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Further reform of regulatory regime of accounting profession

The Secretary for Financial Services and the Treasury announced further reform of the regulatory regime of accounting profession (the Reform) on 8 June 2021. The changes introduced by the Reform through the Financial Reporting Council (Amendment) Bill are extensive and significant. The bill was passed by the Legislative Council on 22 October 2021 and will become effective at a later date. This page brings together relevant information to help members understand the potential consequences for the Institute and its members.

 

The current functions and powers of the Financial Reporting Council (FRC) became effective on 1 October 2019 when it assumed responsibility for regulation of audits of Public Interest Entities (PIE), mainly companies listed in Hong Kong.  Under the current regime the FRC has powers to inspect, investigate and discipline PIE auditors. More information about the earlier reform and the Institute’s relationship with the FRC can be found on this webpage.

 

 

Remaining matters

While the primary legislation necessary for the new regime has been passed by the Legislative Council, there are matters that remain to be handled before the new regime becomes effective. 

Effective date 
The effective date will be announced by the Secretary for Financial Services and the Treasury through a notice in the Government Gazette. When announced, members will be informed by the Institute of this development.

Subsidiary legislation timeline
Under the legal framework of the bill, the government is expected to formulate transitional arrangements for the reform by way of subsidiary legislation. The government has stated that it will engage the Institute and other stakeholders of the accounting profession in the process.

Tripartite working group
The Institute has advocated for stakeholder engagement and a tripartite group of the Institute, the Financial Services and the Treasury Bureau, and the FRC to be set up. If set up, the group would facilitate discussion on the transitional and implementation arrangement for the new regime. The FRC will develop various guidelines and administrative documents on the implementation of its new functions under the new regime. 

Ahead of the commencement of the new regime, the three bodies will work closely together to consider the best ways to address the views of the profession on transitional and operational issues.

 

2022 renewal

For 2022, the renewal of membership and  practising certificate and registration of practice units stay with the Institute. After the new regime becomes effective, the Institute will remain the CPA registration body and the FRC will issue and renew practising certificates and register practice units. 

 

Quick guide to the Reform

Read the quick guide to the Reform for an overview of the changes to the regulatory regime. 

 

See below for more information about the new regulatory regime.

 

Legislative timeline

Date  Activity 
To be announced
Reform becomes effective 
Sometime in 2022
Subsidiary legislation introduced to the Legislative Council 
22 October 2021
The bill was passed by the Legislative Council. 

According to the Financial Services and the Treasury Bureau, the Government will introduce subsidiary legislation to provide for transitional and technical arrangements in 2022. The effective date of the new regime is yet to be announced. 

The Institute will continue to engage with the Financial Reporting Council as we prepare for the implementation of the new regulatory regime.
14 September 2021  The fourth Bills Committee meeting took place on and responded to views towards the bill. For details, please refer to the Summary of views of submissions and the Administration's response.

The submissions on the bill, the Government’s responses, the discussion of the Bills Committee as well as webcast of the Bills Committee are available on the Bills Committee’s website
7 September 2021
Ahead of the Bills Committee meeting, the Institute’s submission has been published.
31 August 2021
The second Bills Committee meeting took place and asked questions about the bill.
12 August 2021
The Bills Committee met for the first time and opened invitations for submissions on the bill until 3 September 2021.
23 July 2021 
House Committee considered the report by LegCo secretariat and decided to form a Bills Committee to study the bill.
21 July 2021 First reading at the Legislative Council meeting.
16 July 2021 The Financial Reporting Council (Amendment) Bill 2021 was gazetted. See the Government’s press release on the gazettal.

 

About the Reform

Institute Council members met with Mr. Christopher Hui, Secretary for Financial Services and the Treasury, and his team from the Financial Services and the Treasury Bureau on 17 June 2021. At the meeting, the secretary explained the Reform, the Government’s rationale, and the timeline for implementing the Reform. These points are summarized below.

 

The secretary explained that the Reform intended to strengthen the regulatory regime by ensuring all regulatory powers are vested with an independent statutory body, i.e. the FRC, which will be renamed the Accounting and Financial Reporting Council (AFRC). The intention is to also rationalize the roles of the Institute and the AFRC to enhance efficiency and consistency, ease the compliance burden on practice units and CPAs and align with international practices.

 

The AFRC will have the registration powers covering all practice units, and PIE auditors, and also the issuance of practising certificates. The AFRC will investigate and discipline all CPAs and practice units, and inspect all practice units. The scope of investigatory and disciplinary powers and sanctions will remain unchanged from their current levels under the Institute in respect of CPAs and practice units.

 

The AFRC will also have greater oversight over the Institute, covering the registration of CPAs, the setting of professional and ethical standards, and continuing professional development (CPD) requirements.

 

There will be a transitional period when the Institute will finish practice reviews, investigations and disciplinary cases that are in progress at the effective date of the transfer of powers.

 

With the above change, in addition to the core functions that will be overseen by the FRC, the Institute will focus on attracting the next generation of accounting professionals to the profession, maintain the quality of entry to the profession through its CPA qualifying process, providing continuing education and professional development, and supporting its members in their careers.

 

The two presentations of the FSTB and FRC from the members’ forums (see below) contain more information on the reforms.

 

The Institute’s actions

Below are links to the Institute’s messages and other actions undertaken since the Reform was announced.

 

Communications

 

Email messages to members

Date
Message
19 November 2021 First meeting on regulatory reform transitional arrangements takes place
22 October 2021 Preparing for the next stage of the regulatory reform
6 September 2021 Institute submission on the Financial Reporting Council (Amendment) Bill 2021 now available
27 August 2021 Updates on the further reform on the regulatory regime of accounting profession
27 July 2021 Complete our survey on the proposed further regulatory reform of accounting profession
14 July 2021  Survey and dedicated webpage on the Further Reform of Regulatory Regime of Accounting Profession 
21 June 2021
Update on the regulatory regime reform proposals and upcoming Members’ Forum 
11 June 2021
The Institute responds to proposed new regulatory regime 

Press release

The Institute calls on the Government to undertake “further reform of regulatory regime of accounting profession” after extensive consultations and assessment of all its impacts, 11 June 2021

 

President’s video

President Raymond Cheng has recorded a video to encourage members to study the information on the webpage and complete the survey.

 

Members' forums

 

The Institute held two members’ forums on the Reform.

 

FSTB forum

At the first forum on 28 June 2021, representatives from the Financial Services and the Treasury Bureau explained the proposals and took questions from the audience. The recorded forum and presentation are linked below. 

 

FRC forum

At the second forum on 6 July 2021, representatives from the Financial Reporting Council discussed how they plan on regulating the profession. The recorded forum and presentation are linked below. 

 
Survey

Council considers that it is important that the views of all members and registered Qualification Programme students are considered and communicated to the Government ahead of any changes. To collect this feedback, the Institute conducted a survey. The survey closed on 4 August 2021 and the findings of the survey were announced in an email.

 

Extraordinary general meeting

In view of the results of the survey of the profession about the reform, and in accordance with Professional Accountants By-Law 13(1), the Council resolved to call an extraordinary general meeting (EGM) of the Institute. The EGM took place on 30 September 2021. The minutes and background information are available on the EGM 2021 webpage

 

Background information

The following three matters prepared by the Institute provides additional information on the Reform:

  • A timeline of auditor regulation development in Hong Kong.
  • A summary of the effects of the proposed transfer of regulatory functions and powers.
  • High level summary of international practices.  
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