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Reporting Requirements for Authorized Institutions’ External Auditors under the Banking Ordinance

The Hong Kong Monetary Authority (HKMA) has outlined specific reporting requirements for authorized institutions’ external auditors under the Banking Ordinance. These requirements are aimed at ensuring that authorized institutions maintain robust internal controls and adhere to regulatory standards.

Types of Reports

The HKMA may commission reports in three categories:

1. Report after Audit Completion

• A report commissioned after an audit of a locally incorporated authorized institution (AI) has been completed, as outlined in §59(2) of the Banking Ordinance.

2. Independent Review Report

• An independent review report in particular areas where there are significant weaknesses in internal controls or other issues that require further investigation.

Commissioning Reports

The HKMA may commission reports based on various circumstances, including:

1. Management Letters

• A management letter from the AI’s auditors highlighting significant weaknesses in internal controls.

2. Examination Findings

• Particular issues arising from:
  • On-site and off-site examinations
  • Prudent interviews
  • Tripartite meetings
  • Internal auditors’ reports
  • External auditors’ reports on annual accounts
  • Ad hoc reports made by the auditors under §61 of the Banking Ordinance

3. Return Errors and Irregularities

• Frequent errors detected in returns submitted to the Monetary Authority or other indications of irregularities in the returns.

4. Material Adverse Events

• Material adverse events or transactions that affect the business operations or financial position of the AI.

Scope, Period, and Submission

The scope of the review, the period to be covered, and the due date for submission will be agreed in advance with the AI and its auditors.