IT Virtual Conference 2021: Technologies and transformation initiatives under “new reality”
The Institute’s IT Virtual Conference 2021 will take place on 23 October. Themed “Coming out from virtual reality to the new reality,” the conference will bring together renowned speakers and panellists to discuss Hong Kong’s first Technology Validation Platform, the modernization of finance in the new normal, virtual and augmented reality technologies, innovative trends and best practices in the future of work, as well as moving from compliance to business advisory. Visit the Institute’s website for more information.
EGM on the further reform of the regulatory regime of the accounting profession
In view of the government’s proposed reform of the regulatory regime of the accounting profession, the Council resolved to call an extraordinary general meeting (EGM) on 30 September. Members can visit the EGM webpage on the Institute’s website to access the Registrar’s official notice and the relevant documents.
China Tax Course
The China Tax Course, a compulsory component of the Institute’s Professional Diploma in China Tax, will start on 9 October. Speakers will cover foundation knowledge and the latest updates on China tax laws and regulations that is critical for analysing China taxation issues and coming up with sound tax planning solutions. The course can also be taken on a standalone basis. Those interested can register now via the Institute’s website.
Annual Dinner 2021: Save the date
The Institute’s annual dinner will take place on 12 November at the JW Marriott Hotel Hong Kong. Event details will be announced soon.
Resolutions by agreement
Shin Yick, Fabian CPA
Complaint: Failure or neglect to observe, maintain or otherwise apply the fundamental principle of professional behaviour under sections 100.5(e) and 150 of the applicable Code of Ethics for Professional Accountants.
Shin was formerly a responsible officer and the chief executive officer of Yi Shun Da Capital Limited. In 2017, he was the sponsor principal in charge of supervising the execution of a listing application for which the company was the sole sponsor. The listing application lapsed subsequently after inquiries by the Securities and Futures Commission (SFC) and the Stock Exchange of Hong Kong.
The SFC later instituted an investigation and found that the company failed to comply with relevant rules and regulations of the SFC. The SFC also found that the company’s failures were attributable to Shin’s failure to discharge his duties and Shin was in breach of the relevant rules and regulations of the SFC. In September 2020, the SFC issued a decision notice banning Shin from re-entering the industry for 20 months.
Regulatory action: In lieu of further proceedings, the Council concluded the following should resolve the complaint:
- Shin acknowledges the facts of the case and the areas of non-compliance with professional standards;
- Shin be reprimanded; and
- Shin pays costs of the Institute of HK$15,000.
Ng Man Fai, CPA (practising)
Complaint: Failure or neglect to observe, maintain or otherwise apply the fundamental principle of professional competence and due care in sections 110.1 A1 (c) and R113.1 under Chapter A of the Code of Ethics for Professional Accountants.
Ng issued an accountant’s report on a solicitors’ firm under the Accountant’s Report Rules (Cap. 159A) (ARR) for the year ended 31 December 2019. However, the procedures Ng performed in support of the report were deficient in that:
(i)The clients’ ledger accounts of the firm were not scrutinized for at least two dates within the year to ensure that no account was overdrawn;
(ii)Ng failed to identify that certain cheque payments out of client accounts, which were checked in his sampling test, were not made to the solicitor but to third parties in violation of the Solicitors’ Accounts Rules;
(iii)Circularization of client ledger accounts was not performed; and
(iv)No written confirmation was obtained from the firm that regular back-up procedures were carried out for its computerized accounting system.
As a result, Ng failed to conduct the reporting engagement in accordance with the ARR and the Institute’s Practice Note 840 (Revised) Reporting on Solicitors’ Accounts under the Solicitors’ Accounts Rules and the Accountant’s Report Rules.
Regulatory action: In lieu of further proceedings, the Council concluded the following should resolve the complaint:
- Ng acknowledges the facts of the case and the areas of non-compliance with professional standards;
- Ng be reprimanded; and
- Ng pays an administrative penalty of HK$50,000 and costs of the Institute of HK$15,000.
Disciplinary finding
KPMG, Yu Yuk Ping, June CPA and Yu Wai Sum CPA (practising)
Complaint: (i) Failure or neglect by KPMG and Yu Yuk Ping, June to observe, maintain or otherwise apply Hong Kong Standard on Auditing (HKSA) 200 Objective and General Principles Governing an Audit of Financial Statements, HKSA 230 Audit Documentation, HKSA 240 The Auditor’s Responsibilities to Consider Fraud in an Audit of Financial Statements, HKSA 500 Audit Evidence, HKSA 505 External Confirmations, HKSA 520 Analytical Procedures, and HKSA 530 Audit Sampling and Other Means of Testing; (ii) Failure or neglect by KPMG and Yu Wai Sum to observe, maintain or otherwise apply HKSA 500 Audit Evidence, HKSA 505 External Confirmations, and HKSA 530 Audit Sampling and Other Means of Testing.
KPMG was the reporting accountant for the Hong Kong initial public offering (IPO) of China Forestry Holdings Co., Ltd. in 2009, and in that capacity, audited the financial information of the company and its subsidiaries (collectively, group) for the years ended 31 December 2006, 2007, 2008 and the six months ended 30 June 2009 (IPO engagement). After the listing, KPMG audited the group’s financial statements for the year ended 31 December 2009 (2009 audit). Unmodified opinions were expressed in the accountant’s report of the IPO engagement and the auditor’s report of the 2009 audit. Yu Yuk Ping, June and Yu Wai Sum were the engagement partners for the IPO engagement and the 2009 audit respectively.
The group was engaged in purchasing and planting forests, managing and harvesting forests, and selling harvested logs. It owned plantation assets in certain provinces of the People’s Republic of China.
The Institute received a referral from the Financial Reporting Council (FRC) about audit irregularities in the IPO engagement and the 2009 audit, alleging that the audit team did not exercise sufficient professional scepticism in conducting audit procedures in a number of areas. As a result, there were deficiencies in the evidence obtained and documentation compiled in the IPO engagement in respect of the reliability of logging permits, existence of certain customers, completeness of sales, occurrence and completeness of expenses for logging activities, existence and ownership of the plantation assets, and effectiveness of the group’s controls over cash and cash equivalents. For the 2009 audit, deficiencies were found in the evidence obtained on the completeness of sales, and existence and ownership of the plantation assets.
Decisions and reasons: The Disciplinary Committee reprimanded the respondents. In addition, KPMG, Yu Yuk Ping, June and Yu Wai Sum were ordered to pay penalties of HK$500,000, HK$300,000 and HK$200,000 respectively, and to pay costs of the Institute and FRC totalling HK$5,000,000. When making its decision, the committee considered the breaches were not intentional, reckless or for improper motive. They noted that the sanctions should be proportionate to the nature of the failure, with the aim to protect public interest. The committee also noted KPMG’s disciplinary history and the other respondents’ clear disciplinary records, and that the cost of HK$5 million, as agreed by all the parties, was reasonable in light of the scale of the investigation and the amount of documents involved.
Details of the resolutions by agreement and disciplinary finding are available on the Institute’s website.
