The Hong Kong Institute of Certified Public Accountants (HKICPA) failed to renew an 11-year mutual recognition agreement (MRA) with the U.S. International Qualifications Appraisal Board (IQAB) over failure to waive the requirement for one-year of local experience.
Announcement of the MRA non-renewal happened amid deteriorating China-U.S. relations, particularly after the recent
U.S.-ASEAN Special Summit. The outcome of the summit in May was a pledge to establish an ASEAN-U.S. Comprehensive Strategic Partnership, a
U.S. effort to upgrade ASEAN relations and curtail Chinese influence.
The MRA between HKICPA and IQAB allows certified accountants in Hong Kong and the United States to practice in each other’s markets. IQAB represents the National Association of State Boards of Accountancy (NASBA) and the American Institute of Certified Public Accountants (AICPA). The MRA was first
signed on Oct. 24, 2011, with a renewal in 2020 and expiry on Dec. 31, 2022.
HKICPA
indicated it has engaged in negotiations with the IQAB for the past three years about adding a “one-year Hong Kong experience rule” as an application requirement for U.S. Certified Public Accountants (CPA), which is a precondition for renewal of the MRA.
“[HKICPA] is unable to accept audit experience obtained in the U.S. as meeting the one-year recent local experience requirement stipulated by the
Professional Accountants Ordinance—[the corporate practice rules that HKICPA is based upon],” the statement reads.
“As such, the MRA will not be renewed after Dec. 31, 2022.”
Accountants with U.S. certificates will now have to pass complete qualification tests set by HKICPA before practicing in Hong Kong—exemption of membership admission requirements will no longer be available.
“Accountants play a critical role in the capital markets as they sign audit reports, which are the most basic information referred to by investors and analysts in the stock and debt markets,” Katherine Jiang, a Hong Kong-based financial analyst, told The Epoch Times on May 28.
“In terms of engaging certificated accountants, the MRAs between countries [or regions] facilitate the cross-boundary practice, which, on a deeper level, may bring more opportunities to the local market. Audit reports signed by accountants certified in countries with MRAs are acceptable for foreign investors interested in or already invested in the local market, thus enhancing the integration with the global market. On the other hand, the local market is almost certainly to become increasingly ‘isolated’ by ending an existing MRA.”
According to a
statement from HKICPA, the accounting body strengthens Hong Kong’s role as “an international connector between the Mainland (China) and global markets.” With over 46,000 members, HKICPA is the only body authorized in Hong Kong to register and grant practicing certificates to certified public accountants.
A recent report from
Deloitte showed Hong Kong’s deteriorating market outlook for foreign investors. In 2021, Hong Kong had only four overseas initial public offerings (IPOs), raising about $200 million, a sharp drop from the 14 IPOs in 2020, which raised approximately $400 million. (Page 39 of 76)
Amid the market’s grim outlook, the Hong Kong Exchanges and Clearing (HKEX) would establish two international offices, in the United States and Europe, in an effort to reach out to more investors outside the country, Nicolas Aguzin, HKEX’s Chief Executive Officer, told South China Morning Post when he attended the 2022 World Economic Forum Annual Meeting held in Davos in May.
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