Hong Kong audit watchdog warns of quality risks amid undercutting and tight deadlines
The Accounting and Financial Reporting Council (AFRC) said that 17 per cent of the 2,631 Hong Kong-listed companies changed auditors last year. The AFRC also said that it had randomly checked the work of 16 auditing firms that were replaced.
The regulator found that of these 16 firms, 13 had received lower fees compared with the previous auditors, while 12 had quality issues and urged them to make improvements.
'Many of these audits were conducted under tight timelines due to late changes in auditor appointments, close to the reporting deadline,' said CEO Janey Lai Chui-pik at a media briefing on the annual audit quality review on Tuesday. 'These practices threaten both the independence of auditors and the quality of audits.'
Accounting and Financial Reporting Council chairman David Sun and CEO Janey Lai at the regulator's office at Two Taikoo Place. Photo: Enoch Yiu
One of the main reasons listed companies changed auditors was cheaper auditing fees, as existing auditors refused to give discounts.
'After the two sides have lengthy discussions and still cannot reach an agreement on cheaper auditing fees, a listed company usually finds a cheaper auditor just one or two months before the auditing deadline,' she said. 'In one case, a company changed its auditor three times in a year.'
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