Hong Kong’s accounting regulator may tighten supervision of audit practices with poor track records, while also encouraging less active companies to take on more listed-company work, Bloomberg reported.
The Accounting and Financial Reporting Council (AFRC) may ask audit practices with substandard performance to cut back their workloads when renewing licences, Bloomberg quoted CEO Janey Lai Chui-pik as saying.
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At the same time, the regulator has identified unused capacity among practices that currently audit few or no listed companies, and believes this could help meet rising demand.
The comments come as regulators scrutinise market standards amid a surge in initial public offerings (IPOs) in Hong Kong.
Hong Kong’s Securities and Futures Commission has capped lead bankers at no more than five concurrent deals.
It also started a review of 13 investment banks in January to address what it described as substandard performance.
In its annual inspection report, the commission said it will focus over the coming year on how companies identify and manage quality risks linked to the increase in IPOs.
The AFRC, in an open letter issued in February, warned that limited audit resources and expertise could put pressure on IPO quality.
Around 64 companies are listed on the AFRC registry as “public interest entity” auditors authorised to sign off listed-company accounts. Bloomberg data showed that at least nine are not named as principal auditors for any listed companies.
Lai added that the AFRC has no immediate plan to impose an industrywide cap on audit workloads, saying that audit assignments vary in size.
