omission that amounts to a “professional irregularity” as defined under section 3B of the AFRCO;

(b) is convicted of an offence under section 21F or 31 of the AFRCO, which generally relates to a failure to properly comply with a requirement imposed by an FR inspector or FR investigator;

(c) is punished by the Court of First Instance under section 32(2)(b) or 45(2)(b) of the AFRCO for failing to comply with a requirement imposed by an FR inspector, FR investigator or enquirer or for being involved in the failure; 

(d) (where the professional person is a CPA) is convicted of an offence under Part V (Perjury) of the Crimes Ordinance; or

(e) (where the professional person is a CPA) is convicted in Hong Kong or elsewhere of any offence involving dishonesty.

A3.

PIE auditor

The AFRC may impose, singly or in combination, the following sanctions on a PIE auditor: 

(a) public or private reprimand;

(b) remedial action;

(c) pecuniary penalty;

(d) imposition of a condition on the registration or recognition;

(e) revocation or suspension of the registration or recognition; and

(f) prohibition from applying to be registered or recognized as a PIE auditor for a period of time.

Registered responsible person

The AFRC may impose, singly or in combination, the following sanctions on a registered responsible person:

(a) public or private reprimand;

(b) remedial action;

(c) pecuniary penalty; and

(d) removal of name from the list of registered responsible persons permanently or for a period of time.

Professional person

The AFRC may impose, singly or in combination, the following sanctions on a professional person:

(a) public or private reprimand;

(b) pecuniary penalty;

(c) revocation or suspension of the professional person’s registration;

(d) cancellation or non-issuance of a practising certificate; and 

(e) investigation costs and expenses.

A4.

Please refer to the Sanctions Policy for PIE Auditors and Registered Responsible Persons and Sanctions Policy for Professional Persons.

A5.

PIE auditor and registered responsible person

The AFRC may order a PIE auditor or registered responsible person to pay a pecuniary penalty not exceeding the amount which is the greater of—

(a) HK$10,000,000; or

(b) 3 times the amount of the profit gained or loss avoided by the person as a result of FR misconduct.

Professional person

The AFRC may order a professional person to pay a pecuniary penalty not exceeding HK$500,000.

A6.

Please refer to Disciplinary Process.

A7.

Disciplinary actions can be fairly and will normally be determined on the basis of written representations.  However, if, in addition to written representations, the regulatee wishes to make oral representations, the regulatee may ask for a meeting with the AFRC at the same time as the regulatee files his or her or its written response to the NPDA.  In this regard:

(a) the AFRC will consider reasonable requests for a meeting;

(b) when making a request, the regulatee should explain why oral representations, in addition to written representations already made, will assist the AFRC in its disciplinary decision-making, and the issues which the regulatee would like to address the AFRC on in the meeting; and

(c) the AFRC expects any oral representations to be limited as far as possible to matters which could not be adequately dealt with by way of written representations.

However, irrespective of whether the regulatee requests it, the AFRC may invite the regulatee to attend a meeting to clarify certain issues if the AFRC considers fairness in the circumstances requires it.

A8.

Yes, the regulatee may seek legal advice at any point in the process, which may include instructing legal advisers to make representations to the AFRC on their behalf.

A9.

No, the disciplinary process outlined in Disciplinary Process and A6, A7 and A8 above is applicable to all regulatees.

A10.

The AFRC has power to take disciplinary actions by consent if the AFRC considers it appropriate to do so in the interest of the investing public or in the public interest.

The regulatee may make a resolution proposal to the AFRC at any time before the issuance of a Decision Notice.  Whether the AFRC will agree to enter into resolution negotiations depends on the facts and circumstances of each case.  Unless otherwise agreed, all discussion about resolution proposals will be treated as “without prejudice”, meaning that neither the AFRC nor the regulatee may refer to those discussions in the disciplinary actions or subsequent legal proceedings.

For more information, please refer to the Guidance Note on Cooperation with the AFRC.

A11.

If the regulatee does not apply to the Tribunal for a review of the AFRC’s decision within 21 days (or such period as extended by the Tribunal), the decision will take effect on the day after the period expires.

If, before such period expires, the regulatee notifies the AFRC in writing that the regulatee will not make a review application, the AFRC’s decision will take effect on the day after the AFRC is so notified. 

If the regulatee applies for a review within 21 days (or such period as extended by the Tribunal), the AFRC’s decision will not take effect until the Tribunal makes a final determination or the regulatee withdraws the review application.

Notwithstanding the above, if the AFRC considers it appropriate in the public interest to do so, it may specify any other day on which its decision is to take effect.

A12.

The AFRC must disclose to the public the material facts of the case, the AFRC’s decision with reasons and the disciplinary sanction imposed / action taken, unless the disclosure:

(a) relates to a private reprimand;

(b) may adversely affect any criminal proceedings before a court or magistrate; or

(c) in the AFRC’s opinion, is not in the interest of the investing public or in the public interest.

All press releases on the AFRC’s disciplinary actions will be made available on Disciplinary Cases. 

A13.

If the regulatee is ordered to pay a pecuniary penalty, the penalty must be paid to the AFRC by the deadline specified in the Decision Notice, by cheque made payable to the “Accounting and Financial Reporting Council” and delivered to:

Accounting and Financial Reporting Council

10/F, Two TaiKoo Place

979 King's Road, Quarry Bay

Hong Kong

Please quote the AFRC’s case reference which is quoted on the AFRC’s correspondence relating to the matter.