Hong Kong's Securities and Futures Commission (SFC), the Accounting and Financial Reporting Council (AFRC), and Hong Kong Exchanges and Clearing Limited (HKEX) today (October 8) issued a joint statement addressing growing regulatory concerns over the rising number of listed issuers receiving "disclaimer of opinion" audit reports solely due to going concern issues.

The joint statement sets out specific expectations for listed issuer management, audit committees, and auditors, aiming to jointly enhance the quality and reliability of financial reporting and maintain investor confidence.

According to regulatory statistics, since the 2019 listing rules introduced an exemption from the trading halt requirement, the number of listed companies receiving disclaimer of opinion audit reports solely due to going concern issues has surged from 12 in 2017 to 95 in 2025. Among these, 65 such audit opinions have persisted for more than one year, with extreme cases lasting as long as 14 years, a phenomenon that has drawn heightened regulatory attention.

A "disclaimer of opinion" means the auditor has not expressed an audit opinion on the listed issuer's financial statements, thereby raising doubts about the reliability of those financial statements. The joint statement emphasizes that addressing these issues is a shared responsibility of all parties in the financial reporting ecosystem.

In 2019, the Stock Exchange established a framework to exempt listed companies from mandatory trading halts for disclaimers of opinion arising solely from going concern uncertainties. The original intent was to avoid prolonged trading suspensions harming investors' trading rights and further exacerbating corporate financial crises.

However, regulators found that this exemption arrangement has been abused by some issuers. Many companies provide vague and hollow disclosures, lacking action plan details, feasibility grounds, and substantive progress, merely stating that negotiations are "ongoing" without adequately disclosing risks to the market, thereby undermining investors' right to information.

Regulators identified three major hidden dangers in the current market: some listed company management have not thoroughly assessed the going concern assumption, with action plans lacking concrete evidence; audit committees have failed to fully perform their independent oversight functions; and some auditors have failed to clearly specify the basis for the disclaimer of opinion while weakening audit work on other significant areas of the financial statements.

Management should base their prudent and comprehensive assessment of going concern ability on reasonable assumptions, reliable data, and practical action plans. Audit committees should critically review and challenge management's assessment and actively monitor the implementation of action plans. Auditors should rigorously scrutinize the relevant assessments, promptly point out deficiencies to management and audit committees, and specifically explain the basis for issuing a disclaimer of opinion.

Ms. Choi Fung Yee, Executive Director of the Corporate Finance Division at the Hong Kong Securities and Futures Commission, said: "Reliable financial reporting is the cornerstone of investor confidence and a quality market. All relevant parties must share responsibility and actively address going concern issues, including taking early action, rigorously scrutinizing assumptions, and making transparent and meaningful disclosures. This joint statement clearly states that ignoring these issues or failing to conduct sufficient scrutiny is unacceptable."

Ms. Wong Siu Ching, Head of Policy, Registration and Oversight at the Hong Kong AFRC, said: "This joint statement highlights the important roles that listed issuer management, audit committees, and auditors each play in maintaining confidence in Hong Kong's capital markets. All parties must work together. Auditors must fulfill their duties, perform high-quality audits, provide sufficient basis for their audit opinions, and clearly state in their auditor's reports any matters other than going concern issues that could lead to a qualified audit opinion."

Ms. Ng Kit Chuen, Head of Listing at HKEX, said: "Even if financial statements contain a disclaimer of opinion solely due to going concern issues, it can still seriously affect market quality and investor confidence. To safeguard financial market integrity, listed issuers must confront the underlying causes, take practical measures, and disclose progress in a timely and transparent manner to fully account to investors. Audit committees should also independently and rigorously oversee management in fulfilling their responsibilities."

The Hong Kong SFC, the Hong Kong AFRC, and the Stock Exchange will continue to closely monitor the situation. If misconduct or non-compliance is identified, appropriate regulatory, disciplinary, or enforcement actions will be taken. If the situation does not show significant improvement, the Stock Exchange will consider amending the Listing Rules as necessary, including requiring listed issuers whose financial statements contain a disclaimer of opinion issued solely due to going concern issues to suspend trading.