LI, Tao @ Hong Kong

The Financial Reporting Council (FRC), an independent statutory body established to enhance regulation of Hong Kong’s accounting profession, may be relatively unfamiliar to the public, since it didn’t come into existence until 2006. However, its new chief executive officer P.M. Kam, who took the helm on April 1, told China Daily he is optimistic about initiating some changes, even though he is still in the process of learning.

“I know FRC is not very familiar to the public, so one of my missions in the position is to bolster FRC’s influence and to enable more people to understand what we are doing, and to let the public contribute to the city’s healthy accounting environment in return,” said Kam.

P.M. Kam, FRC chief executive officer.

Empowered by the Financial Reporting Council Ordinance, FRC was established by the Hong Kong government in 2006, with advice from the then Hong Kong Society of Accountants (now Hong Kong Institute of Certified Public Accountants) with the task of enhancing the integrity of financial reporting through investigations and enquiries of listed entities in Hong Kong.

Though FRC is not empowered to discipline or prosecute, it may look into any auditing or reporting irregularities, or any non-compliance issues related to the listing rule and report them to the Hong Kong Institute of Certified Public Accountants, the Securities and Futures Commission or the stock exchange for follow-up actions.

“From the public perspective, if accountants are investigating other accountants, people may perceive some unfairness going on there. As FRC is an independent statutory body made up of experienced professionals and advisors from a wide range of backgrounds and industries, the public is more likely to deem our work objective and impartial,” said Kam.

Kam himself is a professional with accounting expertise. A certified public accountant who has worked with Jardine Matheson, a well-known British trading company, as the group financial controller for over 30 years, Kam said there is no difficulty for him to identify the irregularities or instances of non-compliance arising by mistake or intentionally.

He said the FRC carries out investigations or enquiries on its own initiative, or mostly, upon receipt of complaints, including anonymous ones. During their initial screening, most technical mistakes will be cleared up immediately after communicating with the relevant companies.

Kam said his experience at Jardine is an advantage, since he can articulate the practicalities of financial reporting from a preparer’s perspective. However, if he finds that a company is trying hard to hide something, he “definitely will not let it run away.”

“What’s more, FRC is entitled to query the director of a listed company, even if he is not a member of the Hong Kong Institute of Certified Public Accountants, while the institute is not authorized to do so. It gives us extra power to solve problems more easily and effectively,” Kam said.

Kam said that in theory, the fewer issues he is investigating, the better the functioning of the regulatory framework of accounting the city is adopting.

“In 2008 and 2009, the number of complaints the FRC reviewed after screening was only 15 and 19 respectively, which, in comparison with the thousand listed companies, is rather small,” Kam said. “However, only about 60 percent of the complaints are settled within two months. I believe there is still room for us to work more efficiently in the future,” he added.

China Daily

(HK Edition 05/25/2010 page3)

http://www.chinadaily.com.cn/hkedition/2010-05/25/content_9887505.htm