Nov 30, 2023
To drive continuous improvements in audit quality, the Accounting and Financial Reporting Council (AFRC) today published the Inspection Insights (The Insights) and an explanatory video on the inspection of non-PIE practice units.
Inspection Insights
The Insights provides detailed and timely observations from our inspection work to date in 2023. Our Insights is valuable to auditors and should enable them to achieve high audit quality when they learn and improve their systems of quality management (SoQM) and key aspects of the audit.
As at 30 September 2023, the AFRC has inspected 20 PIE engagements, 22 non-PIE engagements, 11 systems of quality management and 12 anti-money laundering (AML) and counter-terrorist financing (CTF) compliance monitoring. The Insights reveals certain areas of improvement related to the implementation of the new Hong Kong Quality Management Standards despite that it became effective on 15 December 2022.
The Insights also provides our observations to drive continuous improvement in audit quality and the critical areas for improvement throughout the audit process:
a) Insufficiency in risk identification and assessment in audit planning and why it is important to maintaining audit quality;
b) Lack of effective review by engagement partners and engagement quality reviewers throughout the audit; and
c) Shortfall of enhancement of integrity and quality of the audit documentation.
Explanatory Video
In light of the Further Reform of the regulatory regime of the accounting profession, we have been taking a progressive approach to inspecting non-PIE practice units, including licensed corporations registered under The Securities and Futures Commission. We have also dedicated our effort to monitoring compliance with AML/CTF, which is important to the public. This progressive approach attempts to balance the need for accounting firms to go through the transition and adapt to the new regulation and the need to protect the public interest. To enhance the efficiency of our non-PIE inspections and alleviate concerns of the practice units, the AFRC has created an explanatory video that provides non-PIE practice units with an overview of our inspection approach and their preparatory work necessary for an upcoming inspection.
Topics covered in the video include:
a) The objective of inspection;
b) The inspection regime and scope;
c) The principle for selection of Non-PIE practice units and its application;
d) The inspection process; and
e) How to prepare for an inspection
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