Hong Kong’s Securities and Futures Commission (SFC) released a report reviewing The Stock Exchange of Hong Kong Limited’s (SEHK) performance in regulating listing matters during 2024, with an in-depth assessment of SEHK’s vetting of listed issuers’ internal control reviews and its handling of late auditor resignations. The report notes steps taken by SEHK in response to recommendations from the SFC’s previous review published in late 2024, but sets out further recommendations for improvement across the current review topics and SEHK’s Listing Division operations. On internal controls, the SFC highlighted the need for SEHK to ensure that issuers which fail to publish financial statements due to corporate or accounting irregularities have fully addressed material control deficiencies and put effective measures in place to comply with the Listing Rules while safeguarding assets and interests. It recommended enhancing vetting of internal control reviews, including considering a requirement for an issuer’s independent consultant to opine on the adequacy and effectiveness of controls rather than relying on confirmation from directors. To reduce late auditor resignations, SEHK was advised to update market guidance, including requiring issuers to obtain shareholders’ approval when they request auditors to resign, and promoting earlier discussion and clarity on audit fees to prevent late resignations driven by fee disputes. The SFC also recommended greater scrutiny of how audit committees discharge duties to manage the financial reporting and audit process, resolve audit issues, oversee audit timeliness and quality, and make accurate disclosures.

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