LCQ10: Progress on application to join International Forum of Independent Audit Regulators
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Question:
Since its establishment in Paris in 2006, the International Forum of Independent Audit Regulators (IFIAR) has grown to comprise 56 member jurisdictions worldwide. Membership of IFIAR is widely regarded by international capital markets as a key indicator of whether a jurisdiction's audit oversight system is independent and recognised internationally. Leading financial and commercial centres in the Asia-Pacific region, such as Singapore, Japan, Malaysia, Korea, Taiwan and Indonesia, have long been IFIAR members. However, Hong Kong's Accounting and Financial Reporting Council (AFRC), which has been transformed into a fully independent regulator of the accounting profession since October 1, 2022, has yet to join IFIAR despite the passage of more than three years. To consolidate Hong Kong's status as an international financial centre and align with the requirements set out in the National 15th Five-Year Plan for the high-quality development of professional services, will the Government inform this Council:
(1) whether AFRC currently fully complies with the core requirements of IFIAR for an "independent audit regulator" (including an independent regulatory framework, inspection powers, investigation and disciplinary powers, stable resource allocation and a high degree of transparency), so as to meet the eligibility for applying to join IFIAR; if not, (i) of the areas in which those core requirements are not met; (ii) whether the authorities have allocated additional resources (including staffing establishment and financial provisions) to assist AFRC in this regard; and (iii) of the specific figures on changes to AFRC's budget and staffing over the past three years in order to meet the aforesaid core requirements and advance its membership application;
(2) whether, since the transformation of AFRC in October 2022, the Government or AFRC has formally initiated the procedure for applying to join IFIAR; if so, of the steps that have been completed and the expected timetable for attaining membership; if not, the specific reasons for not having initiated the procedure and the definite timetable for doing so;
(3) whether the authorities will concurrently pursue equivalence recognition from the European Commission (EC) for Hong Kong's audit oversight system, and whether priorities and specific coordinated strategies have been established for pursuing these two international recognitions from IFIAR and EC, with a view to maximally enhancing the international standing of Hong Kong's audit regulatory framework; whether an assessment has been made of the quantifiable benefits of IFIAR membership in facilitating collaboration on cross-boundary audits (particularly the alignment of rules for projects in the Guangdong-Hong Kong-Macao Greater Bay Area and under the Belt and Road Initiative, and in attracting Mainland and overseas enterprises to list in Hong Kong;
(4) whether the authorities will incorporate achieving IFIAR membership for AFRC into the medium- to long-term strategy for developing Hong Kong's financial professional services, and establish quantifiable indicators (such as the proportion of complex international projects undertaken by Hong Kong accounting firms, and the number of overseas auditing professionals attracted to Hong Kong); what specific measures the authorities and other departments (in particular the Education Bureau) have in place to cultivate auditing talent capable of meeting international regulatory standards; and
(5) whether, in the process of moving towards IFIAR's international standards, the authorities have assessed the impact on local accounting firms, particularly small and medium-sized practices, in terms of compliance costs and capacity to adapt; whether the authorities will provide the sector with complementary support measures, such as transitional arrangements, capacity-building funding and training in digital accounting and ESG (environmental, social and governance) assurance, so as to ensure that the sector can turn regulatory upgrades into an opportunity to enhance its professional competitiveness?
Reply:
President,
Having consulted the Accounting and Financial Reporting Council (AFRC) and the Hong Kong Institute of Certified Public Accountants (HKICPA), the reply to the five parts of the question is as follows -
(1) and (2) The Government of the Hong Kong Special Administrative Region has been committed to consolidating Hong Kong's status as an international financial centre. A high-quality, credible, and internationally aligned system of accounting, auditing, and financial reporting is a vital foundation for the effective functioning of capital markets and the protection of investors' interests. For this reason, in October 2022, we introduced a new regulatory regime for the accounting profession, under which the AFRC was reformed into a full-fledged independent regulator of the profession in Hong Kong, with its functions and powers comparable to those of audit regulators in other jurisdictions. These include the issuance of practising certificates to accountants, registration of practice units, registration and recognition of Public Interest Entities auditors, as well as the handling of inspection, investigation and disciplinary matters, and the provision of promotion and support for the development of the accounting profession.
International and regional co-operation is part of the work of the AFRC, which maintains close liaison with regulatory counterparts on the Chinese Mainland and overseas in areas such as enhancing audit oversight and improving financial reporting quality. For example, in November 2025, the AFRC hosted the second edition of the Regional Regulatory Forum, drawing over 400 representatives of regulators and industry leaders from Hong Kong, the Chinese Mainland, the Asia-Pacific and other regions, to discuss topics such as corporate governance, audit quality, sustainability disclosure and assurance, and artificial intelligence transformation. Indeed, after more than three years of effort since its reform, the AFRC has aligned its work with international practices, gaining positive recognition among its peers. In 2025, the AFRC published a research report titled "Global Developments in Audit Regulation: Key Insights for Hong Kong", which indicates that Hong Kong's accounting and audit regulatory regime is consistent with prevailing international practices.
Since the implementation of the reformed regulatory regime in 2022, the AFRC has focused on enhancing local audit quality, strengthening cross-boundary regulatory co-operation with the Supervision and Evaluation Bureau of the Ministry of Finance, as well as promoting and supporting the development of the accounting profession, among other initiatives. The AFRC has, since then, not submitted an application for membership of the International Forum of Independent Audit Regulators (IFIAR), or initiated any process for seeking equivalence recognition of Hong Kong's audit regulatory regime by the European Commission. The AFRC will continue to pay close attention to developments in international audit and accounting regulation, and draw on experience from outside Hong Kong in upholding high standards of local audit quality, and establish appropriate modes of co-operation and liaison with other organisations and institutions.
The expenditure and resources required for the work related to the promotion of international and regional co-operation are subsumed within the AFRC's overall annual budget. The AFRC does not maintain a separate breakdown specifically for such initiatives.
(3) and (4) The work of the AFRC is recognised by financial markets. The independence and credibility of its regulatory regime should not depend on membership of any particular international or regional organisation. Cross-boundary audit regulatory co-operation and the listing of overseas enterprises in Hong Kong are influenced by a range of factors, including global market conditions, regulatory regimes, international economic outlook, and geopolitics. Meanwhile, the AFRC will continue to closely monitor the actual operation and effectiveness of the new regulatory regime, as well as developments in international audit and accounting regulations. Subject to Hong Kong's market conditions, the need for cross-boundary regulatory co-operation, resource allocation, and industry circumstances, the AFRC will maintain communication and liaison with relevant international organisations and regulatory authorities to keep abreast of the latest developments and to facilitate exchange and co-operation. The Government has no plan to set any indicators concerning the participation of AFRC in any individual international or regional organisation.
Regarding the development of audit talent, the Government has been working proactively and closely with the HKICPA, tertiary institutions and industry organisations to strengthen the training of local accounting professionals. Specific initiatives include promoting articulation arrangements between accredited degree programmes and the Qualification Programme (QP) through collaboration with tertiary institutions, so that graduates can be exempted from Associate Level examinations. Moreover, through QP, which is recognised by the Global Accounting Alliance, those who complete the programme will acquire proficiency in accounting standards that are aligned with international benchmarks, and this will enhance cross-boundary professional recognition and mobility of certified public accountants in Hong Kong.
(5) Promoting and supporting the development of the accounting profession is one of the statutory functions of the AFRC. While striving to enhance the quality of financial reporting and audits, the AFRC understands that as accounting and audit regulatory regimes undergo continuous enhancement, there is a need for capacity building for local accounting firms, particularly small and medium-sized practices (SMPs). To this end, in carrying out its regulatory functions, the AFRC places great emphasis on maintaining communication with the industry while providing guidance and support, ensuring that the industry can turn regulatory upgrading into an opportunity to enhance professional competitiveness. For example, at the conference co-organised by the HKICPA and the International Federation of Accountants in November 2025, the Chairman of the AFRC highlighted agility as the strength of SMPs, and encouraged practitioners to leverage their professional skills to seize opportunities brought about by regulatory upgrading.
On the other hand, the HKICPA provides professional training, conducts examinations, and handles registration for those who wish to become accountants, and sets requirements for continuing professional development (CPD) for the industry. The HKICPA has overhauled its CPD curriculum that now puts emphasis on practical and hot topics that align with future development trends, including data analytics, common digital tools, and cybersecurity governance. It delivered nearly 700 courses every year, attracting over 100 000 enrolments annually. In addition, in order to promote capacity building on green finance, the HKICPA introduced specialised professional training in ESG accounting, carbon asset management, and sustainability assurance. Moreover, the HKICPA Certificate on Sustainability Reporting was launched in 2025, facilitating practitioners' transition from financial reporting to high-value sustainability reporting.
Overall speaking, in promoting international and regional co-operation, the AFRC will continue to take into account regulatory requirements and the actual conditions of the industry, maintain close contact with the HKICPA on professional training, and provide appropriate support to the industry, particularly SMPs, so as to ensure the healthy and sustainable development of the accounting profession in Hong Kong.
Ends/Wednesday, June 3, 2026
Issued at HKT 12:15
Issued at HKT 12:15
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