Hong Kong's Accounting and Financial Reporting Council (ARFC) has found significant deficiencies persisting in the auditing of the public interest entities inspected. It said that no more than 20 cases with poor audit quality have been transferred for further investigation. Head of inspection Janey Lai said the common deficiencies identified included inadequate exercise of professional scepticism, insufficient valuation of management's application of accounting standards for revenue recognition and expected credit loss, and insufficient testing of journal entries and other adjustments. The ARFC has “growing concerns” about the auditing firms' quality controls over their clients and urged the auditors to consider the issues identified as they plan and perform the year-end audits. It also found two PIE auditors had violated the auditor independence rules under the code of ethics for professional accountants.
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