The Hong Kong Institute of Certified Public Accountants has undertaken regulatory action against Tong Kwong Lit, Kenneth, a certified public accountant (practising), for his failure or neglect to observe, maintain or otherwise apply professional standards issued by the Institute.
Tong is the sole proprietor of Kenneth Tong & Co., a firm which audited the financial statements of two private companies for the years ended 31 March 2006 to 31 March 2013.
Tong inappropriately accepted a failure to make required disclosures concerning an amount due to a related party in the financial statements.
There were recurrent management-imposed limitations of audit scope on properties and inventory over the years. In the face of these limitations, Tong failed to give due consideration, or properly document his consideration, of the appropriateness of continuing to accept appointment as auditor of the companies.
Tong also inappropriately accepted the non-disclosure in the financial statements of the fact that an item stated to be a balance between the company and a shareholder was in fact a balance between the company and the wife of the deceased shareholder.
The Institute concluded that Tong was in breach of the following Hong Kong Standards of Auditing (HKSAs):
- HKSA 220 Quality control for audits of historical financial information (issued 2004) and HKSA 220 Quality control for an audit of financial statements (issued 2009),
- HKSA 550 Related Parties, and
- HKSA 700 The Independent Auditor's Report on a Complete Set of General Purpose Financial Statements
Tong has acknowledged the facts of the case and his non-compliance with the relevant professional standards. As a result, he will pay an administrative penalty of HK$20,000 and costs of HK$10,000.