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AFRC reprimands BDO Limited and two others for serious audit breaches, imposes fines totalling HK$1.456 million and gives its first direction for additional CPD in disciplinary case

AFRC reprimands BDO Limited and two others for serious audit breaches, imposes fines totalling HK$1.456 million and gives its first direction for additional CPD in disciplinary case 20 December 2024 The Accounting and Financial Reporting Council ( AFRC ) has sanctioned the following PIE auditor and its practising directors for multiple breaches of auditing standards in relation to the audits of China Water Affairs Group Limited ( Company ), a Hong Kong listed company, and its subsidiaries (collectively, Group ) for six consecutive years ended 31 March 2011 to 31 March 2016 ( 2011 to 2016 Audits respectively): BDO Limited (registration number M0200) ( BDO ); Mr Lo Ngai Hang ( Lo ), engagement partner for the 2011 and 2012 Audits; and Mr Lam Hung Yun Andrew ( Lam ), engagement partner for the 2013 to 2016 Audits. ... Besides, the Regulatees failed to critically evaluate the accounting of some of the relevant water supply arrangements in forming the unmodified auditor’s opinions. Further, BDO and Lam also failed to critically assess whether various legal opinions obtained were relevant or sufficient in the 2015 and 2016 Audits. ... Ms Janey Lai, CEO, remarked, “This marks the AFRC’s first settlement case concerning audit deficiencies by a listed entity auditor, and our first direction for additional CPD in a disciplinary case.

Consultations and Studies

Consultation on the Proposed Regulatory Framework for Sustainability Assurance in Hong Kong 30 December 2025 Consultation Conclusions in relation to FRC’s / AFRC’s Disciplinary Process and Sanctions Approach 23 June 2022 Engagement and Consultation on FRC’s / AFRC’s Regulatory Regime (English version only) 9 March 2022 Consultation Paper in relation to FRC’s / AFRC’s Disciplinary Process and Sanctions Approach 9 March 2022 Comparative Study on Audit Oversight Functions 5 June 2017 Consultation paper: Proposal to improve the regulatory regime for listed entity auditors 30 June 2014

FRC launches new Whistleblowing Policy

Mr Marek Grabowski, CEO of FRC said, “Whistleblowers are typically individuals with an insider’s view of listed entities or their auditors. They are therefore an important and highly valued source of intelligence to the FRC.

Discipline

Under the Accounting and Financial Reporting Council Ordinance (AFRCO), the AFRC has disciplinary powers over: PIE auditors Registered responsible persons Professional persons (i.e. CPAs and practice units) For an understanding of the legal framework under the AFRCO, the objectives of discipline and the sanction powers of the AFRC, please refer to the Discipline Policy Statement for PIE Auditors and Registered Responsible Persons and the Discipline Policy Statement for Professional Persons .

Statement of Protocol & MoU

Statement of Protocol & MoU Statement of Protocol In order to enable the AFRC to fulfil its statutory oversight duties effectively as the independent auditor regulator in Hong Kong, the AFRC signed a revised statement of protocol on oversight arrangements with the Hong Kong Institute of Certified Public Accountants.

Financial Statements Review Programme

If misconduct by auditor is identified, an investigation will be initiated.

AFRC Welcomes Process Review Panel Report 2024-25

In the 2024-25 review cycle, the PRP reviewed a broad range of cases handled by the AFRC, covering not only its oversight of Public Interest Entities (“PIEs”) auditors but also its broader statutory functions, including registration, inspection, investigation, and disciplinary matters relating to accounting professionals and practice units.

The Supervision and Evaluation Bureau of the Ministry of Finance and the Financial Reporting Council of the Hong Kong Special Administrative Region sign a Memorandum of Understanding to promote cross-boundary cooperation and enhance audit quality

Dr Kelvin Wong, Chairman of the FRC remarked, “When the Financial Reporting Council (Amendment) Ordinance 2019 takes effect, the FRC will be vested with the direct powers of inspection, investigation and discipline concerning auditors of listed entities. It is indeed an opportune time for us to sign the MOU with the SEB. The MOU facilitates our ability to gain access to audit working papers located in the Mainland through an effective mechanism and clear procedures, thereby enhancing our efficiency in discharging our duties in respect of inspection and investigation as an effective independent auditor regulator. We would like to express our heart-felt thanks to Dr Gao Jinxing for his continued support and assistance to the FRC.

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