Members’ handbook updates
Handbook Update No. 317 deals with the revision of the Statement 1.500 Continuing Professional Development, as follows:
- To provide the specific Continuing Professional Development (CPD) requirements for membership re-applicants.
- To provide the specific CPD requirements for members whose membership has been suspended.
- Other clerical edits.
Financial reporting
Invitation to comment
The Institute is seeking comment on International Accounting Standards Board (IASB) Exposure Draft Equity Method of Accounting – International Accounting Standard 28 Investments in Associates and Joint Ventures (revised 202x) by 29 November.
IASB review concludes the revenue Standard is working as intended
The IASB has concluded its Post-implementation Review of International Financial Reporting Standard (IFRS) 15 Revenue from Contracts with Customers and published the Project Summary and Feedback Statement. Overall, feedback and research carried out during the review indicated that IFRS 15 is working as intended and provides investors with useful information. The IASB also identified a few application issues to consider in its next agenda consultation, which it plans to start in late 2025. These issues include:
- How companies decide whether they are the main seller or an agent in a transaction;
- How to report on payments to customers; and
- How IFRS 15 works alongside several other IFRS Accounting Standards.
Auditing and assurance
Invitation to comment
The Institute is seeking comments on Proposed Hong Kong Standard on Auditing for Audits of Financial Statements of Less Complex Entities (HKSA for LCE). The proposal is to modify Part A of the International Standard on Auditing for Audits of Financial Statements of Less Complex Entities (ISA for LCE) issued by the International Auditing and Assurance Standards Board (IAASB), regarding the authority of the standard concerning the scope of the proposed HKSA for LCE in a local context, which includes:
- Refining the classes of entities prohibited from using the proposed HKSA for LCE to entities having public interest characteristics within a Hong Kong context.
- Establishing quantitative thresholds to determine the appropriate use of the proposed HKSA for LCE within a Hong Kong context.
Watch the video to understand the proposed standard. You may submit your views via email or participate in the survey by 17 November.
The IAASB has also issued the following:
- ISA for LCE – Authority Supplemental Guidance: This resource helps users in determining the appropriate situations to use the ISA for LCE, which further explains relevant matters and circumstances in accordance with Part A of the standard.
- ISA for LCE – Adoption Guide: This guide supports jurisdictions in adopting the ISA for LCE by providing valuable insights into the adoption process. It highlights common steps and successful approaches, and addresses potential challenges.
Empower the audit process with newly updated resources
A Roadmap of an Audit Engagement provides valuable resources that empower practitioners throughout the audit process. The roadmap outlines the essential steps of the audit engagement journey, offering clarity and direction at every stage. By building on key inspection findings related to the application of auditing and accounting standards identified by the Accounting and Financial Reporting Council (AFRC) in their inspection reports, this roadmap ensures that practitioners are well-equipped to handle the complexities of the audit engagements.
HKICPA Audit Practice Manual (APM) (2024 edition)
The APM 2024 edition has been updated to align with the requirements of HKSA 600 (Revised) Special Considerations – Audits of Group Financial Statements (Including the Work of Component Auditors), and includes some new features.
Members may register for the e-learning recording that provides an overview of the HKSA 600 (Revised). This session covers key changes from current practices and their impact to group audit engagements. Access the Institute’s resource centre for the pronouncements, guides and articles that are relevant to the standard.
Disclosure in the auditor’s report on the application of PIE independence requirements
The International Ethics Standards Board for Accountants (IESBA) recently released an update to its Questions and Answers (Q&As) publication on the IESBA Revisions to the Definitions of Listed Entity and Public Interest Entity (PIE) in the IESBA Code of Ethics. One notable update includes the revision of Q&A 20 on forms of public disclosure of the application of the PIE independence requirements when performing an audit of financial statements.
In July, the Institute released amendments to Chapter A of the HKICPA Code of Ethics for Professional Accountants relating to the PIE revisions including local refinements, as well as the narrow scope amendments to HKSA 700 (Revised) and HKSA 260 (Revised) as a result of the corresponding amendments by the IAASB to operationalize changes to the Code that require a firm to publicly disclose when a firm has applied the independence requirements for PIEs. The PIE revisions and amendments to HKSA 700 (Revised) and HKSA 260 (Revised) are effective for audits of financial statements for periods beginning on or after 15 December 2024.
Auditor’s reporting requirements under the enhanced WPRS
The enhanced Producer Responsibility Scheme on Waste Electrical and Electronic Equipment (WPRS) took effect on 1 July. This enhancement has removed the requirement for suppliers and sellers to provide recycling labels when they distribute and sell regulated electronic equipment. However, the Environmental Protection Department of Hong Kong has clarified that auditors reporting on the suppliers’ returns under the WPRS must still address the reporting requirements for recycling labels if the returns include quantities of labels reported prior to 1 July 2024. For guidance on this scenario, refer to Q15 in the EPD’s FAQ.
The Institute’s Circular on Reporting under Section 20 of the Product Eco-responsibility (Regulated Electrical Equipment) Regulation (Cap. 603B) offers guidance to practitioners engaged to report on suppliers’ returns under the WPRS. The circular will be updated in due course to reflect the revised requirements.
Audit focus for 2024 year-end audits
The AFRC has released Audit Focus for 2024 Year-End Audits, providing guidance to auditors in effectively identifying and responding to the elevated risks in financial reporting and auditing created by the current uncertain economic conditions. Critical reminders to auditors are also provided in this publication to ensure that audit quality is upheld for the upcoming year-end audits.
New technology position to shape the future of audit and assurance standards
The IAASB has introduced a new Technology Position that will guide how it adapts its work to embrace the intersection of audit, assurance, and technology. This new position marks a significant step forward in the IAASB’s ongoing commitment to enhancing the quality and relevance of its standards amid rapid technological advancement.
Balancing effectiveness and timeliness in audit and assurances standard setting
The IAASB released a public report that offers a comprehensive overview of the IAASB’s progress in addressing key public interest issues and reiterates its strategic direction to continue bolstering confidence in audits and assurance engagements.
Ethics
Ethics Circular 1 Guidance for Small and Medium Practitioners on the Code
The Institute has updated the Ethics Circular 1 to incorporate the following revised provisions of the Code of Ethics for Professional Accountants (Code):
- Revisions to the Code Relating to the Definition of Engagement Team and Group Audits
- Technology-related Revisions to the Code
Q&As: HKICPA Revisions to the Definitions of Listed Entity and PIE in the Code
This set of Q&As complements the Basis for Conclusions for the Revisions to the Definitions of Listed Entity and Public Interest Entity in the Code issued by the Institute in July. It aims to assist practitioners to better understand the revised requirements and guidance. Watch the video highlighting the key revisions.
IESBA Handbook 2024 edition
The IESBA released the 2024 Handbook of the International Code of Ethics for Professional Accountants (including International Independence Standards) which includes:
- The revisions relating to the definition of a PIE which, among other matters, specifies a broader list of mandatory PIE categories.
- Changes to the definitions of “audit client” and “group audit client” in the Glossary arising from the approved revisions to the definitions of listed entity and PIE.
- Technology-related provisions of the Code.
Safeguarding auditor independence: Concerns surrounding procurement and purchases from audit clients
This article by AFRC highlights concerns regarding potential threats to auditor independence arising from procurement and purchases involving audit clients. It calls on audit firms to remain vigilant in managing their relationships with these clients and to implement robust procedures for identifying and mitigating any potential independence threats. The article also points out that the need for audit committees to take a more proactive role in safeguarding their auditors’ independence.
Sustainability
HKICPA Exposure Drafts on HKFRS S1 and S2
The Institute published of the Exposure Draft HKFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and Exposure Draft HKFRS S2 Climate-related Disclosures (HK EDs) on 16 September, and the submission deadline ended on 27 October.
The Institute prepared an Explanatory Memorandum (EM) to accompany the HK EDs, explaining the history of development of the HK EDs, the reasons for full convergence with IFRS S1 and IFRS S2, the consultation questions and next steps. The EM also contains a number of FAQs and high-level summaries of key comments received from previous local consultations on IFRS S1 and S2 and how those comments have been addressed.
IFRS Foundation publishes guide for companies as investors call for voluntary application of ISSB Standards
Investors globally have called on companies to voluntarily adopt ISSB Standards to provide investors with decision-useful, globally comparable information in the absence of regulatory requirements.
To support companies in meeting this demand, the IFRS Foundation has published Voluntarily applying ISSB Standards – A guide for preparers. The guide is designed to support companies, particularly those in jurisdictions without regulatory requirements to apply ISSB Standards, as they start to adopt these standards voluntarily. It also aims to help companies communicate their progress to investors.
Please refer to the full versions of Technical News on the Institute’s website: www.hkicpa.org.hk
