In its recent annual report, Hong Kong's Accounting and Financial Reporting Council (AFRC) highlighted late auditor resignations and a lack of professional skepticism as major issues tarnishing auditors' credibility.
Nearly 20% of the AFRC's investigations were linked to last-minute auditor resignations, which can leave companies struggling to find replacements before reporting deadlines. "Late resignation of auditors is an issue, as listed companies may not have sufficient time to find a replacement, or the incoming auditors may be appointed at the last minutes before the reporting deadline," said Janey Lai, CEO of the AFRC. The regulator urged incoming auditors to thoroughly analyze the reasons behind outgoing auditors' resignations and assess their capabilities before taking on new engagements.
The AFRC reported receiving a record 190 complaints in the financial year ending March 31, leading to 77 investigations. Florence Wong, Head of Investigation and Compliance, noted that the increase in complaints was due to the council's "expanded power and scope of investigations."
While audit quality has improved since 2019, the AFRC reported that many auditors still fail to maintain professional skepticism and adhere to regulatory requirements. "The quality of auditors is vital to Hong Kong's standing as an international financial centre," Wong said, stressing the need for reliable auditing to maintain investor confidence.
Join The Discussion