Hong Kong regulator urges IPO auditors to safeguard quality

Hong Kong's accounting regulator urged auditors handling initial public offerings to assess whether they have sufficient resources and expertise, warning that a surge in listing activity could put pressure on quality.

In an open letter, the Accounting and Financial Reporting Council said that some auditors of public interest entities serving as reporting accountants for Hong Kong IPO applicants have taken on exceptionally high listing workloads alongside existing mandates. That raised concerns that they may not have sufficient expertise and resources to meet professional standards without compromising quality.

"Public interest entity auditors are strongly urged to immediately undertake a thorough evaluation of their resources and critically assess whether they possess the necessary competencies and capabilities to deliver high-quality audits for both their existing and new IPO engagements," the watchdog said in a statement. It added that it will require auditors to submit updated lists of ongoing IPO mandates, plans for new engagements and details of their resources.

Regulators have been increasing scrutiny over the quality of Hong Kong's IPOs amid the city's booming capital market, with first-time share sales coming off a four-year high in 2025 and already off to the busiest-ever start of a year. 

Last month, the Securities and Futures Commission stepped up warnings to investment banks over filing sloppy applications for share sales, saying a growing number of teams at the most active sponsors are unfamiliar with regulatory requirements and lack experience and resources to handle applications.