In recent times, many corporates in assistance with auditors have tried to cheat investors by presenting a false picture of their growth especially when their firm showed signs of danger, thus galloping hard earned money of the investors, as reported by Reuters.
The law makers of Hong Kong are finalising the proposed Company Bill, to ensure prevention of reckless damage caused by the false audits.
Under the proposed law, the auditors will have to agree that they would be criminally liable if they knowingly or recklessly omit a required statement from an audit report.
The regulation meets the recommendation of Hong Kong’s stock market regulator, whose aim is to put more obligation on auditors’ responsibilities to ensure investors can rely on companies’ financial statements.
The regulator said that similar rules are already being followed in the UK, while in the US, an independent agency, the Public Company Accounting Oversight Board, to keep auditors in check.
It is expected that the bill will be submitted before the Legislative Council for its final reading on 27 June 2012.
The Hong Kong Institute of Certified Public Accountants (HKICPA) president Keith Pogson said, "Despite the good intent for the Companies Ordinance Rewrite to bring Hong Kong company law in line with international norms, the effect of clause 399 could drive more business offshore and create unnecessary barriers for business operations and companies set up in Hong Kong."