The Hong Kong Institute of Certified Public Accountants (HKICPA) and the Ministry of Finance have reached a consensus on cooperation, allowing the inspection of audit working papers in mainland China.
The Hong Kong Financial Reporting Council (AFRC) announced a cooperation agreement with the National Audit Office of the Ministry of Finance, which allows for the inspection of audit working papers in mainland China. This is an important milestone in regulatory cooperation and will ensure the quality of audits. The AFRC has a statutory responsibility to uphold the financial reporting and audit quality of listed entities, and this cooperation agreement is particularly important for the inspection of audit projects of listed entities.
Zhitong App has learned that on December 15th, the Hong Kong Financial Reporting Council (AFRC) announced a cooperation consensus with the National Audit Office of the Ministry of Finance. Under the agreed mechanism, the National Audit Office will assist the Hong Kong Financial Reporting Council in obtaining audit working papers stored in mainland China by Hong Kong auditors for inspection in Hong Kong. This is an important milestone in regulatory cooperation between the two parties since the signing of a memorandum of understanding in May 2019. The two parties will periodically evaluate the agreed mechanism to ensure its smooth and effective operation.
As an independent regulatory body for the accounting profession in Hong Kong, the Financial Reporting Council has a statutory responsibility to uphold the quality of financial reporting and auditing of listed entities to safeguard the interests of investors. With the increasing integration of the capital markets between Hong Kong and mainland China, and the continuous expansion of cross-border business by accounting firms, it is particularly important to inspect audit engagements of listed entities.
This cooperation consensus and agreed mechanism serve as a litmus test for strategic cooperation between the National Audit Office and the Financial Reporting Council of Hong Kong, demonstrating the comprehensive and seamless cooperation between the two parties to ensure the quality of audits. This arrangement not only facilitates the inspection of audit engagements involving audit working papers in mainland China by the Financial Reporting Council, but also sends a strong message to auditors of public interest entities that the Financial Reporting Council can review the quality of relevant audit engagements regardless of where the audit working papers are stored.