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Audit Focus for 2022 year-end audit
Ms Janey Lai, Head of Inspection, emphasized, “Auditors should have by now completed or are in the progress of conducting audit planning to ensure a successful and smooth audit. They should commence the audit planning as early as practicable and attain an in-depth understanding of their clients and their businesses, and communicate with clients to understand whether there are any significant changes in their operations or if any risk-reassessment is required.” ... Ms Lai reiterated, “As the economic environment changes from time to time, auditors should regularly re-assess the audit risk and revise the audit strategy when appropriate to ensure audit quality.”
Guidance Materials
Guidance Materials Policy and Governance Registration Inspection Investigation and Compliance Discipline Policy and Governance Registration Inspection Investigation and Compliance Discipline Policy and Governance Guidance Notes on Change of Auditors Guidelines for Effective Audit Committees – Selection, Appointment and Reappointment of Auditors Embracing an AI-empowered Future for the Accounting Profession Registration Guide for the Registration of PIE Auditors Guide for the Issuance of Practising Certificates Guide for the Registration of Firm Names and Firms Guide for the Registration of Corporate Practices Guide for the Recognition of PIE Auditors Policy Statement for the Issuance of Practising Certificates Policy Statement for the Registration of Firm Names and Firms Policy Statement for the Registration of Corporate Practices Policy Statement for the Registration of PIE Auditors Policy Statement for the Recognition of Overseas Auditors Inspection Guideline on Notification of Change in Auditor Appointment* Outline of the AFRC’s Inspection Process for PIE Auditors Outline of the AFRC’s Inspection Process for Practice Units that are not PIE Auditors Policy Statement for Inspection of PIE Auditors with respect to PIE Engagements Policy Statement for Inspection of Practice Units with respect to compliance with AntiMoney Laundering and CounterTerrorist Financing Requirements Policy Statement for Inspection of Practice Units with respect to engagements other than PIE Engagements Investigation and Compliance 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) Enquiry Policy Statement for Listed Entities Discipline Outline of the AFRC’s Disciplinary Process Guidance Note on Cooperation with the AFRC Discipline Policy Statement for PIE Auditors and Registered Responsible Persons Discipline Policy Statement for Professional Persons Sanctions Policy for PIE Auditors and Registered Responsible Persons Sanctions Policy for Professional Persons Guidelines for Exercising the Power to Impose a Pecuniary Penalty for PIE Auditors and Registered Responsible Persons* Guidelines for Exercising the Power to Impose a Pecuniary Penalty for Professional Persons* Guidelines published in the Gazette pursuant to sections 13 and/or 37H of the Accounting and Financial Reporting Council Ordinance (Cap. 588) are marked with an asterisk (*).
Reports
Reports Inspection Checkpoint - Reminders for Auditors’ Reporting on Licensed Corporations Audit 28 March 2025 Policy and Governance Market Readiness for Sustainability Reporting and Assurance in Hong Kong Corporate Governance Sustainability Assurance 27 January 2025 Inspection Checkpoint – Obtaining an Understanding of the Audit Clients’ IT Environments Audit Technology 24 January 2025 Inspection Inspection Insights – Root Cause Analysis and Remediation: A Call to Action for Quality Improvement Audit Quality Management System 1 December 2024 Inspection Overview of the Non-Public Interest Entity Audit Market in Hong Kong Audit Quality Management System 30 October 2024 Policy and Governance Audit Implications of Current Economic Conditions for Hong Kong-listed Companies Audit Auditor Changes Corporate Governance Sustainability Assurance 21 October 2024 Inspection Audit Focus: 2024 year-end audits Audit Corporate Governance Quality Management System 9 October 2024 Policy and Governance Safeguarding Auditor Independence: Concerns Surrounding Procurement and Purchases from Audit Clients Audit Corporate Governance Quality Management System 4 October 2024 Oversight 2024 Oversight Report on HKICPA’s Performance of Specified Functions Audit Financial Reporting 16 September 2024 Investigation and Compliance 2024 Annual Investigation and Compliance Report Audit Financial Reporting 28 August 2024 Inspection 2023 Annual Inspection Report Audit Corporate Governance Quality Management System 11 July 2024 Inspection Analysis of Listed Entities Suspended from Trading Due to Delay of Preliminary Annual Results Announcement Audit Auditor Changes Corporate Governance Quality Management System 5 July 2024
Press Releases
Press Releases AFRC welcomes the Government’s reappointment/appointment of Non-Executive Directors and an Executive Director to act as the CEO 29 September 2023 Appointments to Accounting and Financial Reporting Review Tribunal 29 September 2023 Appointments to Accounting and Financial Reporting Council 29 September 2023 AFRC urges auditors and audit committees to follow Guidance Notes on Change of Auditors 28 September 2023 AFRC holds Briefing on its 2022 Annual Inspection Report to urge Quality Control System Responsible Persons of registered PIE auditors to enhance audit quality 27 September 2023 AFRC Investigation Report shows auditors’ inadequate response to increasing incidence of fraud in financial statements 4 September 2023
FRC issues Overview of the Market for Listed Entity Audits in Hong Kong
Switching rate The switching rate for the Market (the percentage by number of listed entities that changed auditor) in each year over the period was between 6.6% and 9.6%. Number of listed entities that changed their auditors 2011 2012 2013 2014 2015 2016 2017 2018 2019 Number of listed entities 107 129 127 114 121 166 146 192 224 Percentage of total number of listed entities 7.3% 8.5% 7.8% 6.6% 6.6% 8.6% 7.1% 8.6% 9.6% Audit fee trends Total annual audit fees increased by 82.8% compared with an increase of 67.9% in the number of listed entity audits. ... Total, average and median annual audit fees (in HK$ million) Audit fees 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total 6,666 7,660 8,263 8,666 9,356 9,868 10,212 10,718 11,840 12,187 Average 4.8 5.2 5.4 5.3 5.4 5.4 5.3 5.2 5.3 5.2 Median 1.7 1.9 1.9 2.0 2.1 2.1 2.1 2.0 2.1 2.0 Between 52.6% and 75.4% of the listed entities paid lower or the same audit fees after a change in auditor. When there was a decrease in audit fees after a change in auditor, the average decrease was 24.9% and when there was an increase, the average increase was 37.4%.
Press Releases
Press Releases AFRC issues a follow-up open letter to reiterate expectations on auditor changes 11 January 2023 AFRC welcomes the Government’s appointments to the Process Review Panel 27 December 2022 Audit Focus for 2022 year-end audit 22 December 2022 AFRC stresses the integrity of Hong Kong’s accounting regulatory regime 16 December 2022 AFRC urges CPAs (Practising), CPA Firms and Corporate Practices to renew registrations by 15 December 2022 8 December 2022 AFRC publishes the Complaint Guidelines 7 December 2022
FRC establishes Sustainability and Climate Task Force
This should include a Climate Change Action Roadmap for the FRC that is aligned with Hong Kong’s Climate Action Plan 2050. The SCATF is composed of a diverse group of top-notch experts representing key stakeholders from institutional investors, industry associations, professional institutions, listed entities and auditing professionals: Dr Christine CHOW (Convenor) Ms Nancy TSE Ms Grace HUI Ms Melissa BROWN Ms Ashley KHOO Mr Fox CHU Mr Jamie Allen Ms Sammie LEUNG Mr Pat WOO Mr Marek Grabowski, CEO of the FRC, said, “As an internationally-aligned independent auditor regulator, the FRC strives to enhance the quality of financial reporting, which increasingly takes into account ESG factors in recent years. ... Dr Kelvin Wong, Chairman of the FRC, remarked, “In light of the changing sustainability reporting landscape for listed entities and the increasing connection between financial and sustainability reporting, I have high hope that the FRC would greatly benefit from the expert advice and collective wisdom of SCATF regarding relevant strategic actions in the context of our regulatory functions and the market we regulate and operate.
Press Releases
Press Releases FRC Announces Appointment of Deputy CEO 17 February 2021 FRC Acts on Deloitte China Whistle-blower Allegations 11 February 2021 FRC expresses heartfelt gratitude to retiring Chairman and Members of the Process Review Panel (PRP) and welcomes the Government’s appointments to the PRP 31 December 2020 FRC issues first regulatory reports 11 December 2020 Financial Reporting Council publishes Guideline on notification of changes in auditor appointments 4 December 2020 Effective cross-boundary cooperation between the Supervision and Evaluation Bureau of the PRC Ministry of Finance and the FRC 3 December 2020