Award ceremony for QP top students and scholarship recipients
Outstanding QP students awarded
The Institute hosted an award ceremony for Qualification Programme (QP) top students and scholarship recipients on 22 September, representing a new generation of Hong Kong CPAs.
During the event, the top three candidates in the December 2017 and June 2018 examination sessions were awarded bronze, silver and gold plaques and certificates of merit.
Joseph Chan, Under Secretary for Financial Services and the Treasury, was the guest of honour and presented the bronze awards and QP top candidates awards. The silver awards and BDO Prize of HK$5,000 were presented by Angela Wong, Director of Human Resources at BDO, while the gold awards and Li Fook Shu Memorial Prizes of HK$10,000 were presented by William C.M. Cheng, General Manager and Group Chief Financial Officer at the Bank of East Asia.
The Institute of Chartered Accountants in England and Wales Prizes, QP and university scholarships were also presented to students during the ceremony.
Read more about the QP and what top QP students think about the programme here.
National Day celebration dinner
More than 700 members and guests joined the 69th National Day celebration dinner for the accounting profession on 4 September. The guests of honour this year were Tan Tieniu, Deputy Director, the Liaison Office of the Central People’s Government in the HKSAR; Yang Yirui, Deputy Commissioner, Office of the Commissioner of the Ministry of Foreign Affairs of the People’s Republic of China in the HKSAR; and Joseph Chan, Acting Secretary for Financial Services and the Treasury.
The annual President’s dinner was held this month, with Norman Chan, Chief Executive of Hong Kong Monetary Authority, as the guest of honour. The dinner gathering, attended by past presidents, Council members, committee chairs and senior management, invites Hong Kong’s leading figures to share their views on issues affecting the profession and the city.
Delegation from Chinese People’s Political Consultative Conference
The Institute welcomed a delegation of 29 Chinese People’s Political Consultative Conference on 13 September. The delegates comprised of professionals including accountants, lawyers, architects, and planners. The Institute’s management provided them an overview of the Hong Kong profession, the Institute’s roles and operations, its relationships with Mainland organizations including regulators, its participation in international affairs, and an introduction on how the Institute serves and supports its members. The delegation also learnt about the Qualification Programme and its recognition in Mainland China and globally.
Business startup series
A series of seminars designed to provide valuable insights to members planning or considering to start their own business will run until November. Seminars cover topics such as challenges in the startup and venture capital community from the perspectives of both the entrepreneurs and early-stage investors; key elements of sustainable business for entrepreneurs; and the registration procedures, intellectual property rights and the risks of ignoring them. On 15 November, a sharing forum will be held featuring a panel of successful entrepreneurs who will share insights and their personal experiences in building a business.
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Resolution by Agreement
Kam Hau Choi, Anthony, CPA (practising) and Anthony Kam & Associates Limited
Complaint: Failure or neglect 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 for Professional Accountants (COE).
Anthony Kam & Associates Limited (the corporate practice) was appointed as the new auditor of Sino Agro Food, Inc., a United States-listed company, in June 2013. It expressed unqualified auditor’s opinions on the consolidated financial statements of the company and its subsidiaries for the years ended 31 December 2013 and 2014 and the comparative figures in each of those financial statements. Kam was the engagement director for the audits.
The U.S. Public Company Accounting Oversight Board (PCAOB) found that the respondents had violated PCAOB rules and standards as well as the Securities Exchange Act of 1934, and imposed disciplinary sanctions on them. The company’s 2012 financial statements had been audited by another auditor. The respondents expressed an unqualified auditor’s opinion on the 2012 comparative figures included in the 2013 financial statements without performing sufficient procedures to support the opinion. Instead, they relied exclusively on a management representation letter that they had obtained and the predecessor auditor’s 2012 audit documentation. In addition, the respondents did not gather sufficient evidence to support revenue, certain journal entries and other accounting adjustments included in the 2013 and 2014 financial statements.
Regulatory action: Based on the foregoing, the sanctions imposed by PCAOB and in lieu of further proceedings, the Council concluded that the following should resolve the complaint:
- The respondents acknowledge the facts of the case and their non-compliance with the relevant professional standards;
- The respondents be reprimanded;
- Each of the respondents pay an administrative penalty of HK$25,000; and
- They jointly pay costs of HK$10,000.
Kwok Chee Tack, CPA, Wong Kam Man, Kevin, CPA (practising) and Ernst & Young
Complaint: Failure or neglect to observe, maintain or otherwise apply professional standards issued by the Institute.
During the years 1997 to 2002, Ernst & Young (EY) was the reporting accountant of three companies for the listing of their shares in Hong Kong. The companies, which were under common ownership, were Gold Wo International Holdings Limited (Gold Wo), Fu Cheong International Holdings Limited (Fu Cheong) and Yue Fung International Group Holding Limited (Yue Fung).
EY was also the auditor of these companies. Wong was the engagement partner of the Gold Wo engagements and Kwok was the engagement partner of the Fu Cheong and Yue Fung engagements.
EY expressed unmodified opinions in the accountants’ reports for the three companies. It also expressed unmodified auditor’s opinions on the consolidated financial statements of Gold Wo and its subsidiaries for accounting periods ended in the years from 2000 to 2002; of Fu Cheong and its subsidiaries for accounting periods ended in the years 2000 and 2001; and of Yue Fung and its subsidiaries for accounting periods ended in the years from 1999 to 2002.
In response to the 2002 arrests of persons connected with the three companies, the Institute instigated three investigations under the Professional Accountants Ordinance (Cap. 50) (PAO) into the conduct of the relevant CPAs and CPA practices in connection with the accountants’ reports and audit engagements. The investigations were put on hold while the Independent Commission Against Corruption carried out criminal investigations into certain CPAs’ involvement in fraudulent activities with regard to the three companies.
Relevant criminal proceedings were concluded in 2010. Various individuals, including some members of the companies’ management, were found guilty of conspiring with others to defraud stakeholders by falsifying financial records and documents.
In 2010, the three Investigation Committees were reorganized into a single committee and the investigation proceeded. In November 2015, the Investigation Committee submitted its reports to the Council of the Institute, noting that the respondents would have a case to answer.
In light of the findings set out in the reports of the Investigation Committee, complaints were lodged against the respondents under section 42C(1) of the PAO.
The Disciplinary Committee found, in relation to the Gold Wo engagements, that:
(i) Wong and EY were in breach of Statement of Auditing Standards (SAS) 100 Objective and General Principles Governing an Audit of Financial Statements, SAS 200 Planning, SAS 230 Audit Documentation and SAS 400 Audit Evidence for their deficient audit work in the areas of sales and receipts for sales, purchases and related cash disbursements, and long-term investments.
(ii) Wong and EY were in breach of Statement 1.200 Professional Ethics – Explanatory Foreword and Statement 3.340 Auditing Guideline – Prospectuses and the reporting accountant for their failure to adequately review the preceding auditors’ work for 1998 and 1999, to document the work performed as part of the review and to perform relevant analytical procedures.
The committee found, in relation to the Fu Cheong engagements, that:
(i) Kwok and EY were in breach of SAS 100, SAS 200, SAS 230 and SAS 400 for their deficient audit work in the areas of sales and receipts for sales, and purchases and related cash disbursements.
(ii) Kwok and EY were in breach of Statement 1.200 Professional Ethics and Statement 3.340 Auditing Guideline for their failure to adequately review the preceding auditors’ work for 1998 and 1999, to document the work performed as part of the review and to perform relevant analytical procedures.
The committee found, in relation to the Yue Fung engagements, that Kwok and EY were in breach of SAS 230 and SAS 400 for their deficient audit work in the areas of sales and sales receipts.
Decisions and reasons: Kwok, Wong and EY were reprimanded. In addition, the Disciplinary Committee ordered Kwok, Wong and EY to pay penalties of HK$200,000, HK$100,000 and HK$400,000 respectively. Further, the three respondents were ordered to pay costs of disciplinary proceedings of the Institute in the sum of HK$1,527,416. When making its decision, the committee considered the particulars in support of the complaints, the parties’ submissions and their conduct throughout the proceedings.
Seto Man Fai, a former CPA (practising) and Lo Hung Yan, a CPA (practising)
Complaint: Failure or neglect to observe, maintain or otherwise apply professional standards issued by the Institute.
Seto and Lo were the directors of Parker Randall CF (H.K.) CPA Limited (practice), which is now deregistered. While carrying out a practice review, the reviewer found that the practice failed to establish and maintain an effective system of quality control. Additionally, the reviewer found significant deficiencies in the practice’s audit and assurance engagements, including the audit of a Hong Kong-listed company, Superb Summit International Group Limited, for the financial year ended 31 December 2013 by Seto and the compliance audit of a regulated company by Lo.
The Disciplinary Committee found that:
(i) Seto and Lo were in breach of the Corporate Practices (Registration) Rules for failing to ensure the practice had complied with Hong Kong Standard on Quality Control 1;
(ii) Seto was in breach of paragraphs 290.220 and 290.222 of the COE for failing to carry out the fee independence assessment of his audit clients;
(iii) Seto was also in breach of Hong Kong Standard on Auditing (HKSA) 500 and the fundamental principle of Professional Competence and Due Care under paragraphs 100.5(c) and 130.1 of the COE when carrying out the audit of Superb Summit;
(iv) Lo was in breach of HKSA 230, HKSA 500 and Hong Kong Standard on Assurance Engagements 3000 and the fundamental principle of Professional Competence and Due Care under paragraphs 100.5(c) and 130.1 of the COE when carrying out the audit and compliance reporting of a regulated company.
Decisions and reasons: Seto and Lo were reprimanded. The practising certificate (PC) issued to Lo is to be cancelled with effect from 21 August 2018 and no PC shall be issued to him for nine months.
The Disciplinary Committee also ordered that a PC shall not be issued to Seto for 18 months. This is the third order against Seto. He was previously removed from the register of CPAs for five years from 22 March 2018, pursuant to an order issued by another Disciplinary Committee in January 2018 (first order). Subsequent to the first order, Seto was also subject to another Disciplinary Committee order issued in June 2018 (second order) which ordered that a PC shall not be issued to him for 12 months with effect from 21 March 2023.
The committee ordered that nine months of the 18-month PC non-issuance period of his third order will run concurrently with the first order and the remaining nine months is to be consecutive to the first order. Seto is therefore not eligible for issuance of a PC until 20 March 2024.
In addition to the above, Seto and Lo were ordered to pay costs of the disciplinary proceedings of HK$91,127 and HK$54,721 respectively.
When making its decision, the Disciplinary Committee took into consideration the particulars in support of the complaint and the parties’ submissions. The committee also noted that a high degree of public interest was involved in the audit of a listed company and regulated company and the sanction should reflect this.
Ying Tze Yeuk, CPA (practising) and T.Y. Ying & Co.
Complaint: Failure or neglect 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 COE.
Ying is the sole proprietor of T.Y. Ying & Co. which expressed unmodified auditor’s opinions on the financial statements of a private company for each of the six years ended 31 December 2010 to 2015.
There was non-compliance with accounting standards in the area of property, plant and equipment included in the 2010 to 2015 financial statements, and in the area of income tax included in the 2014 and 2015 financial statements. Further, there were numerous casting errors, incorrect and missing cross-references, incomplete disclosures and inconsistencies in the financial statements, auditor’s reports and other information attached.
Decisions and reasons: The respondents were reprimanded. They were also ordered to pay a penalty of HK$70,000 and disciplinary proceedings expenses of the Institute of HK$49,746. When making its decision, the Disciplinary Committee considered the particulars in support of the complaint, the complainant’s submissions, Ying’s previous disciplinary records and the respondents’ conduct throughout the proceedings.
Details of the disciplinary findings and guidelines for the Resolutions by Agreement are available at the Institute’s website.