Technical news

A Roadmap of an Audit Engagement

The Institute has specially designed A Roadmap of an Audit Engagement to help members’ pursuit of excellence in audit engagements. The resources outline the essential steps of an audit engagement journey and highlights relevant technical resources offered by the Institute and other professional bodies that correspond to the key inspection findings related to the application of auditing and accounting standards identified by the Accounting and Financial Reporting Council in their inspection reports.

Financial reporting

Invitations to comment

The Institute is seeking comments on the IASB Exposure Draft Business Combinations — Disclosures, Goodwill and Impairment by 3 June and Exposure Draft Addendum to the Exposure Draft Third edition of the IFRS for SMEs Accounting Standard by 25 June.

Institute submission

The Institute has submitted its comment letter on the IASB Exposure Draft Financial Instruments with Characteristics of Equity – Proposed amendments to International Accounting Standard (IAS) 32 Financial Instruments: Presentation, International Financial Reporting Standard (IFRS) 7 Financial Instruments: Disclosures and IAS 1 Presentation of Financial Instruments.

New IFRS Accounting Standard will aid investor analysis of companies’ financial performance

The IASB has completed its work to improve the usefulness of information presented and disclosed in financial statements. The new standard, IFRS 18 Presentation and Disclosure in Financial Statements, will give investors more transparent and comparable information about companies’ financial performance, thereby enabling better investment decisions. It will affect all companies using IFRS Accounting Standards.

IFRS 18 introduces three sets of new requirements to improve companies’ reporting of financial performance and give investors a better basis for analysing and comparing companies:

Improved comparability in the statement of profit or loss (income statement)
Enhanced transparency of management-defined performance measures
More useful grouping of information in the financial statements

Article: Digital financial reporting – Facilitating digital comparability and analysis of financial reports

The IFRS Foundation has published an introductory article to explain: what digital financial reports are and how they are created; the benefits of digital financial reporting for investors, companies and regulators; and the importance of the IFRS digital taxonomies.

Auditing and assurance

Invitation to comment

The Institute is seeking comments on the International Auditing and Assurance Standards Board (IAASB) Exposure Draft on Proposed International Standard on Auditing (ISA) 240 (Revised), The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements and Proposed Conforming and Consequential Amendments to Other ISAs (ED-240) by 5 May. These proposed revisions significantly strengthen the IAASB’s standard on auditors’ responsibilities related to fraud by defining the expectations in relation to fraud, delineating more robust procedures, and increasing transparency about the auditors’ responsibilities and fraud-related procedures in the auditor’s report.

The Institute is interested in hearing your views about ED-240. You are invited to take part in the online survey which highlights the key attributes of the proposals. The survey will close on 5 May.

Institute submission

The Institute has submitted its comment letter on the IAASB’s Proposed Narrow Scope Amendments to International Standards on Quality Management; ISAs; and International Standard on Review Engagements 2400 (Revised) Engagements to Review Historical Financial Statement as a Result of the Revisions to the Definitions of Listed Entity and Public Interest Entity (PIE) in the International Ethics Standards Board for Accountants (IESBA) Code.

Revisions to local pronouncements

The following local pronouncements have been updated to align with the latest regulatory and professional requirements, and to provide additional guidance where necessary.

IAASB resources on ISA for LCE

The ISA for Less Complex Entities, known as the ISA for LCE, is tailored to meet the specific audit needs of smaller and less complex businesses and organizations. The IAASB has created a designated webpage for the ISA for LCE which offers various resources to support the utilization of the standard. These resources include videos, fact sheet, frequently asked questions and presentation decks.

The Institute’s Auditing and Assurance Standards Committee will consider the applicability of the ISA for LCE in a local context and will follow the due process for adoption in Hong Kong.

Ethics

Ethics standards on tax planning

IESBA’s final pronouncement, Revisions to the Code Addressing Tax Planning and Related Services, provides a principles-based framework and a global ethical benchmark applicable to tax planning services and activities. These revisions establish a consistent point of reference for all professional accountants, as well as other tax professionals who are strongly encouraged to use them, when dealing with tax planning, to ensure due consideration of public interest as well as potential reputational, commercial, and wider economic consequences for their clients or employing organizations.

The revisions are aimed at complementing and further strengthening the relevance of the existing IESBA’s International Code of Ethics for Professional Accountants (Including International Independence Standards) that addresses tax planning and related services. They will be effective on 1 July 2025.

Summary of prohibitions for PIE audits

IESBA’s Summary of Prohibitions in the IESBA Code Applicable to Audits of PIEs highlights non-assurance services, relationships, interests, or circumstances that are prohibited for PIE audits.

Sustainability

The Institute issues Alert on updates on its Sustainability Disclosure Standards development

The Institute has issued an Alert – Issue 49 to provide members with an update on the progress of its standard-setting work and bring members’ attention to local and international developments in the area of sustainability reporting, capacity building efforts, and next steps.

Educational guidance on sustainability reporting

To enhance comprehension and foster awareness of important concepts related to the IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures, the Institute has prepared two guidance: Two important ideas in IFRS S1 and IFRS S2 to facilitate proportionality and scalability; and Considerations of skills, capabilities and resources climate-related scenario analysis.

New resources supporting the implementation of the ISSB Standards

The IFRS Foundation has recently published the following new resources as part of capacity building for the implementation of International Sustainability Standards Board (ISSB) Standards:

Using the SASB Standards to meet the requirements in IFRS S1 provides guidance on how companies can consider the content in the Sustainability Accounting Standards Board (SASB) Standards to meet the requirements in IFRS S1.
How to apply the Integrated Reporting Framework with IFRS S1 and IFRS S2: A mapping tool maps IFRS S1 and IFRS S2 core content disclosure requirements to the Integrated Reporting Framework content elements, showing one possible way to incorporate IFRS S1 and IFRS S2 disclosures within an integrated report. Nevertheless, the mapping does not capture all disclosures required by IFRS S1 and IFRS S2.

Corporate finance

Institute responds to Public Consultation on Legislative Proposals to Regulate OTC Trading of VA

The Institute issued a submission in response to the Financial Services and the Treasury Bureau (FSTB)’s Consultation Paper seeking market feedback on its proposed licensing regime for providers of over-the-counter (OTC) trading services of virtual assets (VA).

The Institute, in principle, supports FSTB’s proposals to widen the regulation of VA activities to cover OTC trading of VAs to better protect investors in Hong Kong and safeguard the reputation of Hong Kong’s financial system against fraud and money laundering. The Institute’s submission makes various comments on the specific questions including suggesting that the board or senior management team of a licensed VA OTC operator should include a full-time qualified accountant, to ensure the operator’s compliance with anti-money laundering or counter-terrorist financing requirements, improve corporate governance safeguards and provide greater protection to investors.

Insolvency

Revision of Panel A Rules

The Official Receiver’s Office has reviewed the Panel A Rules in consultation with the Institute, primarily to address how liquidators can apply the new standard fee rates announced in February. The revised Panel A Rules took effect on 1 April.

Taxation

Institute issues submission on consultation on the implementation of global minimum tax and Hong Kong minimum top-up tax

The Institute issued a submission in response to the FSTB (Treasury Branch)’s consultation on implementation issues, including the tax compliance and administration framework, relating to the introduction in Hong Kong of a global minimum tax and a Hong Kong minimum top-up tax. These changes are being driven by international tax developments, specifically, the Global Anti-Base Erosion Rules, issued by Organization for Economic Co-operation and Development. The Institute’s submission provides views as to how the proposed measures should be implemented in practice, including how they should co-exist with the existing tax regime in Hong Kong, and also comments on other issues that the government should consider in drawing up more detailed

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