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Frequently Asked Questions
Frequently Asked Questions General Registration Practising Certificate CPA Firm Corporate Practice Local PIE Auditor Non-Hong Kong PIE Auditor Inspection Investigation & Compliance Complaints Whistleblowing Investigations Enquiries Discipline
FAQs - Discipline
The AFRC can discipline: PIE auditors registered or recognized under Part 3 of the AFRCO; registered responsible persons; and professional persons (i.e. ... When can the AFRC discipline? PIE auditor and registered responsible person Disciplinary action may be taken against a PIE auditor or registered responsible person who has committed FR misconduct. ... What are the disciplinary measures available to the AFRC? PIE auditor The AFRC may impose, singly or in combination, the following sanctions on a PIE auditor: public or private reprimand; remedial action; pecuniary penalty; imposition of a condition on the registration or recognition; revocation or suspension of the registration or recognition; and prohibition from applying to be registered or recognized as a PIE auditor for a period of time.
Completed investigation
The FRC found that the auditor, the engagement partner and the engagement quality control reviewer failed or neglected to observe, maintain or otherwise apply certain professional standards in the relevant audit in relation to a business combination and the accounting for the acquired hotel property. The investigation revealed that the auditor and the engagement partner failed to plan and perform the relevant audit, in relation to the above matters, in accordance with the relevant provisions of HKSA 200 (Clarified) Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Hong Kong Standards on Auditing ; HKSA 220 (Clarified) Quality Control for an Audit of Financial Statements ; HKSA 300 (Clarified) Planning an Audit of Financial Statement s; HKSA 315 (Revised) Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment ; HKSA 330 (Clarified) The Auditor’s Responses to Assessed Risks ; HKSA 500 (Clarified) Audit Evidence ; and HKSA 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures .
Completed investigation
The FRC found that the auditor, the engagement partner and the engagement quality control reviewer failed or neglected to observe, maintain or otherwise apply certain professional standards in the relevant audit in relation to a business combination in respect of (a) the classification and measurement of contingent consideration; (b) the acquisition-date fair value measurement of the intangible assets acquired; and (c) the expected useful lives and the subsequent measurement of the intangible assets. In particular, the investigation revealed that, in relation to the above matters, (a) the auditor and the engagement partner failed to properly perform the relevant audit in accordance with the relevant provisions of HKSA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Hong Kong Standards on Auditing ; HKSA 500 Audit Evidence ; HKSA 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures ; and HKSA 620 Using the work of an auditor’s expert .
AFRC welcomes the Government’s support for a funding injection
Since acquiring full regulatory functions over public interest entity ( PIE ) auditors in October 2019, the AFRC has been exercising strict budgetary controls in order to discharge its statutory functions, including its prudent use of the initial seed capital of $400 million for the disbursement of its first two years’ operating expenses in the absence of any levy income. In line with the prevailing international practices of vesting powers to an independent body for the regulation of accounting profession, since October 2022, the AFRC has been vested with expanded functions and powers over the non-public interest entity ( non-PIE ) auditors. Pending exploration of new long-term financing models with the Government for the non-PIE auditors, it became necessary to deploy the balance from the initial seed capital as at 1 October 2022, originally intended for the PIE auditor regime, to support the funding of the expanded functions as an interim measure.
Disciplinary Cases
Substantial weaknesses in the auditor’s governance and monitoring controls in respect of the relevant audits were also identified. ... He also failed to properly evaluate the relevant auditor’s conclusion on its independence. ... The auditor also relied on the deficient work carried out by the auditor’s valuation expert without exercising sufficient professional skepticism.
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 the relevant audit in respect of the impairment assessment of the amount due to the listed entity from its subsidiary. The investigation revealed that the auditor and the engagement partner failed to properly perform the relevant impairment assessment in accordance with the relevant provisions of Hong Kong Standard on Auditing ( HKSA ) 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Hong Kong Standards on Auditing , HKSA 500 Audit Evidence , and HKSA 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures.
Investigations
Investigations The AFRC, as Hong Kong's independent regulator of the accounting profession, is entrusted with the statutory duty to initiate investigations into potential misconduct by PIE auditors, registered responsible persons, non-PIE auditors, and professional persons, referring substantiated cases to the Discipline Department for sanctions or escalation to other regulators or law enforcement agencies. ... For details, please refer to: Investigation Policy Statement for PIE Auditors, Non-PIE Auditors and Registered Responsible Persons Investigation Policy Statement for Professional Persons Investigation Policy Statement (in relation to audits or the preparation of specified reports completed for listed entities before 1 October 2019) .