Hong Kong’s accounting regulator voices concerns over rapid IPO growth

Hong Kong’s accounting regulator has voiced concerns over the rapid increase in initial public offering audit engagements, and remained auditors of their critical responsibilities. 

In an open letter to all public interest entity (PIE) auditors acting as reporting accountants for companies seeking Hong Kong IPO, the Accounting and Financial Reporting Council urged them to safeguard audit quality, uphold professional independence and integrity, and reinforce public trust in the SAR’s capital markets.

The AFRC is aware that several PIE auditors have taken on an exceptionally high volume of IPO engagements in addition to their existing engagement portfolios, the letter said, adding that this rapid growth raises serious questions about whether these auditors have the requisite competencies and capabilities to diligently fulfil their professional responsibilities without compromising audit quality

Auditors are strongly urged to immediately undertake a thorough evaluation of their resources and critically assess whether they possess the necessary competencies and capabilities to deliver high-quality audits for both their existing and new IPO engagements, the watchdog said. 

The AFRC will require auditors to provide an updated list of their ongoing IPO engagements, their plans to take on any new IPO engagements, and details of their resourcing information.

Practices that fall short of its expectations should expect heightened scrutiny and regulatory intervention, the regulator said. 

The AFRC remains available to engage in dialogue with auditors regarding any matters raised in the letter, it added.