Search

The Financial Reporting Council e-newsletter (February 2020) issue gives insights and advice to the audit profession amidst challenging financial and socio-economic situations

Ms Florence Wong, Acting CEO said, ‘In the face of challenging financial and socioeconomic situations including the lingering economic outlook, the threat of the novel coronavirus and the resignation trend of audit firms as auditors of listed companies, it is all the more important to maintain audit quality and audit independence. ... Highlights of the e-newsletter: Audit quality and audit independence are even more important and vulnerable amidst the challenging financial and socio-economic situations. ... The delegation to the audit committee of the oversight of financial reporting and the external audit do not absolve the board of its obligations.

2023 Annual Inspection Report emphasises the pivotal roles of the firm’s leadership in upholding audit quality and reinforces the importance of continuous learning as a key driver of improvement

Strong commitment from leaders of larger firms to improve audit quality Category A firms audited 89% of the PIE audits by market capitalisation. ... We expect to see better results in the future as these firms continue their journey to audit quality improvements. Firm leaders of Category B and C firms must take action to improve audit quality The 2023 inspection results of Category B and C firms, which accounted for 3% of the PIE audits by market capitalisation, were mostly below a satisfactory level.

AFRC holds Briefing on its 2022 Annual Inspection Report to urge Quality Control System Responsible Persons of registered PIE auditors to enhance audit quality

AFRC holds Briefing on its 2022 Annual Inspection Report to urge Quality Control System Responsible Persons of registered PIE auditors to enhance audit quality 27 September 2023 To urge quality control system responsible persons ( QCSRP s ) of the registered PIE auditors to duly discharge their responsibilities in enhancing audit quality, the Accounting and Financial Reporting Council ( AFRC ) held a briefing session on its 2022 Annual Inspection Report on 22 September 2023, which was attended by over 40 target participants. Introducing the purpose of the briefing session, Ms Janey Lai, Head of Inspection, said, “The QCSRPs of registered PIE auditors are the most important gatekeepers within the firms as they hold the ultimate responsibility and accountability for the firms’ audit quality. Given their important roles, they should develop and strengthen a culture that fosters audit quality in the public interest.” ... The QCSRPs should ensure that the accountants and auditors of their firms understand thoroughly what they should and are expected to do to achieve high audit quality. The AFRC will hold the QCSPRs accountable for taking robust actions to enhance an effective quality management system in monitoring audit quality.”

AFRC reprimands and fines Deloitte and two engagement partners over HK$1.9 million for multiple audit deficiencies in relation to two companies formerly listed in Hong Kong

AFRC reprimands and fines Deloitte and two engagement partners over HK$1.9 million for multiple audit deficiencies in relation to two companies formerly listed in Hong Kong 28 August 2025 The Accounting and Financial Reporting Council ( AFRC ) has sanctioned the following PIE audit firm and its two partners for multiple audit deficiencies related to revenue recognition and other breaches involving two companies formerly listed in Hong Kong: Deloitte Touche Tohmatsu ( Deloitte ), as the reporting accountants preparing the accountants’ report of Tianhe Chemicals Group Limited 1 and its subsidiaries ( Tianhe Group ) for the years ended 31 December 2011, 2012 and 2013 included in the prospectus for the company’s initial public offering ( IPO ), and the auditor of Sound Global Limited 2 and its subsidiaries ( Sound Global Group ) for the years ended 31 December 2012 and 2013; Mr Wong Tin Chak Samuel ( Wong ), engagement partner for the 2011, 2012 and 2013 audits of the Tianhe Group; and Mr Mak Chi Lung ( Mak ), engagement partner for the 2012 and 2013 audits of the Sound Global Group. ... In the audits of both companies formerly listed in Hong Kong, the AFRC identified multiple deficiencies in the audit procedures concerning revenue recognition and external confirmations. ... Further, the use of external confirmations is a critical audit procedure for verifying the financial information provided by the audited entity.

AFRC analyses trading suspensions of listed entities due to delays in preliminary annual results announcements and calls for continued efforts to uphold high-quality audits and financial reporting

This presents challenges to PIE auditors to conduct a quality audit under immense time pressure. A lack of effective two-way communication between audit committees and PIE auditors to ensure timely identification and resolution of those audit matters. ... This can be achieved by fostering frequent and direct communication among all parties and implementing early audit planning to facilitate an early detection of any audit issues and their resolution.

FRC completes an investigation relating to an auditor’s failure to obtain necessary evidence to conclude that an associate was not impaired

HKSA 500 Audit Evidence prescribes the overarching requirement to design and perform appropriate audit procedures to obtain “sufficient appropriate audit evidence” and sets out what constitutes such evidence. HKSA 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures deals with the auditor’s responsibilities relating to accounting estimates, including fair value accounting estimates, and related disclosures in an audit of financial statements. ... Our purpose in reporting publicly The FRC announces the adoption of reports on audit investigations and enquiries into financial reporting of listed entities: (a) to promote continuous improvement in the quality of auditing and financial reporting by all our regulatees; (b) to encourage audit committee members to consider the implications of our findings for the financial reporting and audits of their own listed entities; and (c) to maintain public confidence in the system for independent auditor regulation.

Financial Reporting Council welcomes the consultation conclusions on proposed rule changes relating to disclaimer or adverse audit opinion on issuer’s financial statements published by The Stock Exchange of Hong Kong Limited

Financial Reporting Council welcomes the consultation conclusions on proposed rule changes relating to disclaimer or adverse audit opinion on issuer’s financial statements published by The Stock Exchange of Hong Kong Limited 24 May 2019 The Financial Reporting Council (FRC) welcomes the consultation conclusions on the proposed rule changes relating to disclaimer or adverse audit opinion on issuer’s financial statements published by the The Stock Exchange of Hong Kong Limited (the Exchange) today. The FRC firmly believes that high quality auditing by auditors and reliable financial reporting by issuers combined play a pivotal role in protecting investor’s interest. ... At the same time, listed issuers are encouraged to resolve audit issues on a timely basis.”

FRC finds that an auditor failed to obtain the necessary evidence to support the measurement and recognition of a gain on extinguishment of a financial liability

The Auditor used the valuation report as part of the audit evidence and engaged a valuer to review the valuation report during the audit. ... HKSA 230 (Clarified) Audit Documentation deals with the auditor's responsibility to prepare audit documentation for an audit of financial statements. HKSA 500 (Clarified) Audit Evidence explains what constitutes audit evidence in an audit of financial statements, and deals with the auditor's responsibility to design and perform audit procedures to obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the auditor's opinion.

Search across website resources