A disciplinary committee of the Hong Kong Institute of Certified Public Accountants reprimanded Lau Shiu Wai, Franklin, Au Yeung Tin Wah, and Lau & Au Yeung C.P.A. Limited on March 27, 2018 for their failure or neglect to observe, maintain or otherwise apply professional standards issued by the Institute, HKICPA said on Monday.
The committee further ordered Lau and Au Yeung, to each pay a penalty of HK$100,000 and the CPA firm to pay HK$180,000. The three were ordered to pay costs and expenses of disciplinary proceedings of the institute in the total sum of HK$154,567.90, HKICPA noted.
The CPA firm audited the financial statements of a Hong Kong listed company—China Environmental Resources Group Limited—for the years ended June 30, 2011 and 2012, said HKICPA.
Lau was the engagement director who issued the auditor's reports on behalf of the CPA firm and Au Yeung was the engagement quality control reviewer.
The Institute received a referral from the Financial Reporting Council about auditing irregularities relating to the China Environmental Resources's financial statements regarding (i) re-measurement of contingent consideration in respect of acquiring the interest of a target group; (ii) loss per share calculation; (iii) recognition of intangible assets of the acquired target group; and (iv) evaluation of impairment assessment of patents and operating rights of the company.
According to the disciplinary committee, the followings were found:
- the CPA firm was in breach of Hong Kong Standard on Auditing ("HKSA") 230 and HKSA 500;
- Lau failed to act with professional competence and/or diligently in accordance with section 100.5 (c), as elaborated in section 130.1 of the Code of Ethics forProfessional Accountants ("COE"); and
- Au Yeung failed to act with professional competence and/or diligently in accordance with section 100.5 (c), as elaborated in section 130.1 of the COE for failure to carry out an objective engagement quality control review under HKSA 220.