Speech by FS at Financial Reporting Council 10th anniversary cocktail reception (English only) (with photos/video)
John (Chairman of the Financial Reporting Council, Dr John Poon), distinguished guests, ladies and gentlemen,
I'm pleased to join you tonight. And for good reason.
First of all, I'm with friends. With family: the accounting family. Yes, like me, many of you here tonight have numbers in your blood. Balance sheets on your mind. As for our hearts, I am sure all of us here hold close to our hearts the continued economic development of Hong Kong, and the long-term prosperity of our city.
As I was saying, it's an honour to be here, to be celebrating with you the Financial Reporting Council's 10th anniversary.
Anniversaries give us welcome pause, that timely opportunity to look back to the path that brought us here, while contemplating the way forward.
Some of you may remember that I was the President of the Hong Kong Institute of Certified Public Accountants when the Financial Reporting Council Bill was passed in LegCo back in July 2006.
Discussions about establishing the Council began in 2003, when the world was just recovering from the collapse of Enron and WorldCom in the United States, their shocking ends related to major audit failures.
There were, at the time, growing public concerns over a number of corporate governance issues and the credibility of financial reporting and auditing practices. At the same time, there were active discussions on improving the auditor regulatory framework in many overseas jurisdictions.
Here in Hong Kong, the Government initiated discussions with the accountancy sector on ways to improve our auditor regulatory regime.
A two-pronged legislative approach was adopted to enhance the independence, and the accountability, of the regulatory regime.
Legislation was introduced to set up an independent body – the Financial Reporting Council – to take over the investigation functions of the Hong Kong ICPA (Institute of Certified Public Accountants) in regard to auditing and reporting irregularities in relation to listed entities.
As well, amendments to the Professional Accountants Ordinance were made. They introduced independent lay persons to the governing Council of the Institute and to the disciplinary process administered by the Council.
These legislative steps were completed between 2004 and 2006. Following the enactment of the Financial Reporting Council Bill, in 2006, the Council commenced full operation in July 2007, making Hong Kong one of the earliest jurisdictions to improve its auditor regulatory regime.
I would say this underlines the dedication to ensuring integrity of the regime and reinforcing Hong Kong's status as an international financial centre.
Since then, the Council has been responsible for conducting investigations into auditing and reporting practices of the auditors of listed entities, as well as reviewing the financial reports of listed entities.
Over the years, the Council has played an increasingly important role in upholding the quality of financial reporting in respect of listed entities.
It has accumulated expertise and invaluable experience in financial reporting regulatory issues. There is also a full range of statutory and administrative safeguards in place to ensure that the Council exercises its investigative powers properly.
That said, international practice today is that regulatory regimes for auditors of public interest entities are independent of the audit profession, and subject to independent oversight by bodies acting in the public interest.
In that regard, Hong Kong is seen as operating a largely self-regulatory regime over auditors. That has not been to our advantage, as we strive to maintain our international reputation and competitiveness.
In short, the time has come for us to reform the auditor regulatory regime, to ensure its independence.
The auditing profession, I'm pleased to say, largely shares those thoughts. Supports the Government's initiative to boost the Council's functions, to refashion it into an independent auditor oversight body, one with direct investigation and disciplinary powers over auditors of listed entities.
At the same time, the Council will exercise independent oversight of the registration, professional standard-setting and training functions performed by the Hong Kong Institute of Certified Public Accountants.
We plan to introduce the amendment bill into LegCo as soon as possible this year.
The end result will benefit the health, stability and international standing of Hong Kong's financial centre. And I count on your continuing support in realising this important bill.
Ladies and gentlemen, allow me to express my gratitude to the Council's past and present chairpersons, Ms Sophia Kao and Dr John Poon, respectively, for their able leadership and contributions to the Council.
The Council would not have achieved the same level of success without their untiring efforts: Sophia from 2006 to 2012, and John since then.
And it is my "true and fair view" that the Financial Reporting Council will continue to execute its statutory responsibilities effectively, while readying to take up an even more challenging regulatory role in the future.
Once again, my heartiest congratulations to the Financial Reporting Council on its 10th anniversary.
Thank you very much indeed.
Ends/Thursday, July 13, 2017
Issued at HKT 19:56
Issued at HKT 19:56