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AFRC reprimands Prism Hong Kong Limited, Kyaw Sai Hong and Yam Wai Man for conducting PIE engagements without the required registrations and imposes pecuniary penalties totalling HK$353,500
According to sections 20D, 20E and 20V of the AFRCO, a registered PIE auditor must not authorise any person who is not its registered engagement partner or its registered engagement quality control reviewer to carry out any activities in such capacities, and any individual who is to act as an engagement partner or an engagement quality control reviewer for a PIE engagement carried out by a registered PIE auditor must be a registered engagement partner or a registered engagement quality control reviewer of the registered PIE auditor concerned, before undertaking any activities in such capacities. ... However, in 2023, Prism, as the auditor in seven PIE engagements, authorised Kyaw to act as the engagement partner or engagement quality control reviewer in six of those audit engagements, and authorised Yam to act as the engagement quality control reviewer in one of those audit engagements, and Kyaw and Yam acted in such capacities without the required registrations. ... Ms Hester Leung, Head of Discipline, stated, “The registration and associated regulatory requirements for engagement partners and engagement quality control reviewers of PIE auditors were established to safeguard the interests of the investing public.
FRC and ICAC joint operation against suspected misconduct and bribery
The joint operation involved a search of the offices of a public interest entity (PIE) auditor in the initial public offering of a listed company and the premises of other relevant parties. The FRC conducted the search for the suspected misconduct of the relevant PIE auditor and registered responsible persons under the Financial Reporting Council Ordinance.
Driving quality improvement – Setting the right tone at the top for performing an effective root cause analysis and remediation
The Insights share our observations on how PIE auditors, subject to our 2023 inspections, had performed root cause analysis ( RCA ) of the identified deficiencies and responded by designing and implementing remedial actions. ... An effective RCA and remediation process helps firms, including PIE and non-PIE auditors, identify the underlying causes of deficiencies and determine the appropriate remedial actions to address them effectively for continued quality improvement. ... The Insights also share leading practices that we strongly encourage all firms to adopt for improving their RCA and remediation processes. Auditors should focus specifically on the following critical practices: Provide effective training and guidance to personnel involved in the RCA and remediation process; Perform independent oversight to ensure effective implementation of remedial actions at both the firm and engagement levels; Ensure execution of quality audits through coaching and hot reviews conducted before issuing auditor’s reports; and Maintain transparent communication with relevant stakeholders about the identified deficiencies and remedial actions.
AFRC issues 2022 Annual Investigation and Compliance Report
Mr Marek Grabowski, CEO of the AFRC remarked, “The Annual I&C Report provides insights on common areas of misconduct in the work of listed entity auditors and financial reporting non-compliance in financial statements of listed entities. We urge auditors to pay attention to these key findings and observations and take actions to address them so as to improve audit quality. ... Speaking at the press briefing, Ms Wincey Lam, Head of Investigation and Compliance, said, “During the year, there has been a significant increase of 51% in complaints received about potential misconduct of auditors or potential noncompliance with financial reporting requirements by listed entities, in particular from whistleblowers and other regulators, as compared to the 18-month period ended 31 March 2021.
Completed investigation
The FRC found that the auditor and the engagement partner failed or neglected to observe, maintain or otherwise apply certain professional standards in respect of the audit of the impairment assessment of goodwill arising from an acquisition of a subsidiary during the year ended 31 March 2012. In particular, it was found that the auditor and the engagement partner were in breach of Hong Kong Standard on Auditing ( HKSA ) 500 (Clarified) Audit Evidence and HKSA 540 (Clarified) Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures .
Reports
Reports Inspection New and revised quality management standards Survey on implementation progress by PIE Auditors Quality Management System 31 March 2022 Oversight Report on the FRC's Assessment of HKICPA's Performance of the Specified Functions Audit Financial Reporting 16 December 2021 Investigation and Compliance 2021 Annual Investigation and Compliance Report Audit Financial Reporting 3 November 2021 Inspection 2021 Interim Inspection Report Audit Quality Management System 3 November 2021 Inspection 2020 Annual Inspection Report Audit Quality Management System 3 June 2021 Policy and Governance Report on Overview of the Market for Listed Entity Audits in Hong Kong Audit Auditor Changes Corporate Governance 11 March 2021 Inspection 2020 Interim Inspection Report Audit Quality Management System 11 December 2020 Oversight Report on the FRC’s Assessment of the HKICPA’s Performance of the Specified Functions Audit Financial Reporting 11 December 2020 Oversight Abridged Report on the FRC’s Assessment of the HKICPA’s Performance of the Specified Functions Audit Financial Reporting 11 December 2020
The Financial Reporting Council e-newsletter (February 2020) issue gives insights and advice to the audit profession amidst challenging financial and socio-economic situations
This is the first e-newsletter of the FRC since the commencement of the new auditor regulatory regime on 1 October 2019. 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. ... Given the current situation and in light of the Joint Statement by the Securities and Futures Commission and Stock Exchange of Hong Kong Limited of 4 February, management, the audit committee and the auditor should work together to assess the implication of the novel coronavirus on the year-end audit.
Resources
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