HONG KONG (BLOOMBERG) – The stilted accountancy profession is the latest to be shaken by the chaotic changes sweeping Hong Kong.
The government, via a blog post, this month proposed to place all of the city’s accountants under the supervision of its Financial Reporting Council (FRC), eliminating the self-regulatory body that has reigned for nearly five decades. . It also decided to remove the licensing power from the Hong Kong Institute of Chartered Accountants (CPA), building on the 2019 reforms to strengthen oversight and bring the city closer to international standards.
But, as with many recent changes, the proposal skips the formal public consultation process, adding to growing concerns about the rule of law and the dwindling influence of professional groups in the city after China imposed a law on the city. security last year. There are also concerns over whether authorities will now have access to the finances of local parties and institutions critical of the government at a time when Beijing is cracking down on dissenting voices.
“Changing the regulatory regime is not a straightforward process,” said CPA Chairman Raymond Cheng, who only discovered the plan the morning it was revealed. “We urge the government to undertake it in a measured and thoughtful manner, after extensive consultations and an assessment of all its impacts.”
Authorities said they were allowing sufficient time for industry comment and that the narrow nature of the proposal made wider public consultation unnecessary. He is due to be heard by Parliament on July 5.
Mr. Christopher Hui, Secretary of Financial Services and Treasury, said in a question and answer on the government website that the proposal only changes the scope of the regulatory function, not its nature. “The consultation has already started and we have engaged some of the leading accounting organizations here in Hong Kong to assess their views on our proposals,” he said. “So on this front, it’s basically an ongoing process.”
The government declined to comment further.
This is the second important step in tightening control over the city’s accounting industry. In October 2019, the FRC was entrusted with the supervision of audits of listed companies. The latest decision will extend the agency’s oversight to more than 46,000 chartered accountants, including more than 5,100 serving members who have the right to sign financial reports.
FRC Chairman Kelvin Wong has sought to reassure the industry, especially those who conduct audits of private companies and work as financial controllers, saying oversight will largely remain the same.
The FRC released a scathing report earlier this month on the state of accounting in the city, which has in the past been plagued by a proliferation of shell companies. In audit inspections, more than 73 percent of cases showed a need for “improvement” or “significant improvement,” the FRC said in its first annual report after the start of the new regulatory regime.
Despite this, some accounting professionals have said the loss of independent oversight could endanger groups critical of the government, such as local parties and humanitarian groups who must adhere to annual audit rules. as registered companies or partnerships.
An accountant, who was previously part of the industry group entitled to vote on Hong Kong’s chief executive, said he feared the transfer of oversight would mean the government-appointed board would have the power to obtain the document from audit work of these organizations, putting their donors at risk. Still, others said the threat was negligible because the government is unlikely to deepen its oversight. All of the accountants have asked not to be appointed to discuss sensitive matters.
“It would then be paramount for the FRC to ensure that these critical organizations receive a proper audit,” said Kenneth Leung, a former accountancy lawmaker, who was ousted last year during the crackdown on the pro-democracy opposition.
Professional groups are increasingly reluctant to speak out for fear of breaking safety laws. The government this month arrested the main editors of the pro-democracy Apple Daily.
Mr. Leung said the movement of accountants is part of a larger threat to the influence of professional groups in the financial center.
The accounting industry has a decidedly pro-democracy bent. In an election to the CPA council in 2019, at the height of the protests that rocked the city, pro-democracy candidates wiped out a mix of pro-Beijing and independent opponents.
The legal profession also faces similar challenges. The government recently proposed allowing its legal officers to be appointed senior counsel. It is an official title previously awarded by the City Bar and Bar Association, which openly criticized attacks on freedoms and the rule of law.
The authorities also passed changes to the company register, censorship of films, arrested opposition figures and amended electoral laws without the participation of residents and city professionals.
The main economic driver of the city’s finance is also facing a new landscape. Banks had to freeze activists’ accounts and were recently warned not to do business with jailed media mogul Jimmy Lai, whose Apple Daily newspaper is now being forced to shut down.
A recent survey by the local American Chamber of Commerce found that more than 40% of its members said they could leave Hong Kong, underscoring the business community’s concerns over the security law and strict policies of the government linked to Covid-19.
“Every major policy should be subject to an appropriate public consultation to detail the rationale, timing, essence and consequences,” said MJP Lee, chairman of the Hong Kong International Chamber of Commerce, in an interview. after the government decided to restrict the information in the register of companies. “This should never be done solely at the will of administrative officials and approved by a now crippled legislature.”