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The FSC Encourages Audit Firms to Prepare and Publish Transparency Reports to Enhance Audit Quality and Transparency

2022-01-04
The provision of audit services for public companies has profound implications for public interest. To help the public gain a better understanding on the operation, governance, and the internal control of audit firms, the FSC released “Principles for Preparation of Transparency Reports by Audit Firms (The Principles thereafter)”, hoping that the enhancement of transparency of audit firms would promote healthy competition so as to raise overall audit quality.   
The content of the transparency report shall include the overview, legal and governance structure, risk management and quality control, audit quality indicators and also financial and operational information of audit firms. The transparency report should be fact-based, not misleading and not oriented toward marketing or selling service. In addition, to help the public learn more about whether joining global networks would foster the audit quality of the audit firm and whether a multidisciplinary model would have effect on the audit firm’s culture of dedication towards audit quality. Where the audit firm is a member of a network, it shall further disclose the risk management, quality control and support received from the network. Also it should further disclose the details about its affiliated entities, which include subsidiaries and associates, such as the name, the business overview and the proportion of Non-Audit Services (NAS) of affiliated entities.    
Public companies can refer to the transparency report published voluntarily by audit firms to assess the governance and audit quality of the audit firms so as to appoint suitable audit firms or CPAs.
The FSC draws on the experience around the world, taking a two-stage approach to implement this policy:    
I. Stage One: Big Four audit firms will make public their first copies of transparency reports from 2023. Big Four audit firms will be the first movers. Big Four audit firms has reached a consensus with the FSC to prepare the transparency report in accordance with The Principles and to make them public within four months after the end of each financial year on their websites.  
II. Stage Two: from 2023 the FSC will review the result of the implementation for the Big Four audit firms to look into the possibility of extending application to non-Big Four audit firms.  
The Principles are published in the audit quality section of the FSC’s website. The FSC reminds audit firms to review The Principles and be prepared for related information required in the report, encouraging small and medium-sized audit firms to voluntarily publish the transparency report earlier in stage one. 
Attachment:Principles for Preparation of Transparency Reports by Audit Firms
Accounting and Auditing Supervision Division, Securities and Futures Bureau 
Contact Tel. (02)2774-7343 Shirley Huang, Section Chief
Please send your inquiry to:FSCMAIL
 
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  • Update: 2022-01-19
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