Institute launches webpage and survey on the further reform of the regulatory regime of the profession
The Institute has set up a dedicated webpage on the Further Reform of Regulatory Regime of Accounting Profession, which brings together relevant information to help members understand the proposals and the potential consequences for the Institute and its members.
The government gazetted the Financial Reporting Council (Amendment) Bill 2021 on 16 July. On 23 July, the Legislative Council’s House Committee decided to form a Bills Committee to study the bill. The webpage will help members and Qualification Programme (QP) students keep track of the developments.
A survey has also been developed to gauge the views of members and QP students about the reform proposals so that the Institute can effectively represent them when commenting on the draft legislation and discussing transitional arrangements. Members and students are encouraged to complete the survey by 4 August.
Capstone webpage launched
The Capstone, which is the final level of the Institute’s Qualification Programme, will be held for the first time in the coming December examination session. Ahead of the enrolment deadline, a dedicated webpage has been launched featuring information on the Capstone including its focuses, the objectives of the Capstone workshops and what students will gain after completing this level.
Council meeting minutes
The abridged minutes from the June special Council meeting are now available for members to read. They can be found in the “Members’ area” of the Institute’s website.
Hong Kong Institute of CPAs settles regulatory proceedings involving two CPAs
The Hong Kong Institute of CPAs has settled regulatory proceedings concerning alleged non-compliance with its professional standards involving two CPAs, namely Jimmy Siu who is a practising CPA, and Yip Kai Yin.
The complaint concerns audit deficiencies identified in a practice review conducted on Elite Partners CPA Limited. The Practice Review Committee of the Institute raised a complaint pertaining to the audit of the consolidated financial statements of a Hong Kong-listed entity and its subsidiaries for the year ended 30 June 2017, on which Elite issued an unmodified opinion. The entity was principally engaged in manufacturing and sales of chemical products, although some of the production lines had been intermittently suspended since 2012. Siu was the engagement director and Yip was the engagement quality control reviewer of the audit. Although there is no evidence to suggest that the deficiencies below resulted in the wrong audit opinion, the committee found that:
- The entity’s financial statements included material amounts of construction-in-progress, and plant and machinery. In assessing impairment of these assets, Siu failed to obtain sufficient appropriate audit evidence on certain judgemental areas, including assessment of the underlying assumptions and data used by the independent valuer engaged by the entity.
- Siu also failed to perform adequate audit procedures in relation to other material items in the financial statements including bonds payable, government grants repayable, contingent liabilities in relation to a litigation, exchange reserve, and deferred income taxes.
- The auditor’s report disclosed a material uncertainty related to going concern, and the entity’s financial statements contained disclosures pertaining to this matter. However, Siu failed to obtain sufficient appropriate audit evidence to support his conclusion on the appropriateness of the entity’s use of the going concern basis of accounting in the preparation of the financial statements.
- In response to the practice review findings, Elite submitted certain documentation to the Institute which had not been included as part of the audit file. Elite also claimed that certain audit procedures had been performed. However, they were not documented in the audit working papers.
- Financial statements disclosure of the principal amount of corporate bonds issued after the year end could not be reconciled to the audit working papers, demonstrating Siu’s lack of sufficient due care and diligence.
Yip failed to perform an effective engagement quality control review in that he did not identify any of the irregularities in 1 and 3 above. He also did not perform an effective, objective evaluation of the significant judgements and conclusions made by the audit team.
As a result of the above:
(a) Siu failed or neglected to observe, maintain or otherwise apply the following professional standards:
- Hong Kong Standard on Auditing (HKSA) 230 Audit Documentation.
- HKSA 500 Audit Evidence.
- HKSA 570 (Revised) Going Concern and
- The fundamental principle of professional competence and due care in sections 100.5(c), 130.1 and 130.4 of the Code of Ethics for Professional Accountants (code of ethics).
(b) Yip failed or neglected to observe, maintain or otherwise apply HKSA 220 Quality Control for an Audit of Financial Statements, and the fundamental principle of professional competence and due care in sections 100.5(c) and 130.1 of the code of ethics.
Settlement agreement: The Council of the Institute has agreed with Siu and Yip that:
- Siu and Yip acknowledge the facts of the case and areas of non-compliance with professional standards;
- The Institute will cease regulatory proceedings against Siu and Yip;
- Siu and Yip be reprimanded; and
- Siu and Yip jointly pay a financial penalty to the Institute of HK$300,000 and make a contribution to the costs of the Institute in the amount of HK$200,000.
The Council considers that dealing with the matter by way of this settlement will achieve an appropriate resolution without incurring additional expenses and tying up resources in disciplinary proceedings. Therefore, it has agreed to withdraw the complaint.
Kwok Chi Sun, Vincent CPA (practising)
Complaint: Failure or neglect to observe, maintain or otherwise apply the fundamental principle of integrity in sections 100.5(a), 110.1 and 110.2 of the code of ethics, the fundamental principle of professional competence and due care in sections 100.5(c) and 130.1 of the code of ethics and Hong Kong Standard on Quality Control 1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements, and being guilty of professional misconduct.
Kwok was the sole proprietor of Vincent Kwok & Company (practice) and was responsible for the practice’s quality control system and the quality of its audit engagements. A practice review was conducted on the practice in December 2018, which revealed significant deficiencies both in the quality control system and in a number of audit engagements. Furthermore, the practice reviewer found that Kwok had created certain audit documents for the practice review. Those audit documents were created after the audits had been completed and the relevant file assembly periods had passed.
Decisions and reasons: The Disciplinary Committee reprimanded Kwok and ordered cancellation of his practising certificate, with no issuance of a practising certificate to him for six months, with effect from 24 June 2021. In addition, Kwok was ordered to pay a penalty of HK$100,000 and costs of the disciplinary proceedings of HK$69,464. When making its decision, the committee took into consideration the particulars of the breaches committed in this case, Kwok’s conduct throughout the proceedings and his pleas of mitigation.
Han Heli CPA
Complaint: Failure or neglect to observe, maintain or otherwise apply the fundamental principle of integrity under sections 110.1 A1(a), R110.2, and R111.2 under Chapter A of the code of ethics.
Han provided copies of two medical certificates purportedly issued by a hospital in support of her sick leave applications to her employer. The employer subsequently discovered that the medical certificates were not issued by the hospital and Han had not attended the hospital or any of its polyclinics. The employer referred the matter to the Institute. Han was not very cooperative with the Institute during its investigation.
Decisions and reasons: The Disciplinary Committee ordered the name of Han Heli be removed from the register of CPAs for five years with effect from 9 July 2021. In addition, Han was ordered to pay costs of the disciplinary proceedings of HK$44,590. When making its decision, the committee noted that this is a very serious case involving dishonesty and breach of trust. The committee also considered the mitigating factor that Han admitted the complaint at the beginning of the disciplinary proceedings, which saved the parties from incurring further costs.
Details of the settlement and disciplinary findings are available at the Institute’s website.