Hong Kong CPAs Stand Against Provision That Causes Serious Damages to Auditors

by CFO Innovation Asia Staff, 14 June 2012

0 comments

Facebook

Digg

Twitter

topics:
Accounting and Regulations Auditing

tags:
auditors Companies Amendment Bill Hong Kong Institute of Certified Public Accountants

Thumbnail:

The Hong Kong Institute of CPAs put forward its third submission against clause 399 of Companies Amendment Bill, which for the first time would introduce criminal offences on auditors for an omission in its professional work without need to prove any dishonest intent.

The bill is now going through final hearings at the Legislative Council.

"The consequence and harm done for the profession and Hong Kong will be huge if the clause is passed," says Winnie C. W. Cheung, chief executive and registrar of the Institute.

Cheung explains that Clause 399 will unduly lower the barriers to prosecution and bring great risks to good people in the profession.

"Talented young members of the profession will seek other career options with fewer risks and the quality of the profession will suffer. The consequence will not be in the interests of the market or the community in Hong Kong," adds Cheung.

HKICPA's position is to remove the clause altogether. It has also proposed a way to reduce the damage and alleviate the uncertainty the clause creates. It asks, in its submission, to change the prosecution threshold from "knowingly or recklessly" omitting a required statement from the audit report to making such an omission "dishonestly or with intent to defraud."

The institute points out that the policy intention behind the provision is not clear and would result in driving business away from Hong Kong.

The institute stressed in its submission that clause 399 will not apply to non-Hong Kong companies which represent 75 percent of the market capitalisation of the Hong Kong stock exchange, and will create an unlevel playing field for auditors of Hong Kong companies with auditors of non-Hong Kong companies. Further, it will also not cover non-Hong Kong companies audited by non-Hong Kong auditors, which is becoming a trend.

"Despite the good intent for the Companies Ordinance Rewrite to bring Hong Kong company law in line with international norms, the effect of clause 399 could drive more business offshore and create unnecessary barriers for business operations and companies set up in Hong Kong," says Keith Pogson, president of the Institute.

The institute's submission says it regrets that the scope of the clause has been extended in its Committee Stage Amendment. The amended wording will make relatively junior people in the profession liable for prosecution.

"Imposing a criminal liability on the managerial positions will only aggravate the job pressures and push aspiring young professionals away from public accounting service. It will gravely impede the healthy development of the audit profession," says Cheung.

The institute urges the Bills Committee to defer enactment of the provision until a more comprehensive review of the legislation relating to criminal and civil liability of auditors has been conducted.

MORE ARTICLES ON AUDITORS

Orignal Author:

CFO Innovation Asia Staff

Quote Image:

Comment on this article

Your name: *

E-mail: *

The content of this field is kept private and will not be shown publicly.

Homepage:

Comment: *

Web page addresses and e-mail addresses turn into links automatically.
Allowed HTML tags: <a> <em> <strong> <cite> <code> <ul> <ol> <li> <dl> <dt> <dd> <a> <p> <span> <div> <h1> <h2> <h3> <h4> <h5> <h6> <img> <img /> <map> <area> <hr> <br> <br /> <ul> <ol> <li> <dl> <dt> <dd> <table> <tr> <td> <em> <b> <u> <i> <strong> <font> <del> <ins> <sub> <sup> <quote> <blockquote> <pre> <address> <code> <cite> <embed> <object> <strike> <caption>
Lines and paragraphs break automatically.
Use  to create page breaks.

More information about formatting options

Verification Code

This question is for testing whether you are a human visitor and to prevent automated spam submissions.

What is the third word in the phrase "upevop yumatis obiyago gaj oki"?: *

Accounting and Regulations

CFO innovation Asia Accounting and Regulation the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Accounting Regulation, IFRS, US GAAP, Tax, investor relations, corporate governance, Corporate Law, Financial Regulators, Internal Audit, Audit, Corporate Law.

Auditing, Investor Relations, Law and Compliance, Tax

Finance and Banking

CFO innovation Asia, Finance and Banking the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Corporate Finance, trade finance, treasury and risk management, capital expenditure, Banking, mergers and acquisitions

Cash and Liquidity Management, Corporate Finance, Insurance, Treasury Management

Management

CFO innovation Asia the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Finance Management, Corporate Governance, Human Resource Management, Compensation and Benefits, Mergers and Acquisitions, Professional Development, Corporate Real Estate, Risk Management, Budgeting and Forecasting, Business Process Management, Business Process Reengineering, Outsourcing.

Budgeting and Planning, Business Expense Management, Human Capital Management, Outsourcing and Shared Services, Risk Management

Metrics

Corporates, Financial Services

Technology

CFO innovation Asia Technology the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Finance Systems, Business Intelligence, EPR, Accounting software, CRM, Cloud Computing, Telecommunications, Business Process Outsourcing, Business Process Management Software.

Business Intelligence, Enterprise Software and Systems, Financial Systems, Security