Update no. 273 revises a number of auditing and assurance pronouncements in Volume III of the members’ handbook, among others, to:
- Withdraw Auditing Guideline 3.283 on 30 June 2022.
- Reflect conforming and consequential amendments as a result of Hong Kong Standard on Auditing (HKSA) 315 (Revised 2019) Identifying and Assessing the Risks of Material Misstatement which will be effective for audits of financial statements for periods beginning on or after 15 December 2021.
- Insert “Section 2: Effective for audits and reviews of financial statements/other assurance and related services engagements beginning on or after 15 December 2022” to contain the pronouncements and those containing conforming and consequential amendments as a result of the new and revised quality management standards (QMS amendments) which will be effective for (a) audits and reviews of financial statements for periods beginning on or after 15 December 2022; and (b) other assurance and related services engagements beginning on or after 15 December 2022. The effective date of the QMS amendments does not amend or override the effective date of Hong Kong Standard on Quality Management 1.
Update no. 274 updates the Code of Ethics for Professional Accountants (the Code) to incorporate the post-implementation review policy to identify and address issues arising from the application of the Code. These changes are effective upon issuance.
The Institute has submitted its comment letter on the International Financial Reporting Standards (IFRS) Interpretations Committee tentative agenda decision on Lessor Forgiveness of Lease Payments.
IASB Investor Update May 2022
The International Accounting Standards Board (IASB) Investor Update includes an interview with Dr Kenneth Lee, Associate Professorial Lecturer at the London School of Economics and Political Science, and member of the Capital Markets Advisory Committee. It also includes a summary of news about the International Sustainability Standards Board (ISSB) and a reminder about the current consultation on the ISSB’s exposure drafts.
IASB May 2022 podcast and update
The IASB podcast, with its chair and executive technical director highlighting the projects discussed during its May meeting, and a summary of the May meeting, are now available.
IFRS Interpretations Committee agenda decision
The IFRS Interpretations Committee has published its agenda decision on Principal versus Agent: Software Reseller – IFRS 15 Revenue from Contracts with Customers.
Audit and assurance
Getting ready for the quality management standards
The Institute has issued an alert reminding firms requiring to comply with the suite of quality management standards to have their systems of quality management (SOQM) designed and implemented by 15 December 2022 and evaluate their SOQM within one year of the effective date. Firms which have not yet started the preparation for the new suite of quality management standards should take immediate action now to meet the new requirements.
Visit the Institute’s New and Major Standards Resource Centre for available resources.
Recordings of the New Quality Management Standards Series
Register for the e-learning series which covers key requirements, applications and illustrated examples on how small and medium practitioners can meet the requirements of the new quality management standards.
IAASB audits of LCEs conference key takeaways
The International Auditing and Assurance Standards Board (IAASB) published key takeaways from its recent Paris conference on the audits of financial statements of less complex entities (LCEs). Key takeaways focus on themes around the continuing need for a timely global solution comprising a separate, standalone standard; working towards a common understanding of what an LCE is and that this should also appropriately include audits of group financial statements; ways to support adoption and implementation of the standard; and the importance of communication about how the standard helps serve the public interest.
Balancing urgency and effectiveness in international sustainability assurance standards
An article by the IAASB discusses the next steps to be taken for new standards for environmental, social and governance assurance. The article describes the growing desire globally to develop reliable, high-quality sustainability reporting as a key element of corporate reporting, which is leading to new requirements and heightened expectations, as a critical moment. In addition to the well-established principles-based and subject-specific standards and guidance that are being effectively applied, the IAASB is committed to leading this effort to create new “sustainability bespoke” assurance standards and is now in the process of identifying the specific approach to building these standards that will have the greatest impact on establishing high-quality assurance to support reliable sustainability reporting. The IAASB expects the sustainability assurance standards will need to be developed in a phased approach and will keep stakeholders updated of the progress.
ICAEW audit and assurance resources
The Institute of Chartered Accountants in England and Wales (ICAEW) has the following resources that may be of interest to members:
- International Standard on Quality Management (ISQM) 1: The role of tech and training covers experience sharing by a practitioner of a small-sized firm on how she established her firm’s SOQM by using the available training materials, webinars and guidance provided by the ICAEW, the IAASB and the International Federation of Accountants. It is also emphasized that the firm is solely responsible for designing, implementing and operating the SOQM. Each firm has its own quality risks and should tailor its SOQM accordingly.
- Quality management guide targeting resources from service providers highlights the standard requirements in relation to resources from service providers and the types of information that audit firms are needed to obtain from service providers.
- Resources to help audit firms prepare for the new and revised quality management standards under ISQM 1, ISQM 2 and International Standard on Auditing (ISA) 220 (Revised).
- Summary of links to technical help, webinars, publications and events to all stages of an audit.
- Resources and support tools on auditing accounting estimates under ISA 540 (Revised), such as webcasts and articles with practical illustrations.
Institute members can subscribe to ICAEW’s International Standards platform for free to access a wide range of resources on auditing and ethics.
The Institute has submitted its comment letter on International Ethics Standards Board for Accountants (IESBA) Exposure Draft Proposed Revisions to the Code Relating to the Definition of Engagement Team and Group Audits.
IESBA June board meeting
The audio recording of the IESBA June board meeting is now available.
IESBA commits to readying global ethics and independence standards timely in support of sustainability reporting and assurance
The IESBA announced that it commits to develop fit-for-purpose, globally applicable ethics and independence standards to support transparent, relevant and trustworthy sustainability reporting. The related work will proceed in tandem with the development of IFRS Sustainablity Disclosure Standards by the ISSB, and sustainability-related International Standards on Assurance Engagements by the IAASB. The IESBA will issue in the near term guidance to draw the attention of professional accountants and other market participants to the fundamental principles and key provisions of the International Code of Ethics for Professional Accountants (including International Independence Standards) that already apply broadly to sustainability reporting and assurance.
IESBA’s discussion on sustainability and ethics
Watch a sustainability and ethics discussion by the IESBA that examines the critical role complying with ethics standards (including on independence), plays in ensuring the reliability and trustworthiness of sustainability information. Speakers provide key insights about the applicability of the Code to the preparation and presentation of sustainability information and the provision of assurance thereon.
Four further members appointed to the ISSB
The IFRS Foundation Trustees announced the appointment of Richard Barker, Verity Chegar, Bing Leng and Ndidi Nnoli-Edozien as inaugural members of the ISSB.
ISSB outlines actions required to deliver global baseline of sustainability disclosures
The ISSB has outlined the necessary steps required to establish a comprehensive global baseline of sustainability disclosures. The ISSB’s global baseline presents a unique opportunity to reduce the existing and further fragmentation of sustainability disclosure requirements. The global baseline builds upon, incorporates and protects the heritage of the existing investor-focused sustainability disclosure standards, including those of the Task Force on Climate-related Financial Disclosures, the Climate Disclosure Standards Board, Sustainability Accounting Standards Board Standards, Integrated Reporting and the World Economic Forum’s metrics.
Integrated Reporting: articulating a future path
The IASB Chair Andreas Barckow and the ISSB Chair Emmanuel Faber have communicated plans for the future role, governance and development of the Value Reporting Foundation’s Integrated Reporting Framework and Integrated Thinking Principles.
SFC proposes amendments to the SFO to strengthen enforcement
On 10 June, Securities and Futures Commission (SFC) issued a consultation paper to seek views from the market about its proposed enforcement-related amendments to the Securities and Futures Ordinance (SFO), which may enable SFC to take more effective enforcement action. The amendments include amending section 213 of the SFO to expand the basis for applying for remedial and other orders against a regulated person by the SFC, and broadening the insider dealing provisions to address insider dealing perpetrated in Hong Kong involving overseas-listed securities and insider dealing involving Hong Kong-listed securities perpetrated elsewhere.
Please refer to the press release for details. The deadline for responding to the consultation paper is 12 August.
Proposed resolution to amend the Protection of Wages on Insolvency Ordinance
A proposed resolution to amend the Protection of Wages on Insolvency Ordinance (PWIO) was passed on 16 June in the Legislative Council (LegCo). The resolution increases the ceilings for wages in arrears, wages in lieu of notice, severance, untaken statutory holidays and untaken leave, under the PWIO.
Summary procedure order applications by provisional trustees in bankruptcy cases
The Official Receiver’s Office (ORO) has issued a letter, advising that due to a lack of consistency in applications for summary procedure orders (SPOs) by different provisional trustees in bankruptcy cases, the court has approved a template and two checklists, which the ORO considers appropriate for use in all cases, to streamline the application process. With immediate effect, provisional trustees are expected to follow the template and complete the relevant checklist in every SPO application. Please refer to the letter and the annexes for further details.
Announcements by the Inland Revenue Department (IRD)
Members may wish to be aware of the following matters:
- Inland Revenue (Amendment) (Tax Concessions for Certain Shipping-Related Activities) Bill 2022 gazetted.
- Order to reduce levy rate of business registration gazetted and the Business Registration Office’s notice.
- Frequently asked questions and illustrative examples on tax deduction for domestic rent.
- LegCo question (LCQ) 20: Facilitating family offices to come to Hong Kong for development.
- LCQ11: Establishing dedicated tax regime for maritime industry.
- LCQ12: Consolidating Hong Kong’s position as international maritime centre.
- LCQ3: Development of innovation and technology in Hong Kong.
- IRD issues over 2.4 million tax returns for individuals.
- IRD notice – file your tax return on time.
- Enhancement to online appointment booking for business registration office counter services.
- Fraudulent email purportedly issued by IRD.
- Stamp duty statistics.
Filing tax returns through eTAX
IRD encourages taxpayers to consider filing their Tax Return through the IRD’s eTAX system to enjoy personalized online tax services. To save paper, you may also choose to receive notices and documents electronically.
Legislation and other initiatives
Announcements by the government
Members may wish to be aware of the following matters:
- Government announces details of 2022 (Phase II) Consumption Voucher Scheme.
- LegCo to consider proposed resolution on reorganizing government structure.
- Free use of leisure facilities set for 1 July to celebrate HKSAR’s 25th anniversary.
- Financial Secretary’s office alerts public to deceptive advertisements purported to be interviews with the Financial Secretary.
- Chief Executive welcomes LegCo’s passage of amendment bill on abolishing “offsetting” arrangement under Mandatory Provident Fund.
- LCQ22: Enhancing the competitiveness of the securities market of Hong Kong.
- LCQ14: Promoting liquidity of stock market.
- LCQ10: Supply of talents.
- LCQ8: Land title registration system.
- LCQ5: Promoting development of digital economy.
- LCQ4: Regional comprehensive economic partnership.
- Ministry of Finance issues Renminbi Sovereign Bonds through Central Moneymarkets Unit of Hong Kong Monetary Authority.
- Hong Kong’s latest foreign currency reserve assets figures released.
- Official launch of counter-terrorism reporting hotline.
- Professional Services Advancement Support Scheme invites new round of applications.
- HKMC Annuity Plan product enhancements and promotional offer.
- Exchange fund abridged balance sheet and currency board account.
- Joint guidebook by InvestHK and PwC highlights business opportunities for foreign companies in the Greater Bay Area and winning strategies via Hong Kong.
- Consumer Price Indices for April 2022.
- Unemployment and underemployment statistics for February – April 2022.
- Government reminds members of public commencement of Vaccine Pass third stage.
- “LeaveHomeSafe” hotline to commence operation.
The updated list of terrorists and terrorist associates designated by the United Nations Security Council, published pursuant to the United Nations (Anti-Terrorism Measures) Ordinance (Cap. 575) was gazetted on 30 May.
The list of individuals, groups, undertakings and entities published under section 25 of the United Nations Sanctions (ISIL and Al-Qaida) Regulation (Cap. 537CB) was updated on 28 May. See the relevant UNSC press releases – SC/14913 and SC/14914.
The United Nations Sanctions (Yemen) Regulation 2019 (Amendment) Regulation 2022 was gazetted on 27 May.
For the current lists of terrorists, terrorist associates and relevant persons/entities under United Nations sanctions, members should refer regularly to the Institute’s AML webpage. Other useful documents and guidance can also be found on the same page.
Please refer to the full versions of Technical News on the Institute’s website: www.hkicpa.org.hk