Appointment of new auditors
Mazars CPA Limited (Mazars) has resigned as auditor of the Institute with effect from 23 March 2018, after the Institute and Mazars were unable to reach an agreement on the fees for providing services required under the Professional Accountants Ordinance, namely, audit of the financial statements of the Institute and its subsidiaries for the financial year ending 30 June 2018 and the 2018 Council election vote counting.
Mazars confirmed that there were no other circumstances connected with their resignation which should be brought to the attention of the Institute’s members or creditors.
The Council, using the power vested in it under Professional Accountants By-law 42(2), filled the casual vacancy by requesting the Audit Committee to invite tenders for providing services required under the Professional Accoun- tants Ordinance.
The Audit Committee, following a due selection process, recommended, and the Council approved, the appointment of PKF Hong Kong Limited to hold office until the Institute’s next Annual General Meeting.
Council minutes
Abridged February Council minutes are now available for members. They can be found in the Members’ area of the Institute’s website.
IFAC SMP Global Survey
The International Federation of Accountants (IFAC) has released the 2018 IFAC Global SMP Survey, conducted every two years on the challenges and key issues facing small- and medium- sized practices (SMPs). This year’s survey incorporates new questions on talent management, technology developments, and marketing and branding. The survey provides an opportunity for SMPs around the world to share their insights on key trends and developments facing them and their small business clients. The results are critical to IFAC and its member organizations, including the Institute, gaining a deeper understanding of the challenges and opportunities facing this critical sector. The survey is open until 21 May and can be found here.
Quality Assurance Report and Compliance Department Annual Report out now
This month, the Institute published its Quality Assurance Report 2017, summarizing the work of the Quality Assurance Department in practice review and professional standards monitoring over the past year. The report also highlights common review findings that members should be aware of.
Elsa Ho, Director of the Quality Assurance Department, noted in the foreword that compared with previous years, the significance of many of the deficiencies identified in 2017 has been reduced. “Practices are now putting more efforts to address findings before the practice review is closed. The increase in practice review follow up visit and complaint cases in the past few years could be a contributing factor as practices are well aware that we now have less tolerance for practices not showing commitment to audit quality,” she said.
The Institute has also published the 2017 Compliance Department Annual Report, which sets out the department’s key activities for 2017 and 2016, and the Regulatory Oversight Board’s process review report. Linda Biek, Director of compliance says “the strength of a profession’s compliance structure defines its commitment to quality and public protection. This year’s compliance annual report highlights key developments over the year in ensuring the strength of the Institute’s compliance regime and the disciplinary cases handled.”
The department carries out the Institute’s function of regulating the ethical and professional conduct of CPAs. Integrated within its function are systems for continuous process monitoring supported by an independent process review carried out by the board.
Mainland China tax conference 2018
This year’s Mainland China tax conference will provide an opportunity for Institute members to learn how the latest Mainland China tax developments are affecting Hong Kong and international businesses. Through a panel discussion and case studies, participants will also be updated on tax issues relating to supply chain management, including corporate structure, corporate income tax, transfer pricing and indirect tax. The conference will take place on 19 May from 9:00 a.m. to 1:00 p.m. at The Ritz-Carlton Hong Kong. The enrolment deadline is 16 May.
Financial Controllership Programme open for applicants
The Financial Controllership Programme 2018, which runs from June to December, is now open for applications. This is the third year of the programme which is designed to develop the competencies of a skilled financial controller. It will provide participants with insight into their work as well as the core technical knowledge and skills that will add value to businesses. Institute members with at least five years post-CPA qualification work experience are eligible to enrol. More details are available at www.hkicpa.org.hk/fcp.
CFOs under 35 video
In a new video series produced by the Institute highlighting successful CPAs, chief financial officers under 35 discuss their personal thoughts on the value of being an Institute member, what it means to be a CPA today, and the future role of CPAs. The video is a supplement to the article Nothing but a number, published in the February issue of A Plus, in which CFOs under 35 are interviewed about their career development. Look out for the video on social media and on the Institute’s YouTube page.
Disciplinary findings
Chan Wing Keung, Simon, CPA (practising)
Complaint: Failure or neglect to observe, maintain or otherwise apply professional standards issued by the Institute.
The Institute received a referral from the Law Society of Hong Kong about an accountant’s report issued by Chan, in which he failed to report breaches of the Solicitors’ Accounts Rules (SAR) by a solicitor’s firm. Chan did not comply with a number of provisions of the Institute’s Practice Note 840 when he carried out procedures in relation to the accountant’s report, and he failed to identify breaches of the SAR by the solicitor’s firm, including rules over handling of client money.
Decisions and reasons: Chan was reprimanded. Also, his practising certificate was ordered to be cancelled from3 April 2018 with no issuance of a practising certificate to him for 12 months. In addition, he was ordered to pay the costs of disciplinary proceedings of HK$56,204. When making its decision, the Disciplinary Committee considered the particulars in support of the complaint, Chan’s personal circumstances and his conduct throughout the proceedings. The committee found Chan’s unquestioning acceptance of the very limited information provided by the firm’s principal showed a total abdication by him of his responsibilities as an auditor under the Accountant’s Report Rules.
Wong Tak Man, Stephen, CPA (practising) and RSM Hong Kong
Complaint: Failure or neglect to observe, maintain or otherwise apply a professional standard issued by the Institute.
On 28 October 2009, RSM Hong Kong issued an unmodified auditor’s report on the financial statements of Heng Tai Consumables Group Limited and its subsidiaries (group) for the year ended 30 June 2009. Wong was the engagement partner.
In November 2012, the Institute received a referral from the Financial Reporting Council (FRC) regarding the group’s treatment of an available-for-sale (AFS) financial asset, which had suffered significant decline in fair value. The FRC considered that respondents’ issuance of an unmodified auditor’s report was inappropriate.
After considering the information available, the Institute lodged a complaint against the respondents. The Disciplinary Committee found that in the audit of the financial statements the respondents failed to properly interpret Hong Kong Accounting Standard 39 Financial Instruments: Recognition and Measurement, which requires an entity to recognize an impairment loss in profit or loss for an AFS financial asset when objective evidence of impairment exists.
In handing down sanctions, the committee had imposed a restriction on the Institute regarding the publication of the sanctions ordered, saved with the respondents’ consent. The respondents refused their consent and challenged the disciplinary order.
In October 2015, the respondents appealed the committee’s decision and the matter was dismissed by the Court of Appeal (CACV 233/2015) in July 2016. The respondents sought leave to appeal to the Court of Final Appeal on grounds of Great General Public Importance. Leave to appeal to the Court of Final Appeal was granted and, after hearing the parties, the Court of Final Appeal (FACV 10/2017) dismissed the respondents’ appeal on 22 December 2017.
Since the handing down of the committee’s decision, the respondents have been disputing the extent of the committee’s order on the publication of sanctions and the publication of the committee’s decision.
Following clarification from the committee, and the Institute’s indication that it would proceed with the publication of the committee’s decision in accordance with the committee’s clarification, the respondents agreed to the Institute publishing the full disciplinary decision and order.
Decisions and reasons: The respondents were each ordered to pay a penalty of HK$10,000 and jointly pay costs and expenses of the disciplinary proceedings of the Institute in the total sum of HK$95,401.
Yu Oi Kee, CPA
Complaint: Being convicted in Hong Kong of offences involving dishonesty.
Yu was convicted in the District Court in August 2014 of one count of conspiring as an agent to use a document with intent to deceive her principal, and one count of accepting an advantage as an agent. She was sentenced to imprisonment for 15 months. Her appeal was later dismissed by the Court of Appeal and the Court of Final Appeal.
Yu was a director of a subsidiary of a Hong Kong listed company. She conspired with another director to make a false statement in the board meeting minutes to conceal the interests of that director in a material disposal transaction entered into by the subsidiary. Accordingly, the transaction was incorrectly announced as an unconnected transaction and was not reported to the Stock Exchange of Hong Kong as a connected transaction. As a reward for her part in processing the transaction, Yu privately accepted the listed company’s shares given to her by the other director. She later sold the shares in the market and received about HK$317,000.
Decisions and reasons: Yu was removed from the register of CPAs for four years with effect from 24 March 2018 and was ordered to pay costs of the disciplinary proceedings of the Institute of HK$36,165. When making its decision, the Disciplinary Committee noted that the offences were serious, Yu was in breach of trust in her position as an agent and she received a substantial advantage for her acts. The committee further noted that the dishonourable nature of the offences had brought disrepute upon the integrity of the Institute and the accounting profession.
Details of the disciplinary findings are available at the Institute’s website: www.hkicpa.org.hk.
