The Finance Bureau issues an open letter to auditors regarding the rapid growth of IPO audit projects

The Accounting and Financial Reporting Bureau recently (February 13) issued an open letter to all public interest entity auditors who intend to serve as reporting accountants for companies planning to list on the Hong Kong Stock Exchange, outlining the main expectations for public interest entity auditors, including ensuring sufficient expertise and resources for IPO projects, and reiterating their core role in maintaining the quality of financial reporting and confidence in the Hong Kong capital market.

The Bureau stated that the recent rapid growth in IPO activities presents unprecedented challenges in maintaining high-quality audits, noting that some public interest entity auditors have taken on a large number of IPO audit projects in addition to their existing audit projects, raising concerns about whether these auditors possess sufficient professional competence and resources to fulfill their professional duties without compromising audit quality.

The authorities strongly urged all public interest entity auditors to immediately conduct a comprehensive resource assessment, carefully evaluate whether they have the capacity and resources to undertake existing and new IPO audit projects, and will require the relevant auditors to provide an updated IPO audit list, plans for taking on new IPO audit business, and related detailed information.

The Bureau indicated that if any auditor is found to be failing to meet established expectations, it will strengthen supervision and take necessary regulatory interventions. The Bureau also welcomes auditors to engage in dialogue with the authorities regarding the mentioned matters and encourages open and proactive communication to collaboratively address potential challenges and promote continuous improvement in audit quality