HKEX reveals high compliance rates of 2021 issuers

But there are issues such as modifications of audit opinions by auditors.

There is a high compliance rate with the listing rules in the Hong Kong Stock Exchange (HKEX) published report on its annual review of issuers' annual reports for the 2021 financial year end. 

But it identified fairness of asset reported values as an issue, leading to delays in financial reporting and modifications of audit opinions by auditors. 

HKEX made the following recommendations to issuers:

Financial reporting and related controls – Directors should establish and maintain proper risk management and internal controls, and deploy adequate resources to maintain them. They should critically assess management’s accounting estimates and challenge the reasonableness of their adopted assumptions.

Material lending transactions – In conducting lending transactions, directors should critically assess the commercial rationale, whether their terms are fair and reasonable, and whether the use of funds is in the interests of the issuer and its shareholders. For issuers that operate money lending businesses, the directors should also maintain effective risk management and internal control systems to assess and manage credit risk exposure and to monitor the recoverability of loans and adequacy of the collaterals.Issuers should follow recommendations made by the Exchange on the disclosure on their loan receivables and, for issuers operating a money lending business, such business.

Financial statement disclosure under accounting standards – Issuers and their audit committees should maintain close dialogue with auditors on the audit focus areas and other emerging issues identified during the audit, and take prompt actions to address auditors’ concerns.

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