From left: Eugene Yeung CPA, Convenor of Budget Proposals Sub-Committee, Institute President Loretta Fong CPA (practising); and Sarah Chan FCPA, Chairman of the Taxation Faculty Executive Committee.
Institute releases proposals for 2022-23 budget
The Institute released its tax policy and proposals for the Hong Kong government’s 2022-23 budget. Under the theme “Building a Sustainable Future for Hong Kong, its Economy and Community,” the proposals include more than 40 immediate and longer-term measures. These are aimed at maintaining the city’s competitive edge, ensuring a sustainable tax system, rolling out relief measures to help businesses and citizens ride through these challenging times, and helping Hong Kong achieve the goal of carbon neutrality.
The Institute estimates that the fiscal deficit for 2021/22 will reach HK$25.2 billion. This is significantly less than the government’s original estimation of over HK$100 billion, as a result of better-than-expected economic performance in the second half of 2021 and robust land sales, which indicates that developers have an optimistic outlook for the property market in the coming few years. Fiscal reserves are expected to stand at HK$902.6 billion at 31 March 2022.
“Despite these positive signs, the situation remains very uncertain,” says Loretta Fong CPA (practising), Institute President. “Our proposals recommend that the government adopt a number of specific short-term relief measures, while, at the same time, enhancing the Hong Kong economy by promoting digital transformation, and building on the opportunities presented by the development of the Greater Bay Area. More also needs to be done to maintain our competitive edge and build a sustainable future.”
The full budget proposal is available on the Institute’s website.
New committee appointments
The appointments to the new term of the Institute’s committees and panels to support the activities of the Council have been finalized. Learn about the committees and their composition for the year ahead through the “Committees” section of the Institute’s website.
Net zero commitment and ESG Information Centre
The Institute has joined 13 other accounting bodies, all members of The Prince of Wales’s Accounting for Sustainability Project Accounting Bodies Network, in publicly committing to achieve net zero greenhouse gas emissions within their own organizations, as well as provide an enabling environment for their membership to do the same.
As part of our net zero efforts, a new ESG Information Centre is now available on the Institute’s website to provide members with regular updates on the latest market development and thought leadership. The Institute has also appointed a Sustainability Lead and formed a task force to develop our net zero pathway going forward. Stay tuned for our further support and development on ESG matters.
Code of ethics webpage
The Institute has launched a new webpage on the Code of Ethics for Professional Accountants to help members uphold professionalism. The page includes links to educational material, and other relevant information. Visit now via the Institute’s website.
Minutes of the 49th AGM
The minutes from the Institute’s 49th annual general meeting (AGM) held on 9 December 2021 are now available for members to read.
Council meeting minutes
The abridged minutes from the December 2021 Council meeting are now available for members to read.
Blessings for the year of the tiger
The Institute wishes you and your family, friends and colleagues a prosperous and fruitful year of the tiger. Visit the celebration webpage to watch greeting videos featuring the President, and download some e-fai chun to deliver blessings.
Resolution by agreement
Chung Koon Shing, Patrick CPA (practising)
Complaint: Failure or neglect to observe, maintain or otherwise apply the fundamental principle of professional competence and due care under sections 100.5(c) and 130 (for the 2013 to 2018 audits) and sections 110.1 A1(c) and R113.1 under Chapter A (for the 2019 audit) of the Code of Ethics for Professional Accountants.
Chung was the honorary auditor of an entity registered under the Trade Unions Ordinance (Cap. 332). He issued an unmodified auditor’s report on the statement of account of the entity for each of the seven years ended 31 August 2013 to 2019. However, the audit procedures performed by Chung were deficient in that he did not (i) evaluate how the limited extent of the audit work performed on the entity’s receipts and expenditures met the statutory requirements; (ii) adequately analyse the nature of the receipts to support his conclusion that the entity was exempted from profits tax; and (iii) obtain an adequate understanding of the internal controls related to the entity’s recording of its receipts and expenses. Furthermore, Chung failed to specify the accounting framework under which the statement of account had been prepared, and the auditing and assurance standards under which the engagement had been conducted.
As a result, Chung failed to (a) design and perform audit procedures to obtain sufficient appropriate audit evidence in accordance with Hong Kong Standard on Auditing (HKSA) 500 Audit Evidence; (b) obtain an understanding of the client, its environment and internal controls in accordance with HKSA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment; and (c) prepare sufficient audit documentation to support his audit conclusion in accordance with HKSA 230 Audit Documentation.
When considering the sanctions to be imposed against Chung, the Institute took into account the circumstances of this case, including the mitigating circumstances of Chung.
Regulatory action: In lieu of further proceedings, the Council concluded the following should resolve the complaint:
- Chung acknowledges the facts of the case and areas of non-compliance with professional standards;
- Chung be reprimanded; and
- Chung pays costs of the Institute of HK$15,000.
Wong Ho Yuen, Gary CPA (practising) and Chan Lap Chi CPA (practising)
Complaint: Failure or neglect by Wong to observe, maintain or otherwise apply HKSA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Hong Kong Standards on Auditing, HKSA 230 Audit Documentation, HKSA 500 Audit Evidence, and HKSA 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures. Failure or neglect by Chan to observe, maintain or otherwise apply HKSA 220 Quality Control for an Audit of Financial Statements.
Wong was the engagement director and Chan was the engagement quality control reviewer in an audit carried out by Confucius International CPA Limited on the consolidated financial statements of a Hong Kong listed company and its subsidiaries for the year ended 31 December 2018. The audit was selected for review as part of the Institute’s practice review.
The practice reviewer identified significant deficiencies in the audit procedures carried out by the audit team on impairment assessment of the company’s intangible assets, comprising technological know-how, a distribution vending system, and deferred development costs for patents. Chan failed to perform an adequate engagement quality control review of the significant judgements made and conclusions reached by the audit team in the impairment assessment.
Decisions and reasons: The Disciplinary Committee reprimanded Wong and Chan. In addition, the committee ordered Wong and Chan to pay penalties of HK$100,000 and HK$50,000 respectively, and to pay costs of the disciplinary proceedings of HK$104,394. When making its decision, the committee took into consideration the particulars in support of the complaints, the agreed mitigating factors, and the conduct of Wong and Chan throughout the proceedings.
Details of the resolution by agreement and disciplinary finding are available on the Institute’s website.