Upholding trust in capital markets: Maintain healthy practices in auditor appointments and audit fee setting

As the audit regulator in Hong Kong, the AFRC maintains close oversight of market conduct.  In this article, the AFRC highlights encouraging progress in the reduction of late auditor resignations. As part of its ongoing efforts to ensure high quality of audit in Hong Kong, the AFRC sets out further steps needed to strengthen practices in auditor appointment and audit fee setting.     

The AFRC reiterates its call for all stakeholders to play their part in safeguarding the integrity of financial reporting.  

Audit committees should: 

• Appoint auditors early to avoid compressed audit schedules.  

• Scrutinise audit bids with unusually low fees.  

• Ensure timely payment of audit fees to support auditor independence. 

Auditors should:   

• Set fees that match the audit’s scope and complexity. 

• Decline engagements initiated late in the reporting cycle unless sufficient resources are available to maintain audit quality. 

• Agree on payment terms that support auditor independence.