The Financial Reporting Council (Amendment) Bill 2018 (the Bill) was introduced into the Legislative Council (LegCo) on 19 January 2018 to further enhance the independence of the existing regulatory regime for auditors of listed entities from the audit profession so as to enhance investor protection and ensure that the regime is benchmarked against the international standard and practice.
The Bill proposed that the Financial Reporting Council (“FRC”) should act as the independent oversight body regulating PIE auditors, and be responsible for the inspection and disciplinary functions with regard to PIE auditors under the new regulatory regime. The HKICPA will continue to perform the statutory functions of registering, and setting continuing professional development (CPD) requirements and standards on professional ethics, auditing and assurance for local public interest entities “PIE” auditors under the new regime, subject to oversight by the FRC.
Resulted from expanded functions of the FRC under the Bill, three levies are suggested to impose to sustain its operation:
- Levy on securities transactions: 0.00015% of the consideration for a securities transaction, payable by each of the seller and purchaser in the transaction ;
- Levy on PIEs: 4.2% of the annual listing fee paid by a PIE to the HKEX for a calendar year pursuant to the Listing Rules; and
- Levy on PIE auditors: $12,310 for a calendar year in respect of every PIE client, and a standard levy of $2,000 for a calendar year on a PIE auditor with no PIE client.
The Bill also introduces a transitional arrangement for auditors who have undertaken engagements in the nature of PIE engagements before the commencement of the Bill. If any of the engagements is still on-going on the date of commencement of the Bill, the auditor may notify the HKICPA or the FRC (as the case may be) of its intention to continue to carry out the engagement on the commencement date. On sending such notification, the auditor will be taken to be a PIE auditor during the transitional period. The name of those who are taken to be registered or recognised PIE auditors will be put onto the PIE auditors register, and the auditors concerned will be subject to the inspection, investigation and disciplinary mechanisms under the new regime. During the transitional period, these auditors may file applications for registration or recognition as PIE auditors under the new regime.