News

The Accounting and Financial Reporting Council (AFRC) today announces its Strategic Priorities for 2025-2027, to support the discharge of its statutory function. The AFRC's strategic priorities for 2025-2027 are based on four key pillars: Regulation: Upholding the quality of financial reporting and audit, thereby safeguarding stakeholder and public interests. Governance: Cultivating a healthy environment based on high-quality financial reporting and audit through robust governance. Development: Promoting the development of the accounting profession by advocating sustainability, digital transformation, and talent management. Organisational Effectiveness: Driving effective outcomes through efficient processes. For details, please visit: https://www.afrc.org.hk/media/stsjhckc/afrc-strategic-priorities.pdf

The Accounting and Finance Reporting Authority (AFRA) released an article titled "Maintaining Capital Market Credibility: Carefully Appointing Auditors and Determining Audit Fees," emphasizing the importance of improving audit quality. It notes that the recent rapid resignation problem among auditors has markedly improved, dropping from 70 % in 2021 to 30 % in 2024. To further enhance audit quality, AFRA offers the following observations and recommendations: **Challenges of Hasty Auditor Appointment** Between 2020 and 2024, 45 % of auditor resignations occurred within a month before or after the fiscal year-end, tightening audit timelines and increasing the risk of first‑year audit misstatements. **Competitive Underpricing** Seventy‑three percent of auditor changes accompanied a reduction in audit fees, potentially leading auditors to cut back on audit procedures, reduce sample sizes, or rely on less‑experienced staff, thereby compromising audit quality and heightening the risk of non‑compliance. **Delayed Audit Fee Payments** As of 31 March 2025, at least ten listed companies had not fully paid their 2023 and/or 2024 audit fees, with some delays extending up to 30 months. This could erode auditor independence and increase the risk of biased audit opinions. **AFRA’s Recommendations** • **Audit Committees** should appoint auditors early, carefully evaluate low‑bid proposals, and ensure timely fee payment to preserve independence. • **Auditors** should set reasonable fees, decline rushed engagements due to resource constraints, and establish fair payment terms. **Goal** AFRA stresses that audits are a professional service essential for maintaining trust in capital markets. Fees should reflect service quality and be paid on time, supporting accounting firms’ investment in talent and technology to promote Hong Kong’s resilience as an international financial centre.