A firm of practising certified public accountants, Leslie Cheng & Co., is facing regulatory action after a complaint was lodged against it for non-compliance with professional standards.
The complaint, lodged with the Hong Kong Institute of Certified Public Accountants, concerned the firm's failure to act with sufficient diligence to identify material understatement of liabilities in the audits of financial statements for two consecutive years.
During the course of the audits, the firm was provided with information indicating that the client entity had undertaken contract work which was completed with remaining unpaid contract amounts.
The firm admitted that it had omitted to carry out further procedures to identify the unpaid contract amounts which represented material liabilities that should have been included in the financial statements.
The Institute concluded that the firm was in breach of paragraphs 100.5(c) and 130.1 of the Code of Ethics for Professional Accountants – "Professional Competence and Due Care".
In lieu of further proceedings, the Council offered a Resolution, specifically: the firm acknowledges the facts of the case and areas of its non-compliance with reference to the professional standards; and the firm be reprimanded.
The firm has also been directed to pay an administrative penalty of HK$10,000 (US$1,290).
In accordance with Council powers outlined in the Professional Accountants Ordinance and as a part of the regulatory process to handle complaint, a Resolution may be offered to respondents in cases considered to be moderate after taking into account factors including, but not limited to, the nature and seriousness of a complaint, past disciplinary records of the respondents and any aggravating or mitigating circumstances.
A Resolution will not be offered in cases involving complaints of dishonesty.