Institute news

Best Corporate Governance and ESG Awards 2022 invites entries

The Institute’s prestigious Best Corporate Governance and ESG Awards 2022 are now open for entries until 10 August. Listed companies and public sector or not-for-profit organizations that have achieved high standards in corporate governance (CG) and environmental, social and governance (ESG) are invited to submit their applications.

The awards reflect the importance of both good CG and ESG reporting and practices for organizations, and their investors and stakeholders. “We aim to identify role models in the private and public sectors that set good examples for other companies and organizations to follow. They should be taking significant steps towards integrating CG and ESG considerations into their strategy, oversight and the implementation of their policies, procedures and controls. We will also recognize those entities that continue to uplift the standard of their disclosures and practices in at least one of these areas,” said Loretta Fong CPA (practising), President of the Institute and Chairman of Judging Panel of the Best Corporate Governance and ESG Awards 2022.

The top accolades in the awards are the Most Sustainable Companies or Organizations Awards, which will be presented to companies and organizations that demonstrate the overall best practices in both CG and ESG, and are integrating these two key aspects into their business model. There will continue to be separate awards to recognize entities that have performed well in either CG or ESG, while not yet achieving an equal standard in both areas.

For financial years beginning after 1 January 2022, under the revised Corporate Governance Code, the boards of listed companies should establish the company’s purpose, values and strategy, and ensure that these and the company’s culture are aligned. Fong noted that while these provisions were not yet in effect during the reporting year covered by the awards, having the right culture and values in place is an essential part of having award-winning CG and ESG.

Last year, the awards were revamped and renamed the Best Corporate Governance and ESG Awards. More details on the awards and entry procedure are available on the Institute’s website.

New council member appointed to fill vacancy

Subsequent to Professor Nelson Lam FCPA (practising)’s tendered resignation as elected Council member in June, the arising vacancy has been filled by the Council through the appointment of Frank Lam FCPA (practising) with effect from 20 July 2022.

Inauguration ceremony of CPA talent training programme

The inauguration ceremony of the Guangdong-Hong Kong-Macau Young High-end CPA Talent Training Programme was successfully held on 21 July at the Institute. Numerous local leaders from the accounting profession attended the ceremony, which was co-organized by the Institute, Guangdong Institute of Certified Public Accountants, Hong Kong Association of Registered Public Interest Entity Auditors Limited and the Union of Associations of Professional Accountants of Macau. The newly launched programme aims to train young CPAs across Guangdong, Hong Kong and Macau into future visionary leaders with strategic thinking and creative minds, equipped with comprehensive skills needed to support the sustainable development of the Greater Bay Area.

Application for CPD exemption

With the exception of practising certificate or specialist designation holders, members who are not carrying out any accounting or accounting-related work, and do not plan to do so for a significant period of time, and are not directors of any companies, may apply to the Institute for the continuing professional development (CPD) exemption. Visit the Institute’s website for more details and other frequently asked questions on CPD requirements.

Council meetings minutes

The abridged minutes from the May and June Council meetings are now available in the “Members’ area” of the Institute’s website.

Resolutions by agreement

HLM CPA Limited, Yuen Suk Ching CPA and Ng Fai, Fiona CPA (practising)

Complaint: Failure or neglect by HLM CPA Limited and Yuen to observe, maintain or otherwise apply Hong Kong Standard on Auditing (HKSA) 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Hong Kong Standards on Auditing, HKSA 220 Quality Control for an Audit of Financial Statements, HKSA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment, and HKSA 700 Forming an Opinion and Reporting  on Financial Statements. Failure or neglect by Ng to observe, maintain or otherwise apply HKSA 220.

HLM CPA Limited audited the consolidated financial statements of China Investment Fund International Holdings Limited (currently known as China Investment Fund Company Limited), a Hong Kong listed company and its subsidiaries for the year ended 31 December 2016. It issued an unmodified opinion. Yuen was the engagement director and Ng was the engagement quality control reviewer.

The Hong Kong Institute of CPAs received a referral from the Financial Reporting Council (FRC) about deficiencies in the audit. They noted that the fair values of two available-for-sale investments included in the financial statements had declined significantly below their original costs. This was objective evidence of impairment of the investments, and would require an impairment loss to be recognized in accordance with Hong Kong Accounting Standard 39 Financial Instruments: Recognition and Measurement. The company did not do so and instead inappropriately recognized the cumulative fair value decline in equity. The auditor failed to recognize the objective evidence of impairment of the investments and the inappropriate accounting treatment of their fair value decline in the financial statements.

The Institute concluded that HLM CPA Limited and Yuen failed to properly understand the applicable accounting framework, exercise professional judgement, seek appropriate consultation, and evaluate the accounting treatment and evidence on the available-for-sale investments, which was assessed as a high risk audit area. The Institute further concluded that Ng failed to perform an adequate engagement quality control review of the audit team’s procedures and conclusion.

Regulatory action: In lieu of further proceedings, the Council concluded the following should resolve the complaint:

1. The respondents acknowledge the facts of the case and their non-compliance with professional standards;
2. The respondents be reprimanded; and
3. HLM CPA Limited, Yuen and Ng pay administrative penalties of HK$35,000 and HK$45,000 and HK$20,000 respectively to the Institute, and they jointly pay the costs of the Institute of HK$15,000 and of the FRC of HK$81,045.97.

Chan Kong Wang CPA (practising) and RSM Hong Kong​

Complaint: Failure or neglect by Chan and RSM Hong Kong to observe, maintain or otherwise apply HKSA 330 The Auditor’s Responses to Assessed Risks, HKSA 500 Audit Evidence, and HKSA 700 Forming an Opinion and Reporting on Financial Statements. Failure or neglect by Chan to observe, maintain or otherwise apply sections 100.5(c) and 130.1 of the Code of Ethics for Professional Accountants (Code of Ethics).

RSM Hong Kong audited the consolidated financial statements of Seamless Green China (Holdings) Limited, a Hong Kong listed company, and its subsidiaries for the year ended 31 December 2016. Chan was the engagement partner of the audit.

The Institute received a referral from the FRC about audit irregularities. They noted that the financial statements had been revised to correct material misstatements in the consolidated loss for the year and exchange reserve, which were caused by an accounting error in relation to a duplicated recognition of an impairment loss on a receivable which was fully impaired in 2014. The respondents failed to identify the misstatements.

FRC’s investigation revealed that the respondents failed to design and perform appropriate audit procedures to obtain sufficient appropriate audit evidence pertaining to the receivable, the impairment loss on the receivable, and the exchange reserve. The respondents also drew an inappropriate conclusion that the financial statements as a whole were free from material misstatement. In addition, Chan failed to evaluate the appropriateness and accuracy of the consolidation adjustments pertaining to the receivable.

Regulatory action: In lieu of further proceedings, the Council concluded the following should resolve the complaint:

1. The respondents acknowledge the facts of the case and their non-compliance with professional standards;
2. The respondents be reprimanded; and
3. Chan and RSM Hong Kong pay administrative penalties of HK$35,000 and HK$50,000 respectively to the Institute, and they jointly pay the costs of the Institute of HK$15,000 and of the FRC of HK$133,772.07.

Chan Shek Chi CPA (practising), Tong Yat Hung CPA (practising) and Cheng & Cheng Limited​

Complaint: Failure or neglect by Chan and Cheng & Cheng Limited 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 500 Audit Evidence, and HKSA 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures. Failure or neglect by Tong to observe, maintain or otherwise apply HKSA 220 Quality Control for an Audit of Financial Statements. Failure or neglect by Chan and Tong to observe, maintain or otherwise apply the fundamental principle of professional competence and due care in sections 100.5(c) and 130.1 of the Code of Ethics.

Cheng & Cheng Limited audited the consolidated financial statements of Asia Investment Finance Group Limited (currently known as Amber Hill Financial Holdings Limited), a Hong Kong listed company, and its subsidiaries (collectively, group) for the year ended 31 December 2018. Chan was the engagement director and Tong was the engagement quality control reviewer of the audit.

The Institute received a referral from the FRC about audit irregularities. The FRC’s investigation revealed that the respondents failed to carry out sufficient audit procedures when they evaluated management’s impairment assessment on the group’s interest in an associate, which had been identified as one of the key audit matters in the auditor’s report.

Regulatory action: In lieu of further proceedings, the Council concluded the following should resolve the complaint:

1. The respondents acknowledge the facts of the case and their non-compliance with professional standards;
2. The respondents be reprimanded; and
3. Chan, Tong, and Cheng & Cheng Limited pay administrative penalties of HK$35,000, HK$25,000, and HK$50,000 respectively to the Institute, and they jointly pay the costs of the Institute of HK$15,000 and of the FRC of HK$93,243.82.

Disciplinary findings

Wong Man Shan, Joyce CPA

Complaint: Failure or neglect to observe, maintain or otherwise apply the fundamental principle of integrity under sections 100.5(a), 110.1 and 110.2 of the Code of Ethics, and being guilty of professional misconduct.

Wong is a non-practising director of Tandem (HK) CPA Limited (practice). The practice was selected for its first practice review in 2019. The reviewer found that Wong issued an accountant’s report on a solicitor’s firm under the Accountant’s Report Rules (Cap. 159A) for the year ended 31 March 2018, although only limited compliance work had been done. Significant deficiencies were identified in 12 of the 15 required tests set out in the engagement programme. The multiple deficiencies in the test work and reckless issuance of the accountant’s report demonstrated blatant disregard of the requirements of the statutory compliance reporting engagement, and amounted to professional misconduct.

Decisions and reasons: The Disciplinary Committee reprimanded Wong and ordered that no practising certificate be issued to her for 12 months from 4 July 2022. In addition, the committee ordered Wong to pay a penalty of HK$100,000 and costs of the disciplinary proceedings of HK$56,786. When making its decision, the committee took into consideration the relevant facts of the complaint, Wong’s personal circumstances, her conduct throughout the proceedings and her admission of the complaint.

Yip Wai Wing CPA (practising)​

Complaint: Failure or neglect to observe, maintain or otherwise apply the fundamental principles of integrity in sections 100.5(a), 110.1 and 110.2 (later amended as section 110.1A1(a) and subsections R111.1-2 of Chapter A) and professional competence and due care in sections 100.5(c) and 130 (later amended as section 110.1A1(c) and subsection 113 of Chapter A) of the Code of Ethics, Hong Kong Standard on Quality Control (HKSQC) 1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements, HKSA 500 Audit Evidence and HKSA 505 External Confirmations, and being guilty of professional misconduct.

Yip was the sole proprietor of Nic Yip & Co. In 2020, the Institute’s practice review on the firm found that Yip reported false information in the self-assessment questionnaire, created working papers in reaction to the practice review, and issued audit reports in a large number of audit engagements in which he performed no or minimal audit work. In addition, the practice review found significant inadequacies in the firm’s quality controls over human resources, engagement performance and compliance with ethical requirements. Furthermore, the reviewers found significant deficiencies in two audit engagements of the firm that were selected for review.

Decisions and reasons: The Disciplinary Committee ordered the name of Yip be removed from the register of certified public accountants for 12 months and his practising certificate be cancelled with effect from 4 July 2022. In addition, the committee reprimanded Yip and ordered him to pay a penalty of HK$200,000 and costs of the disciplinary proceedings of HK$53,737. When making its decision, the committee took into consideration the particulars in support of the complaints, Yip’s admission of the complaint and his conduct throughout the proceedings.

Settlement

Cheung Wai Lun CPA (practising)

The Institute has settled regulatory proceedings concerning alleged non-compliance of its professional standard by Cheung Wai Lun CPA (practising).

Cheung’s practice was selected for practice review in August 2020. Cheung, however, was unable to provide the requested information and documentation. The practice reviewer found that Cheung failed to establish and implement proper controls and procedures to maintain the safe custody, accessibility and retrievability of engagement documentation for a stipulated period of time.

As a result of the above, Cheung failed or neglected to observe, maintain or otherwise apply HKSQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements.

Settlement agreement: The Council of the Institute has agreed with Cheung that:

1. Cheung acknowledges the facts of the case and area of non-compliance with a professional standard;
2. Cheung be reprimanded; and
3. Cheung pays a financial penalty of HK$80,000 and costs of HK$30,000.

The Institute considers a settlement on the agreed basis to be in the public interest. In the circumstances, the Institute is satisfied that there is no purpose to be served in pursuing disciplinary proceedings.​

Details of the resolutions by agreement, disciplinary findings and the settlement are available on the Institute’s website.