Ministry of Finance will continue to support Hong Kong in cross-border accounting regulation and talent nurturing, vice-minister says
Hong Kong will continue to play a critical role in connecting China with the rest of the world when it comes to the regulation of cross-border accounting regulation and talent development in the industry, according to Financial Secretary Paul Chan Mo-po.
Since 2022, Hong Kong has been the nerve centre for the Public Company Accounting Oversight Board’s (PCAOB’s) annual inspections into the audits of US-listed mainland companies, which Chan said underscored the city’s crucial role in the process. The PCAOB is a Washington-based non-profit organisation that oversees audits of US-listed public companies.
In August 2022, China’s Ministry of Finance, the China Securities Regulatory Commission and the PCAOB signed an agreement that paved the way for Beijing to allow overseas inspectors to review the audit records of Chinese companies. The PCAOB had previously said it could not verify the quality of the audits on the companies in question.
“Thanks to the unwavering support of the Ministry of Finance, [Hong Kong’s audit regulator] is able to access and inspect audit working papers in both Hong Kong and on the mainland,” Chan said in a speech at the first regional regulatory forum hosted by the Accounting and Financial Reporting Council (AFRC), the city’s audit regulator.
“Hong Kong has become what it is because international investors and businesses have confidence in us,” Chan said to around 350 professionals and regulators from the city, the mainland and overseas.
More than 30 inspectors from the PCAOB spent about nine weeks from mid-September 2022 at the Hong Kong offices of PwC and KPMG, poring over audit papers.
The inspections in Hong Kong have been successful, with PCAOB in December 2022 declaring it was able to inspect audit firms serving mainland Chinese companies listed in the US, removing the risk of delisting hanging over about 170 such firms. Previously, the US threatened to force these firms out of the US market for it could not inspect their auditors.
The Ministry of Finance will continue to support Hong Kong’s accounting sector, according to Guo Tingting, China’s vice-minister of finance.
“The Ministry of Finance will transmit the central government’s support to Hong Kong by deepening the cross-border regulatory cooperation on financial and accounting issues,” Guo said at the forum.
She said Hong Kong and mainland regulators will unite to enhance cross-border regulation and crack down on false accounting and tax avoidance, as well as to nurture and promote talent in the sector.
“Hong Kong’s accounting sector will need to enhance its enforcement so it can crack down on violators, as the accounting sector is the gatekeeper for corporate disclosures and we want to see healthy development for the industry,” she said.
In September, Guo met with Mohamed Kande, PwC’s global chairman, after the accounting company’s mainland unit was hit with a six-month suspension and a fine of 441 million yuan (US$62 million) over deficiencies in the firm’s audit of failed property developer China Evergrande Group.
Guo said Beijing believes the accounting industry is important.
“The Ministry of Finance will follow President Xi Jinping’s instructions to introduce accounting standards and regulatory systems that are in line with international practices,” she said.
Chan said more than 11,000 professionals and stakeholders were engaged in AFRC’s policy research and engagement last year.
In addition, the Hong Kong Institute of Certified Public Accountants, an industry body representing more than 48,000 accountants in the city, has membership recognition arrangements with five chartered accountancy bodies from the Global Accounting Alliance, which Chan said makes it easier for overseas professionals to build their careers in Hong Kong.