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AFRC Investigation Report shows auditors’ inadequate response to increasing incidence of fraud in financial statements
Key findings of the Annual I&C Report From the investigations and enquiries handled regarding listed entity financial statements, the AFRC identified the following common areas of potential misconduct and financial reporting non-compliance: Top 5 areas of potential misconduct by PIE auditors obtaining sufficient appropriate audit evidence (87%) performing engagement quality control review (71%) exercising professional skepticism and professional judgment (63%) performing audit work on accounting estimates (48%) meeting their responsibilities relating to fraud in their audit of the financial statements (30%) Top 5 areas of potential financial reporting non compliance impairment assessment and fair value measurement (34%) recognition and measurement of financial instruments (25%) fraudulent financial reporting or misappropriation of assets (20%) going concern assessment and reporting (16%) revenue recognition (15%) From our investigations in relation to professional persons (i.e. ... The AFRC expects auditors to carry out their audits in strict compliance with relevant auditing standards, be familiar with the types of fraud that are relevant to financial reporting non-compliance and the conditions that may indicate they have occurred, and design audit procedures that are adequate to enable them to address identified fraud risks.” ... We will resolutely take swift and robust regulatory actions to uphold the quality of audit and financial reporting, thereby protecting the public interest.”
New Memorandum of Understanding to strengthen collaboration between the HKMA and the AFRC
The enhanced cooperation will facilitate the AFRC’s regulatory efforts in upholding the quality of financial reporting, auditing and the accounting profession’s work in relation to the banking sector, which is vital to the HKMA in assessing the financial resilience of banks and ensuring their safety and soundness.
Press Releases
Press Releases AFRC takes first ever disciplinary actions against multiple practice units for non-compliance with anti-money laundering requirements and imposes fines totalling HK$290,000 5 March 2026 AFRC reprimands and fines Forvis Mazars CPA Limited HK$1.4 million and Grant Thornton Hong Kong Limited HK$2.32 million for widespread and systemic failures to archive files on a timely basis 3 March 2026 AFRC welcomes the Government’s 2026-27 Budget 25 February 2026 AFRC advocates the value of transparency reports in driving trust and market confidence 16 February 2026 AFRC issues open letter to PIE auditors on upholding audit quality and professional integrity amid rising IPO engagements 13 February 2026 Cross Agency Steering Group announces Strategic Priorities for 2026–2028 30 January 2026
FAQs - Local PIE 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. 6. ... What are the requirements for registration as an engagement quality control reviewer (“EQCR”)?
AFRC welcomes appointment of Chairman
Welcoming Dr Sun’s appointment, Dr Wong said, “Dr Sun’s extensive experience and leadership in the accounting and auditing fields will be a tremendous asset to the AFRC. His notable public service, including his role as Director of Audit for the Hong Kong Government from 2012 to 2018, will help elevate the AFRC to new heights." Ms Janey Lai, Chief Executive Officer of the AFRC, said, “I look forward to working closely with Dr Sun to advance our mission of upholding the integrity and quality of audit and financial reporting through a holistic regulatory approach.”
AFRC supports the Chief Executive’s 2025 Policy Address
Advancing technological innovation within financial reporting and audit practices will enable accounting professionals and audit firms to improve operational efficiency and deliver greater value to Hong Kong’s financial industry. ... The Council promotes the adoption of AI internally and across audit firms, not only to enhance processes, but to ensure that the profession remains agile and future-ready in a rapidly evolving financial landscape.” ... The AFRC remains dedicated to upholding rigorous standards in financial reporting and auditing, with a particular emphasis on continuously improving audit quality, to strengthen market confidence and reinforce Hong Kong’s reputation for excellence within the financial sector.”
FRC Acts on Deloitte China Whistle-blower Allegations
The allegations include claims: Of improper conduct by certain Deloitte staff members in performing the audits of two Hong Kong listed entities in 2016 and 2017, and other audits That those staff were still involved in performing audits of Hong Kong listed entities and other entities at the end of 2020 That the Firm has not appropriately handled related whistle-blower reports. Given the seriousness of the allegations and in order to protect the interests of the investing public and the wider public interest in audits of listed entities, the FRC has logged the allegations as a complaint, which is now being handled in accordance with our normal procedures. ... Maintaining justified public confidence in the quality of listed entity audits requires a dependable, swift and transparent response to the allegations.
AFRC welcomes the Government’s appointment of the Chief Executive Officer and Executive Director of the AFRC
Wellversed with the development needs of the sector at the same time, Ms Lai is committed to promoting the accounting and audit quality in Hong Kong while supporting the development of the profession.