Hong Kong Industry Profiles

	Dec 2011
No. of establishments of accounting, auditing, book-keeping and tax consulting services	4,575
Employment	28,576

Major services provided by certified public accounting (CPA) firms are statutory audit services, tax advisory, company listing, corporate finance, company secretarial, liquidation and due diligence services. Although statutory audit work is still a major source of income for the accounting profession, CPA firms also provide a full range of business advisory services to their clients such as financial planning, corporate management and internal audit.

Non-CPA firms offer services like bookkeeping, general accounting services, year-end financial reporting, tax filing and company secretarial work.

The industry is dominated by a few international firms. The world’s "Big Four” accounting firms hold a dominant share of the market in terms of professional fees earned. They provide audit services for the vast majority of blue chips and other large enterprises listed on HKSE. Other accountancy firms, including the second-tier international accountancy firms and local Hong Kong CPA firms, mainly serve the local and mainland companies of smaller sizes.

Accountants have organised themselves into professional societies. Most of the accounting professionals in Hong Kong are members of the Hong Kong Institute of Certified Public Accountants (HKICPA) (formerly known as Hong Kong Society of Accountants), a self-regulating body governing the professional conduct of accounting professionals in Hong Kong. According to HKICPA, the number of members reached 33,459 and practising members climbed to 3,896, with 1,593 firms and corporate practices as at January 2012.

Accounting, auditing and bookkeeping	2010
Export of accounting, auditing, book-keeping and tax consulting services (US$ mn)	186
Contribution to total services exports (%)	0.2

Hong Kong's exports of accounting services amounted to US$ 186 million in 2010. The Chinese mainland is the biggest export market for Hong Kong’s accounting services. Major export services include: statutory audit services, investment-related advisory services (e.g. due diligence), tax advisory and corporate advisory services.

The clients requiring accounting services on the mainland can be broadly divided into four types, namely multinational corporations, Hong Kong companies which have invested or intend to invest on the mainland, Hong Kong-listed mainland enterprises and mainland enterprises expanding overseas.
    
Industry Development & Market Outlook

China’s World Trade Organisation (WTO) Accession

In its WTO accession, China made substantial concessions on foreign investment in the services economy. Market access commitments in relation to the accounting sector are as follows:

• Partnerships or incorporated accounting firms are allowed for CPA firms licensed by Chinese authorities.
• Foreign accounting firms can affiliate with their Chinese counterparts and enter into contractual agreements with their affiliated firms in other WTO members.
• Foreign nationals who have passed the Chinese national CPA examination will receive national treatment (i.e. they can form partnerships or incorporated accounting firms).

Closer Economic Partnership Arrangement between Hong Kong and the Mainland (CEPA)

In addition to the mainland’s WTO liberalisation, Hong Kong’s accounting sector and professionals benefit from the CEPA agreement signed with the mainland. In general, CEPA does not include significant market liberalisation measures for Hong Kong's accounting firms and professionals. For smaller Hong Kong accounting firms, the main option for them to serve the mainland market is via the Temporary Audit Business Permit. Under Supplement V to CEPA, which took effect from January 2009, Hong Kong accounting firms which conduct auditing business on a temporary basis on the Chinese mainland can apply for a “Provisional Licence to Perform Audit-Related Services” with the validity period extended from two years to five years. This helps reduce the administrative burden for Hong Kong accounting firms compared with the requirements which otherwise apply to non-CEPA beneficiaries.

Hong Kong is allowed to set up an examination centre for holding the Mainland’s Accounting Professional Technician Qualification Examination under Supplement V to CEPA. On the other hand, Shenzhen and Dongguan in the Guangdong Province are allowed to establish dedicated examination centres for Hong Kong residents to take the Chinese mainland’s accounting qualification examination and handle related matters. Accounting qualification certificates will be issued by the Guangdong authorities to Hong Kong residents who pass the examination. As at February 2012, 2 management accounting, auditing and bookkeeping service providers had obtained HKSS certificates.

Exemption of Professional Examination Papers

Further to the agreement signed in 2004 on mutual exemption, Hong Kong’s Financial Services and Treasury Bureau and the mainland’s Ministry of Finance signed two supplementary agreements on 29 July 2008. The first agreement is the extension of mutual exemption examination subjects between members of the Chinese Institute of Certified Public Accountants (CICPA) and the Qualification Programme graduates of Hong Kong Institute of Certified Public Accountants (HKICPA), meaning that HKICPA’s members only need to pass the tax and law papers of the CICPA exam to become CICPA members. The second agreement is related to the scope of beneficiaries, which has been extended to all HKICPA members who were not qualified solely through the Qualification Programme since 29 July 2008.

The mutual exemption of equivalent examination papers will facilitate accountants in Hong Kong and the Chinese mainland to acquire the professional qualification in both places, thus enhancing the cooperation of the accounting sectors in Hong Kong and the mainland.

On the other hand, in June 2006, the Taxation Institute of Hong Kong (TIHK) entered into an agreement with the Certified Tax Agent (CTA) Management Centre of the State Administration of Taxation, State Personnel Examination Centre and the Hong Kong Examination Authority. With effect from 2007, Hong Kong residents can attempt the CTA Examination through the TIHK and sit the examination in Hong Kong. A successful Hong Kong candidate will receive the CTA Certificate.

Mainland Standards Convergence

In recent years, there have been an increasing number of CPA firms / international affiliates and their clients entering the mainland market. In December 2007, the HKICPA signed joint declarations with the China Accounting Standards Committee and the Chinese Auditing Standards Board in relation to the financial reporting and auditing standards in Hong Kong and the Chinese mainland.