Accounting Rule Change Draws Harsh Comparisons

By ALISON TUDOR

A shift in rules for accounting standards on Hong Kong's stock exchange is raising concerns that fraud may now more easily slip through the regulatory cracks, and drawing uncomfortable comparisons with problems among Chinese companies listed in the U.S. and Singapore.

European Pressphoto Agency

Hong Kong's stock exchange is allowing mainland Chinese companies to use Chinese accounting standards and employ auditors based in mainland China.

Hong Kong Exchanges & Clearing Ltd. has since Dec. 15 allowed mainland Chinese companies to use Chinese accounting standards and employ auditors based in mainland China to sign off on their books.
Relaxing the rules will cut costs for mainland companies seeking to list in Hong Kong if they choose to prepare one set of financial statements instead of two, China's Ministry of Finance and the Hong Kong exchange said in statements. But other implications of those changes are beginning to sink in among investors and other market watchers.