HKICPA piles on to PCAOB action | China Accounting Blog | Paul Gillis

HKICPA piles on to PCAOB action

The Hong Kong Institute of CPAs (HKICPAs) functions as the regulator of the CPA profession in Hong Kong. Nearly every country in the world has abandoned self-regulation of the profession because it is apparent the profession never really regulates itself. There have been proposals to enhance audit regulation in Hong Kong by transferring regulation from the HKICPA to the Financial Reporting Council. But after a long round of consultations in 2014 nothing has happened, and Hong Kong remains an unfortunate outlier operating well below international standard. It has been promised that legislation will be introduced to establish independent audit regulation by the end of this month.

There is an interesting disciplinary case by the HKICPAs against a Hong Kong CPA firm and three of its partners because the firm had beenbanned by the PCAOB for faulty audits. The firm was Albert Wong & Company, that later morphed into AWC (CPA) Limited, and then DCAW (CPA) Limited and in its current incarnation is Centurion ZD (CPA) Limited (Centurion). In its Form 3 filed with the PCAOB to report the Hong Kong sanctions, Centurion admits it is the successor to banned firm AWC (CPA) Limited. I fail to understand why the PCAOB ban did not apply to the successor firm. Despite the fact that AWC (CPA) Limited was banned from PCAOB practice, Centurion remains registered with the PCAOB and has issued 34 audit reports on US listed companies this year. I think they may have pulled one over on the PCAOB.

What is significant about the HKICPAs action is that they pursued it on an audit of a U.S. listed company. I think this is the first time they have found fault with audit work of a firm that was not based on a Hong Kong report. The penalty is consistent with the profession-friendly self-regulator - the penalty is a reprimand and a fine of HK$25,000 (US$3,200). Contrast that to the PCAOB penalty of banishment and a US$10,000 fine. Hong Kong really needs to up its game in audit regulation.

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