P M Kam FCMA CEO, Hong Kong Financial Reporting Council.
My priority at the moment is to complete investigations initiated before I joined the council in April 2010. Furthermore, we're considering the introduction of a risk-based approach in the review of listed entities' financial statements. I'm responsible for the day-to-day management of the council, for leading investigations into possible auditing and reporting irregularities by listed entities, and for heading inquiries into cases of possible non-compliance with the financial reporting requirements.
I report to the council, which is led by a non-executive chairman. In addition, I have to communicate and maintain working relationships with other local, Chinese mainland and overseas regulators, and with the government of the Hong Kong Special Administrative Region, as well as to promote the work of the FRC.
How was Hong Kong affected by the global financial crisis? And how is it recovering now?
The local economy was hit hard initially--the pace of deterioration and the depth of decline in external trade were unprecedented in decades. But the government introduced a number of measures to shore up the financial system, support enterprise and preserve jobs. These helped to stabilise the economy.
As the downturn in the US began to slow, Asia's economies started to improve. In particular, GDP growth on the Chinese mainland quickly regained its momentum following forceful stimulus measures by the mainland authorities. Hong Kong's economy benefited from this.
The stated mission of the FRC is "to promote confidence in Hong Kong's regulatory framework for the accounting profession" and "oversee the quality of financial reporting". How is it doing this?
The self-regulatory regime for the Hong Kong auditing profession was established in 1973. Confidence in the profession was brought into sharp focus after the corporate scandals in the US. The council was set up in 2006 following proposals by the Hong Kong Institute of Certified Public Accountants in 2003 to address the issues of independence and transparency that arose in the institute's investigation into auditors.
To promote confidence in, and enhance the quality of, corporate financial reporting, a financial reporting review panel was established as part of the overall structure of the FRC. Its purpose is to conduct inquiries into whether the provision of financial information by listed corporations complies with relevant accounting requirements.
What is the council's relationship with central Chinese regulatory bodies and policies on reporting?
It enjoys a good working relationship with them. The FRC meets China's Ministry of Finance (MoF) and other mainland regulators regularly to exchange views and discuss cooperative arrangements concerning mutual assistance in cross-border investigations.
We have signed a memorandum of understanding with the MoF to set up an investigation co-operation framework. This will enable us to investigate, via the MoF, any potential auditing irregularities concerning mainland auditors of entities listed in Hong Kong under the proposed new arrangements on the acceptance of mainland accounting and auditing standards and audit services provided to mainland incorporated companies listed in Hong Kong.
What do you see as the key roles and opportunities for CIMA professionals in corporate governance and reporting in your region in the future?
The key roles and opportunities for CIMA members are to promote enterprise governance--ie, a framework covering both the corporate governance (conformance) and the business management (performance) aspects of organisations. While the conformance dimension is important to ensure quality and reliable financial reporting, CIMA members play a key role in value creation and resource utilisation. Accountants in business can develop best-practice tools and techniques to help management teams assess performance, understand the key drivers of performance and make strategic decisions.
Do you think that CIMA accountants can offer Chinese businesses more in future?
Management accounting is still in its infancy in mainland China. CIMA members can organise talks and seminars for Chinese businesses to emphasise the important role that management accountants play in both the internal and external aspects of corporate governance and in driving value growth.
Regulators around the world are trying to design systems to ensure that reporting is fair and accurate--and to reduce the possibility of another crash. What is the Hong Kong FRC doing?
Hong Kong's financial reporting standards are on a par with IFRS. The International Accounting Standards Board has been reviewing the accounting issues that have emerged from the financial crisis and we're closely monitoring all of this work, which includes projects on: improving the standard on financial instruments that is to replace IAS39, consolidation, the derecognition of financial assets and liabilities, and the provision of guidance on measuring fair value. We also keep tabs on discussions about these projects and the interaction of IFRS reporting with prudential regulation. We've been conducting a review of financial statements with modified auditors' reports, too, and we're thinking about widening our scope to cover financial statements with unqualified reports by auditors of listed entities by using a risk-based approach.
Do you think such policies can prevent another global economic crash?
No systems or policies can last forever. It's essential to subject them to periodic reviews to ensure that they remain relevant.
How effective are the recent changes to reporting regulations in other key markets, such as the US and Europe?
They have led to improvements in standards on valuation and disclosure. The new standards increase transparency and help to enhance investors' confidence. This in turn stabilises the financial markets.
Is there anything you would like to see done by other countries' regulatory bodies to minimise risk and strengthen the global economy?
Risk would be minimised if we managed to reduce differences between the financial reports of different countries to enhance investors' confidence. The adoption of IFRS, or the convergence of local accounting standards with IFRS, and the adoption of a common system of audit regulation are ways to achieve this.
How do you foresee financial regulation developing in your region and globally?
In the longer term I expect the regulation and oversight of foreign-listed entities to be done by the home country in which the statutory auditor or audit firm is registered and the audited entity has its registered office.
How is CIMA perceived in Hong Kong and why did you take the qualification?
The qualification is well recognised here and it's particularly relevant to management trainees who are looking to acquire some accounting knowledge and develop their analytical skills in problem-solving.
I'm also a member of the Hong Kong Institute of Certified Public Accountants and was its president in 1999 and 2000. I took the CIMA qualification when I decided to leave the auditing industry and pursue my career in commence.
You have been deeply involved in running CIMA's Hong Kong branch. What do you feel that you have gained--and achieved--from that experience?
I was a committee member for a number of years and was branch president in 1985 and 1986. My involvement has been a rewarding experience. As well as widening my network with fellow CIMA members, I was able to get involved in various aspects of the work of the branch, such as student education and recruitment, continuing professional education for members and public relations--including producing the first branch newsletter.
Kam starts his career in the auditing profession, including four years with Price Waterhouse (now PwC), becoming a member of the Hong Kong Institute of Certified Public Accountants (HKICPA).
Joins multinational conglomerate Jardine Matheson and takes the CIMA qualification, assuming the role of group financial controller in 1984. He serves as president of the HKICPA and also sits on several public-sector advisory and statutory bodies, including the Corruption Prevention Advisory Committee, the Licensing Appeals Board and the Travel Industry Compensation Fund.
Appointed CEO of the Hong Kong Financial Reporting Council. Kam, who holds a PhD in accounting from the University of the Sunshine Coast, Queensland, is also a member of the IFRS Advisory Council of the International Accounting Standards Board. He is an adjunct associate professor at the School of Accountancy of the Chinese University of Hong Kong and an adjunct professor at the City University of Hong Kong. Other memberships include the Institute of Chartered Secretaries and Administrators, the Association of International Accountants and the Certified General Accountants Association of Canada.
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|Publication:||Financial Management (UK)|
|Date:||Oct 1, 2010|
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