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

FRC completes an investigation relating to an auditor’s failure to obtain necessary evidence to conclude that an associate was not impaired 14 December 2021 The FRC adopted an investigation report finding that the auditor ( the Auditor ) of a listed entity (Listed Entity) failed to obtain sufficient appropriate audit evidence in relation to the impairment assessment of the Listed Entity’s investment in an associate ( the Investment ). ... HKSA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Hong Kong Standards on Auditing prescribes the application of a competent understanding of the applicable financial reporting framework in the exercise of professional judgement by an auditor. ... 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.

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

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. In response to the Consultation, the FRC expressed its full support of the Exchange’s objective of encouraging issuers to maintain appropriate and effective risk management and internal control systems, and of requiring issuers to act promptly to resolve audit issues with their auditors. This will in essence enhance the effectiveness of communication between listed issuers and their auditors. ... We believe that the revised proposal by the Exchange will foster a constructive and proactive working relationship between PIE auditors and their clients where auditors can duly, fairly, and independently discharge their statutory duty in relation to financial reports prepared by the issuers.

FRC publishes survey of implementation progress by PIE Auditors for new and revised quality management standards

FRC publishes survey of implementation progress by PIE Auditors for new and revised quality management standards 31 March 2022 The Financial Reporting Council (the FRC ) today publishes the results of its survey ( Survey ) on implementation progress by Public Interest Entity ( PIE ) Auditors (the PIE Auditors ) for the new and revised quality management standards (the new QMSs ). ... Mr Marek Grabowksi, CEO of the FRC, said, “As the regulator of PIE Auditors in Hong Kong, the FRC will have the duty to evaluate whether PIE Auditors implemented the new quality management standards by the fast approaching deadline of 15 December 2022. ... A self-assessment questionnaire was sent to all Registered PIE Auditors and Recognised PIE Auditors to understand their readiness for implementation of the new QMSs.

AFRC calls on auditors and audit committees to strengthen independence safeguards around procurement and purchases from audit clients

AFRC calls on auditors and audit committees to strengthen independence safeguards around procurement and purchases from audit clients 4 October 2024 The AFRC has today published an article titled Safeguarding Auditor Independence: Concerns Surrounding Procurement and Purchases from Audit Clients . The article highlights the AFRC’s concerns regarding potential threats to auditor independence that may arise from procurement and purchases involving audit clients. ... Any breaches to independence requirements can undermine an auditor’s professionalism and jeopardise audit quality.

AFRC reminds auditors of the importance of audit documentation integrity

AFRC reminds auditors of the importance of audit documentation integrity 29 May 2024 The Accounting and Financial Reporting Council ( AFRC ) today publishes an article titled The Importance of Audit Documentation Integrity . It aims to remind auditors of the key standards relating to audit documentation integrity and to emphasise the importance of improving audit quality through the development of an effective system of audit documentation policies, procedures, and controls. Audit documentation is the primary means by which auditors demonstrate their compliance with auditing standards.

AFRC Study Advocates for Improved Sustainability Assurance Practices and Urges Auditors to Incorporate Climate Risks in Financial Audits

Notably, over one-third of the 75 PIE auditors with PIE engagements now offer sustainability assurance services. ... Auditors are required to assess the financial impact of climate-related risks when auditing financial statements. ... The analysis was based on the assurance reports published by the entities in 2023 and 2024. 2 These PIE auditors have at least one PIE audit engagement as of 30 April 2024. 3 Category A PIE auditors have more than 100 PIE audit engagements.

FRC finds that an auditor failed to identify a material misstatement and to express an appropriate audit opinion

FRC finds that an auditor failed to identify a material misstatement and to express an appropriate audit opinion 18 February 2022 On 17 February 2022, the FRC adopted an investigation report finding that the auditor ( the Auditor ) of a listed entity ( Listed Entity ) failed to: (a) identify that an impairment loss on a receivable which had been fully impaired in 2014 was duplicated in the Listed Entity’s consolidated financial statements for the year ended 31 December 2016 ( 2016 Financial Statements ); and (b) express an appropriate modified opinion on the 2016 Financial Statements given the misstatement set out in item (a) above. ... The Auditor also failed to express an appropriate modified opinion on the 2016 Financial Statements. ... Relevant technical standards HKSA 330 The Auditor’s Responses to Assessed Risks deals with the auditor’s responsibility to design and implement responses to the risks of material misstatement identified and assessed by the auditor.

AFRC issues the Audit Fee Report and 2023 Survey Report on the implementation of Guidelines for Effective Audit Committees – Selection, Appointment and Reappointment of Auditors

AFRC issues the Audit Fee Report and 2023 Survey Report on the implementation of Guidelines for Effective Audit Committees – Selection, Appointment and Reappointment of Auditors 24 March 2023 The Accounting and Financial Reporting Council ( AFRC ), the independent audit regulator in Hong Kong, publishes two new reports today on audit fees and the appointment of auditors in Hong Kong. ... These factors include the level of audit fees, the market structure of audit services and the selection, appointment and reappointment of auditors.” ... Key findings: 2023 Survey Report on the Implementation of the Guidelines for Effective Audit Committees – Selection, Appointment and Reappointment of Auditors (the Survey Report) The Survey Report contains the results of AFRC’s online survey on the practical realities facing auditors and audit committees in relation to auditor appointments and audit fee setting.

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