AFRC highlights impact of current economic conditions on financial reporting and audit practices

The Accounting and Financial Reporting Council (AFRC) has released a report on the effects of current economic conditions on financial reporting and audit practices for Hong Kong-listed companies. The report emphasizes that economic factors influence business strategies and may lead to earnings management, which misrepresents financial situations. It stresses the importance of company management and audit committees in ensuring accurate financial statements, considering factors like GDP growth and interest rates. Auditors are urged to evaluate the impact of economic conditions on accounting estimates such as expected credit loss, asset impairment, and going concern assessments, all of which carry heightened audit risks. AFRC CEO Janey Lai highlighted the need for early involvement of audit partners to effectively address these risks, reinforcing the roles of directors, auditors, and audit committees in maintaining high-quality financial reporting and market integrity.

Resources: https://www.afrc.org.hk/media/a2ghzw1t/press-release-audit-implications_en.pdf