Thursday, 5 November 2009
New rule could spur competition
Competition in the accounting sector should rise after implementation of a stock exchange proposal to allow mainland companies listed in Hong Kong to use mainland auditors and accounting standards, according to Winnie Cheung Chi-woon, the chief executive of the Hong Kong Institute of Certified Public Accountants.
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New rule could spur competition
Maria Chan
28 October 2009
Competition in the accounting sector should rise after implementation of a stock exchange proposal to allow mainland companies listed in Hong Kong to use mainland auditors and accounting standards, according to Winnie Cheung Chi-woon, the chief executive of the Hong Kong Institute of Certified Public Accountants.
She also said the change might trigger mergers and acquisitions in the sector.
“But competition is healthy for the industry,” she said, adding that there were 150 mainland companies listed in Hong Kong. Of these, eight accounting firms audited 90 per cent, or 135 companies, with 80 per cent going to the Big Four.
At present, mainland companies wishing to list in Hong Kong must prepare two sets of accounts according to the different standards.
Under the reform mooted by the exchange, these companies would be allowed to draw up their accounts using mainland auditors, and Hong Kong firms listing on the mainland could retain their Hong Kong auditors and abide by the city’s accounting standards.
Cheung said the accounting regulator supported the new framework because it could encourage more co-operation between auditors in Hong Kong and on the mainland, and the city’s accountants could share their experience with their mainland counterparts. She said the new arrangement might generate new business opportunities.
“More mainland companies may choose to list in Hong Kong because of its lower compliance costs,” Cheung said. She also suggested the new regime be extended to other jurisdictions, rather than being implemented on a case-by-case basis for overseas firms seeking to list in Hong Kong.
Separately, Cheung said regulation of the accounting industry had strengthened in the past 10 years. The regulator received 53 complaints in the year to September 15, of which seven applied to listed companies.
She also said it was unlikely to see a repeat of a case like Akai Holdings.
Last month, Ernst & Young paid hundreds of millions of dollars to settle a civil negligence case after Akai’s liquidators alleged Ernst & Young Hong Kong staff tampered with and falsified Akai-related audit files in the months after the company collapsed, then used the questionable papers in witness statements, court pleadings and expert reports.
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