October 2026 | Renewal readiness brief for Hong Kong CPA practice owners
2027 PC / Practice Unit renewal: it is time to evidence your HKSQM 1 compliance
AFRC follow-up is expected as part of the November–December 2026 renewal process.
In July 2026, the AFRC reminded CPA practices that it will follow up on HKSQM 1 compliance, including external monitoring reviews, as part of the 2027 practising-certificate / practice-unit renewal exercise. For practice owners, October is the point to move from “we have a manual” to “we can demonstrate that our quality-management system operates.”
The upcoming process should not be treated as a document-submission exercise. A current manual is necessary, but it will not on its own answer questions about independence, people, completed audit files, monitoring findings and remediation. When evidence is assembled late, gaps in policies, timing and ownership are much harder to resolve. A delayed or unsuccessful renewal can create serious operational disruption for a practice and its clients.
Four questions to ask now
If the answer to any question is “not yet,” the immediate task is not to write a better explanation. It is to create an accurate record, assess the gap, assign ownership and complete practical follow-through before the renewal window begins.
AFRC EMAIL — 7 OCTOBER 2026 | AUDIT METHODOLOGY + INTELLECTUAL RESOURCES
A compliant manual must be customised—and used
The AFRC expects current audit methodology, templates and evidence that they are used.
On 7 October 2026, the AFRC wrote to all practice owners after the AFRC Survey 2025. While most PUs maintain methodologies and templates, some rely only on auditing standards or use materials last revised before 1 January 2022.
The AFRC linked this to HKSQM 1: PUs must obtain or develop, implement, maintain and use appropriate intellectual resources, including audit methodology. PUs are expected to establish methodology, keep it and standardised templates current, and give personnel training and guidance.
Four areas that should be tailored and evidenced
1. Independence, including affiliated TCSP relationships
Identify affiliated TCSPs, common owners, referral arrangements and other relationships that may create threats. Explain safeguards, approvals and how independence confirmations are retained.
2. Tone at the top and engagement accountability
Show how the managing partner communicates quality expectations, handles escalations, permits challenge and reviews whether the system is working.
3. People, competence and work allocation
Match competence, capacity and time to each engagement. Retain training logs, appraisal outcomes, work-allocation and supervision records, plus promotion criteria for audit-manager-level personnel.
4. Learning from reviews, inspections and remediation
For each issue, record the root cause, correction, owner, implementation date and evidence that the change has been tested. This demonstrates continuous improvement rather than a one-time response.
Implementation turns policy into credibility
Keep a rolling record of archive procedures, file-retrieval authority, annual training, appraisal and engagement allocation. Compare actual practice against the manual. If a stated policy cannot be followed, revise the policy or correct the operational process—do not leave the mismatch unexplained.
What to do in October, 2026
Bring the manual and operating evidence together. Retrieve the current manual, the risk assessment that supports it and records showing how key policies were applied. Do not rely on memory or one-off declarations.
Map the quality cycle. Identify the annual SQM review, the completed-file monitoring cycle, the file selected for review, findings raised and the documented response to each finding.
Secure independent review capacity early. A reviewer needs time to understand the practice, examine records and files, discuss findings and allow management to respond.
Make ownership visible. For each open issue, identify the responsible partner or manager, required action, evidence of completion and follow-up date.
Monitoring | Annual system review + completed-file evidence
Monitoring makes the quality system demonstrable
Show the quality cycle across the year—not merely a policy written at its start.
A quality-management system must work over a period of time. For renewal readiness, this means being able to show a current monitoring programme, a completed evaluation, review reports, root-cause analysis, action ownership and follow-up—not simply a policy written at the start of the year.
Annual SQM / Ongoing Policy Monitoring (OPM) Review
The annual system evaluation should be supported by a documented review of whether the policies in the SQM manual operated as designed. A practical external OPM review can look at acceptance and continuance, independence safeguards, AML procedures, engagement-performance controls, training, resources, monitoring records and remediation. It should test both the manual and the evidence behind it.
Before the reviewer starts, assemble the manual, risk assessment, declarations and independence records, training and appraisal records, engagement-allocation material, archive and retrieval procedures, monitoring records and open remediation items. The value of the review is not merely the report; it is the time to correct a deficiency before it becomes a renewal or inspection issue.
Completed File Monitoring (CFM) Review
Completed-file monitoring tests whether firm-wide quality policies are visible in the work actually performed. The completed audit or assurance file should be sizeable and selected on risk, not convenience. HKSQM 1 requires a CFM review of an audit or assurance engagement for each practitioner at least once in every rolling three-year period.
A CFM reviewer should have appropriate professional competence, regulatory-compliance and review experience, as well as the objectivity to challenge the work. The reviewer examines a completed file, discusses findings and issues a report. The practice should document the cause of each issue, address the engagement-level gap and consider whether the same issue affects other files, training, supervision or the SQM itself.
What your evidence pack should show
- A complete archive of the selected working-paper file, financial statements and key engagement documents.
- Why the engagement was chosen, including complexity, risk areas, staff mix, reporting framework and prior findings.
- The reviewer’s report, management’s response and corrective actions.
- A rolling record that tracks file selection and review coverage across practitioners and years.
- Evidence that recommendations have been implemented and checked for effectiveness.
EQC’s external monitoring service combines OPM and CFM work. It is designed to identify implementation and engagement-file gaps, discuss practical actions with management and issue a report after necessary follow-up is considered. A review can be performed efficiently through a desktop review of submitted records and files, with findings discussed by report, Zoom or in person.
RENEWAL READINESS DEPENDS ON EVIDENCE YOU CAN PRODUCE TODAY • services@eqcadvisory.com
October offers | Services and promotion
Renewal-readiness services and October 2026 offers
Secure compliance support before the November–December renewal process begins.
Current EQC prices for eligible CPA and TCSP licensee services
| Service | Original price |
|---|---|
| SQM Manual — own-name Practice Unit, no employees | HK$5,000 |
| SQM Manual — firm / corporate practice with employees, subcontractors and/or network firms | HK$15,000 |
| External Annual SQM Monitoring Review — first year | HK$7,000 |
| External Annual SQM Monitoring Review — subsequent year | HK$6,000 |
| Completed File Monitoring (CFM) Review — SME-FRS | HK$20,000 |
| CFM Review — HKFRS for Private Entities / Full HKFRS | HK$25,000 / HK$30,000 |
| TCSP Licensee — Drafting or Updating of AML/CFT Manual | HK$6,000 |
| TCSP Licensee — Independent AML/CFT Audit — fewer than 150 / 151–300 / more than 300 active clients | HK$8,000 / HK$12,000 / HK$15,000 |
Free AP4.1 credits: the easiest way to update—and evidence—methodology
FREE BONUS, NOT A CREDIT PURCHASE. AFRC email — 7 October 2026: use AP4.1 to generate tailored work papers, providing file-level evidence of a customised audit methodology updated after 1 January 2022.
| Qualifying Step 1 service spend (not a credit price) | Free AP4.1 bonus credits (1 workstation) | Audit capability / stated value |
|---|---|---|
| HK$20,000 | 60 FREE credits | Approx. 30 engagements Value: HK$30,000 |
| HK$40,000 | 120 FREE credits | Approx. 60 engagements Value: HK$60,000 |
| HK$60,000 | 180 FREE credits | Approx. 90 engagements Value: HK$90,000 |
| HK$80,000 (cap) | 240 FREE credits (cap) | Approx. 120 engagements Value capped at HK$100,000 |
Qualification & AFRC outcome. Both first-time and returning clients must newly engage 3+ services in the Step 1 table from 7–31 October 2026. Only post-discount fees for those new services count; historic spending and earlier engagements do not. AP4.1 supports current working-paper evidence; PUs remain responsible for review, implementation, training and guidance. Free credits are capped at 240, with the stated value capped at HK$100,000.