Hong Kong Exchanges and Clearing Limited (HKEx) today (Friday) published a consultation paper which seeks the public's views regarding a proposed framework to accept the use of Mainland accounting and auditing standards and Mainland audit firms endorsed by the Ministry of Finance and the China Securities Regulatory Commission by Mainland incorporated companies listed in Hong Kong for the purposes of the Listing Rules.

The proposed framework is a joint effort of Hong Kong regulators and is based on input from representatives of the Financial Services and the Treasury Bureau, the Securities and Futures Commission, the Financial Reporting Council, the Hong Kong Institute of Certified Public Accountants and The Stock Exchange of Hong Kong Limited, a wholly-owned subsidiary of HKEx.  The Ministry of Finance and the China Securities Regulatory Commission provided views and input from the Mainland side.

The proposed framework provides for cooperation between the relevant regulatory authorities in Hong Kong and the Mainland in investigation and regulation of the endorsed audit firms.

Implementation of the proposed framework should reduce compliance costs for Mainland incorporated issuers.  It should also promote more timely disclosure of information to investors and increase market efficiency. 

The consultation paper proposes that the related rule changes become effective 1 January 2010 and will apply to annual accounting periods beginning on or after 1 January 2010.

If the proposed framework is implemented, the Mainland would operate a parallel scheme as a reciprocal arrangement.  The Mainland scheme would be applicable to Mainland listings of companies incorporated or registered in Hong Kong that prepare financial statements using Hong Kong Financial Reporting Standards or International Financial Reporting Standards and audited by Hong Kong audit firms using Hong Kong Standards on Auditing or International Standards on Auditing.

“Our proposed framework recognises that Mainland accounting and auditing standards have converged with international standards,” said HKEx's Head of Listing, Mark Dickens.

The deadline for replies to the consultation paper is 23 October 2009. 

The consultation paper  can be downloaded from the HKEx website.  Interested parties are encouraged to respond to the consultation paper by completing and submitting the questionnaire.