Technical news

Members’ handbook

Due to system limitations, the offline version of the members’ handbook is updated only up to update no. 272 (March 2022) and does not reflect any subsequent updates. The offline version will be decommissioned in Q4 2022.

Please refer to the online members’ handbook for the latest version. The online version can also be downloaded for offline use.

Update no. 275 includes:

• Revisions to Hong Kong Standard on Auditing (HKSA) 600 (Revised) Special Considerations – Audits of Group Financial Statements (Including the Work of Component Auditors) and Conforming and Consequential Amendments to Other Hong Kong Standards Arising from HKSA 600 (Revised) will be effective for audits of group financial statements for periods beginning on or after 15 December 2023.
• Withdrawal of Auditing Guideline 3.283 Guidance for Internal Auditors on 30 June 2022.

Financial reporting

Andreas Barckow delivers IFRS Foundation Conference keynote speech

Andreas Barckow, Chair of the International Accounting Standards Board (IASB), delivered the keynote speech at the International Financial Reporting Standard (IFRS) Foundation Conference 2022. In his speech, he set out the IASB’s decisions on its work plan and the rationale for these decisions and shared some important recent developments of the IASB.

IFRS Foundation Conference 2022: a summary

The IFRS Foundation published a summary of the various discussions held at the conference. The event, which was held across two days, focused on sustainability and accounting matters respectively.

Post-implementation Review of IFRS 10, IFRS 11 and IFRS 12 – Conclusion

The IASB has published a Project Report and Feedback Statement concluding its Post-implementation Review (PIR) of IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities. Feedback from the PIR shows that the requirements set out in the standards are working as intended and that application of the requirements did not give rise to unexpected costs.

IASB June 2022 podcast and update

The IASB podcast, with its chair and executive technical director highlighting the projects discussed during its June meeting, and a summary of the June meeting, are now available.

IFRS Interpretations Committee June 2022 Update

The IFRS Interpretations Committee Update provides a summary of discussions at its June meeting.

Auditing and assurance

Invitations to comment

The Institute is seeking comments on the following:

• The exposure draft Circular on Reporting for Certification of Funds under Schedule 16D to the Inland Revenue Ordinance (Cap. 112) by 13 August. It provides guidance to practising members when undertaking engagements to report on a fund’s compliance with Guideline on Certification of Funds Issued by the Monetary Authority under Schedule 16D to the Inland Revenue Ordinance (Cap. 112).
• The International Auditing and Assurance Standards Board (IAASB) released an exposure draft on proposed narrow scope amendments to International Standard on Auditing (ISA) 700 (Revised) Forming an Opinion and Reporting on Financial Statements and ISA 260 (Revised) Communication with Those Charged with Governance. The proposed amendments will help operationalize recently approved changes to the International Ethics Standards Board for Accountants’ (IESBA) International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code) related to listed and public interest entities. The changes to the Code require firms to publicly disclose when the independence requirements for public interest entities have been applied in an audit of financial statements. Send your comments on on the IAASB exposure draft on the proposed narrow scope amendments to ISA 700 (Revised) and ISA 260 (Revised) to the Institute by 4 September.

Financial Reporting Council Annual Inspection Report

The Financial Reporting Council (FRC) in Hong Kong issued the 2021 Annual Inspection Report which presents the full year results of their inspections of listed entity audits completed in 2021. The inspection report contains useful insights and significant recommendations that are highly important to the sustainable development and continuous improvement of the accounting profession.

The Institute’s Auditing and Assurance Standards Committee meeting minutes

Minutes of the 400th meeting is now available.

IAASB digital technology market scan

The fourth market scan from the IAASB Disruptive Technology team explores Natural Language Processing, a technology that has applications within accessing information & data and within assessing internal controls. This technology has the potential to impact many areas of the audit, enhancing the way auditors work and providing opportunities for greater insight.

Previous digital technology market scans released by the IAASB’s Disruptive Technology team covered topics on data standardization, application programming interface access and artificial intelligence.

IAASB June board meeting

The meeting summary of the IAASB June board meeting is now available.

Assurance in the digital age

In this article, the IAASB recognizes the ever-growing availability of data combined with emerging technologies as one of its most relevant strategic drivers influencing auditing and assurance standards and future activities. In its ongoing projects relating to audit evidence, fraud, and going concern, the IAASB will account for the impact of new technologies, which will include considering whether the use of the technology will become the norm in fulfilling audit and assurance requirements and how that will impact the thinking on the scalability of the auditing and assurance standards.

IAASB eNews

The IAASB July 2022 eNews is now available. It highlights various activities going on in and around the IAASB.

IFAC panel discussion on the IAASB’s new quality management standards
The International Federation of Accountants (IFAC) in collaboration with the Forum of Firms held two video panel discussions providing an overview of International Standard on Quality Management (ISQM) 1 Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements. They discussed how firms have been planning for the implementation, shared practical examples, and tips and suggested good practices.

The fast future with IFAC

The new podcast series by the IFAC features innovative small- and medium-sized practices (SMPs) sharing how they’re adapting to the rapidly changing global economy. The first three episodes are about technology, the COVID pandemic, advisory services, and recruiting and hiring; value pricing, subscription models, client relationships, and attracting and retaining talent; and technology investments, cybersecurity, mental health, and workplace culture.

For more thought leadership, articles, case studies, and other resources – including the road map to the future for SMPs – visit the IFAC’s dedicated practice transformation page.

Professional judgement guidance for auditors

The FRC in the United Kingdom published a non-prescriptive guidance on the effective exercise of professional judgement by auditors. It comprises a framework for making professional judgements and a series of illustrative examples showing the exercise of professional judgement in practice.

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:

• ISQM 1: Use of resources obtained from service providers highlights quality management requirements and the range of information auditors may need from providers to identify quality risks that may arise from using their services.
• The podcast, What are the issues with tackling fraud? highlights the common types of fraud, the challenges of trying to combat it, the red flags that accountants might come across, and how professionals should respond.
• Resources to help audit firms prepare for the new and revised quality management standards under ISQM 1, ISQM 2 and 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.

Ethics

Institute submission

The Institute has submitted its comment letter on IESBA exposure draft Proposed Technology-related Revisions to the Code.

The Institute’s Ethics Committee meeting minutes

Minutes of the 250th meeting is now available.

Responding to NOCLAR

Professional accountants should take a proactive role in responding to non-compliance with laws and regulations (NOCLAR). The Institute has published a video highlighting the relevant NOCLAR requirements in the Code of Ethics for Professional Accountants. A technical article previously published in A Plus also discussed the NOCLAR requirements and response framework that guides professional accountants in responding to NOCLAR or suspected NOCLAR.

HKICPA resource centre

Access resources and publications at the Institute’s revamped Resource Centre to Code of Ethics for Professional Accountants which will keep you updated on the latest ethics pronouncements.

IESBA staff Q&A: Revised non-assurance services provisions of the Code

This questions and answers (Q&A) publication by the IESBA explain key revisions to the non-assurance services (NAS) provisions of the Code. It complements the basis for conclusions for the final NAS pronouncement and is intended to assist stakeholders to better understand the new requirements and guidance which are effective for audits of financial statements for periods beginning on or after 15 December 2022.

Sustainability

Erkki Liikanen delivers opening remarks at the IFRS Foundation Conference

Erkki Liikanen, Chair of the IFRS Foundation Trustees, delivered his opening remarks at the IFRS Foundation Conference 2022. He reflected on the changes that have happened since the International Sustainability Standards Board (ISSB) was created in 2021. He also explained the rationale for the formation of the ISSB.

Consolidation with VRF expected to complete 1 August

The IFRS Foundation Trustees and Value Reporting Foundation (VRF) Board have announced an updated expected target date for the consolidation of the VRF into the IFRS Foundation as 1 August, to finalize the remaining procedures necessary to complete the legal consolidation.

IFRS Foundation launches Montreal ISSB centre supported by key actions

The IFRS Foundation announced a package of key actions, including an agreement to obtain the financial support of the Government of Canada and the Government of Quebec, to help fully establish the ISSB within the Canadian sustainability ecosystem. This follows the announcement at the November 2021 COP26 climate conference that the ISSB would establish a Montreal centre as part of a multilocation approach.

Four further members appointed to the ISSB

The IFRS Foundation Trustees have appointed Jeffrey Hales and Michael Jantzi, Tae-Young Paik and Elizabeth Seeger as members of the ISSB, effective July 2022. Their appointments make the ISSB quorate.

ISSB and GRI provide an update on ongoing collaboration

Technical representatives from the ISSB and the Global Reporting Initiative (GRI) met in May to begin work on delivering the agreed memorandum of understanding (MoU).

The MoU, announced in March, commits the two organizations to seeking to coordinate work programmes and standard-setting activities. The IFRS Foundation and GRI recognize the need to further harmonize the sustainability reporting landscape at an international level. IFRS Sustainability Disclosure Standards and GRI Standards can be viewed as two interconnected reporting pillars that address distinct perspectives, which can together form a comprehensive corporate reporting regime for the disclosure of sustainability information.

Navigating the Reporting Landscape guide of the A4S

The Accounting for Sustainability (A4S) has updated its Navigating the Reporting Landscape guide, which offers a brief introduction to the changing corporate reporting landscape and summarizes the latest developments in sustainability reporting. Please refer to its website for the updated edition.

Taxation

Announcements by the Inland Revenue Department (IRD)

Members may wish to be aware of the following matters:

• Government welcomes passage of tax deduction for domestic rent.
• IRD waives surcharges for payment of tax by instalments for businesses and individuals in need.
• IRD notice – Tax obligations of property owners.
• IRD notice – Tax obligations of taxpayers and employers.
• Stock borrowing relief – Filing of return of stock borrowing transactions.
• Annual Report on Performance Pledge 2021-22.
• Fraudulent emails purportedly issued by IRD.
• Stamp Duty statistics.

Legislation and other initiatives

Announcements by the government

Members may wish to be aware of the following matters:

• Hong Kong greenhouse gas emission inventory for 2020 released.
• New-term Executive Council membership announced.
• Principal officials of sixth-term HKSAR government appointed.
• Senior appointments.
• Appointment of under secretaries and political assistants.
• President Xi meets with new Chief Executive and members of executive, legislature and judiciary.
• Chief Executive Officer to leave the Securities and Futures Commission.
• Government welcomes passage of Professional Accountants (Amendment) Bill 2022.
• Secretary for Financial Services and the Treasury’s keynote speech at “EU – Hong Kong Engagement Forum: Building a Fair Tax Environment through International Cooperation.”
• Hong Kong’s balance of payments and international investment position statistics for first quarter of 2022.
• Chain volume measures of gross domestic product by economic activity for the first quarter of 2022.
• Transport Advisory Committee briefed on proposed principles of congestion charging and takeover arrangements of Western Harbour Crossing as well as e-licensing initiatives of Transport Department.
• LCQ4: Reforming Growth Enterprise Market.
• LCQ11: Hong Kong’s financial risk management.
• Land Registry releases statistics for first half of 2022.
• Government extends existing social distancing measures.
• Government updates list of places of recognized vaccination records.
• Government reminds public of registration timing of 2022 (Phase II) Consumption Voucher Scheme.

AML notices

Gazettal of Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022

On 24 June, the Hong Kong government published in the Gazette the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022 (the Bill) for enhancing Hong Kong’s regulatory regime for combating money laundering and terrorist financing.

In brief, the Bill seeks to introduce a licensing regime for virtual asset service providers and a registration regime for dealers in precious metals and stones. Further, a number of miscellaneous and technical issues under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615), which were identified in the mutual evaluation by the Financial Action Task Force (FATF) and other contexts, are being addressed. The Bill will be introduced into the Legislative Council for first reading on 6 July.

The Institute, in January 2021, issued a submission in response to the consultation paper on these proposals. Please refer to the Institute’s submission for details.

Latest issue of Hong Kong’s Money Laundering and Terrorist Financing Risk Assessment Report published

On 8 July, the Hong Kong government published the latest issue of Hong Kong’s Money Laundering and Terrorist Financing (ML/TF) Risk Assessment Report.

The report is prepared based on the requirements of the FATF. It examines the ML/TF threats and vulnerabilities facing various sectors in Hong Kong and the city as a whole in recent years, as well as assessing the risk of proliferation financing faced by Hong Kong for the first time. FATF members’ jurisdictional risk assessment reports are important sources of information for the FATF’s mutual evaluation of the relevant jurisdictions. The Institute worked closely with Narcotics Division of the Security Bureau on updating this report for the accounting profession. Please refer to the press release for details.

FATF publication on high-risk and other monitored jurisdictions

The FATF published a statement on 17 June regarding high risk jurisdictions subject to a call for action, calling on its members and all jurisdictions to continue to apply specific measures and actions on Iran and the Democratic People’s Republic of Korea.

The FATF also issued a notice on jurisdictions under increased monitoring, referring to other jurisdictions that have been identified to have strategic anti-money laundering/counter-terrorist strategic deficiencies and that are working with the FATF to address these deficiencies. Following recent reviews, Malta is no longer subject to increased monitoring and updated statements are provided for some of the remaining 22 jurisdictions on the list. In addition, Gibraltar has been newly included on the list.

Sanctions update

The List of individuals and entities published under section 31 of the United Nations Sanctions (Democratic People’s Republic of Korea) Regulation (Cap. 537AE), was updated on 1 July.

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