Hong Kong's Political Parties Back Audit Crime Bill

by CFO Innovation Asia Staff, 05 July 2012

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Accounting and Regulations Auditing

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audit fraud Companies Amendment Bill Hong Kong Institute of Certified Public Accountants law

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A proposed law that would make Hong Kong's auditors face criminal sanctions for poor audit work, such as knowingly or recklessly omitting a required statement from an audit report, is likely to be approved by the Legislative Council after gaining support from the city's two largest political parties.

The 2,000-page Companies Bill has been facing mounting opposition from Hong Kong's accountants and auditors who have come under spotlight recently after several companies were found to have accounting problems after listing.

Under the proposed bill, accountants will face fines of up to HK$150,000 (US$19,343,219.96) for failing to declare a company's financial troubles.

The Hong Kong Institute of Certified Public Accountants (HKICPA) has stated that the bill would drive people out of the audit industry as they would run the risk of being criminalized even if there is no dishonest intent behind their actions.

"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," says Winnie C. W. Cheung, chief executive and registrar of the institute.

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 South China Morning Post reports that Paul Chan Mo-po, legislator for the accountancy sector, has proposed amending the bill to remove criminal liability. Chan proposes that the criminal liability clause only apply if an accountant did not make the declaration knowingly.

"Although many accountants worry about the liability, there is a public interest so we support the law change,'" Starry Lee Wai-king of the Democratic Alliance for the Betterment and Progress of Hong Kong (DAB) told the newspaper.

The Democratic Party's Albert Ho Chun-yan says he also supports criminal liability as an important element in safeguarding the interests of investors.

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Foes unite over audit crime bill

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Foes unite over audit crime bill

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