Resolution By Agreement

Resolution by Agreement represents a just and proper resolution for complaints which meet the pre-determined criteria under the Guidelines.

 

This page lists details of the Resolution By Agreements entered into by the Institute.

 

Date of ResolutionRespondentNature of complaintPenalty
11 September 2017

Lee Ping Kai
(ENG)

(CHI)

Failure or neglect to observe, maintain or otherwise apply Hong Kong Standard on Auditing 500 and Hong Kong Standard on Review Engagements 2410.


Lee was a director of a corporate practice. The practice was appointed as auditor of a Hong Kong listed group and Lee was the engagement director. The practice issued an unmodified auditor's opinion on the group's financial statements for the year ended 31 December 2014 and an unqualified review opinion on the group's interim financial statements for the six months ended 30 June 2015. 


The 2014 annual financial statements and 2015 interim financial statements misstated the earnings per share of the holding company. The misstatements were caused by wrongly calculated adjustments made for the company's share consolidation and rights issue.

Reprimand
 
Penalty:
HK$30,000
 
Cost:
HK$10,000
18 August 2017Li Chun On
(ENG)
(CHI)

Failure or neglect to observe, maintain or otherwise apply fundamental principle of Professional Behavior under sections 100.5(e) and 150.1 of the Code of Ethics for Professional Accountants.


Li was formerly the company secretary and an executive director of a Hong Kong listed company. On 13 July 2016, Li was found by the Listing Committee of Stock Exchange of Hong Kong Limited to have breached Rule 3.08(f) of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited ("Listing Rules") and the Director's Undertakings. The listed company in question had failed to make an announcement, issue a circular and seek shareholders' approval when entering into a major transaction as required under the Listing Rules. 

Reprimand
 
Penalty:

HK$35,000
 
Cost:
HK$10,000

10 August 2017

1) Yip Kai Yin

2) Edmund Siu

3) Elite Partners   CPA Limited

(ENG)

(CHI)

Failure or neglect to observe, maintain or otherwise apply Hong Kong Standard on Auditing 710.


Elite Partners CPA Limited audited the consolidated financial statements of a Hong Kong listed company and its subsidiaries for each of the five years ended 30 June 2011 to 2015.  Yip was the engagement director and Siu was the engagement quality control reviewer.


Elite issued modified auditor's opinions on the financial statements for each of the two years ended 30 June 2013 and 2014 due to a limitation of audit scope resulting from the auditor's inability to attend the physical count of inventory and asset inspection at 30 June 2013 and its consequential effect. The effect of the audit scope limitation remained unresolved in the year ended 30 June 2015, but Elite issued an unmodified auditor's opinion on the financial statements for that year.

Reprimand
 
Penalty:
Each of 1st  & 3rd Respondent
HK$50,000
2nd Respondent
HK$10,000
 
Cost:
HK$10,000 (paid by three respondents jointly)
22 June 2017

Lui Chi Kit
(ENG)

(CHI)

Lui was a practising director of a corporate practice. Lui had not obtained Council's approval in writing when he allowed the practice to employ a former member of the Institute whose name had been removed from the register pursuant to an order of a Disciplinary Committee and had not been restored thereto. In light of this, the Institute concluded that Lui was guilty of professional misconduct under section 28 of the Professional Accountants By-laws.
Reprimand
 
Penalty:
-
 
Cost:
HK$10,000
19 June 2017

1) Lee Wing Yan

2) Tse Wai Ho

(ENG)

(CHI)

Failure or neglect to observe, maintain or otherwise apply sections 450.10, 450.12 and 450.22 of the Code of Ethics for Professional Accountants.


Lee was the sole shareholder and director of a Hong Kong private company and Tse was the company secretary. The company was not a corporate practice registered with the Institute and therefore it could not undertake audit engagements within the meaning of the Companies Ordinance or any other Ordinance.  However, Lee and Tse allowed the company to hold itself out as providing audit services in its promotional emails and website. Lee and Tse also permitted the company to send unsolicited promotional emails to third parties.

Reprimand
 
Penalty:
HK$20,000


 
Cost:
HK$10,000

 

(penalty and costs to be paid by respondents jointly)

8 June 2017

Wong Kwai Hung
(ENG)

(CHI)

Failure to comply with sections 100.5(c) and 130 of the Code of Ethics for Professional Accountants for failure to act diligently in accordance with the Accountant's Report Rules (Cap.159A) ("ARR").

 

Wong issued an accountant's report for a solicitor firm ("Firm") under the ARR. The ARR requires a reporting accountant to report details of a solicitor firm's non-compliance with Solicitors' Accounts Rules (Cap.159F). In the accountant's report, Wong failed to disclose the Firm's failure to record transactions with clients' money within 3 working days, prepare appropriate client account reconciliations and ensure proper withdrawals from a client account.

Reprimand
 
Penalty:
HK$25,000
 
Cost:
HK$10,000

23 May
2017

1) Tse Po Chu
2) Leung Man

    Chiu, Lawrence
3) CCIF CPA  Limited
(ENG)

(CHI)

 

 

 

Failure or neglect by Tse, Leung and CCIF to observe, maintain or otherwise apply auditing standards. Tse and Leung were also in breach of the Fundamental Principle of Professional Competence and Due Care in the Code of Ethics for Professional Accountants.

 

CCIF audited the consolidated financial statements of a Hong Kong listed company and its subsidiaries for the year ended 30 June 2011. Tse was the engagement director and Leung was the engagement quality control reviewer.

 

The relevant financial statements failed to reflect a contingent consideration receivable arising from an acquisition of a group of companies.  CCIF did not plan, perform and document sufficient appropriate audit procedures on the fair value evaluation and calculation of the contingent consideration receivable.  CCIF expressed a disclaimer of opinion on the financial statements for reasons that did not concern the contingent consideration receivable.

 

Reprimand
 
Penalty:

Each of 1st  & 2nd Respondent
HK$10,000

3rd Respondent
HK$30,000
 
Cost:
HK$86,822.5 (including FRC costs and paid by three respondents jointly)

23 May
2017

1. Kay Man Wo
2. Chan Ping Him

(ENG)

(CHI)

 

 

Failure or neglect by Kay and Leung to observe, maintain or otherwise apply the Fundamental Principle of Professional Competence and Due Care in the Code of Ethics for Professional Accountants.

 

Kay was the engagement partner and Chen was the engagement quality control reviewer of a firm which audited the consolidated financial statements of a Hong Kong listed company and its subsidiaries for the year ended 31 December 2014.  They inappropriately accepted that an impairment of the company's financial assets was not required to be recognised in profit or loss.

Reprimand
 
Penalty:
-


Cost:
HK$10,000 ( paid by two respondents jointly)

20 January

2017

Lai Man Shing, Stephen

(ENG)

(CHI)

Failure or neglect to observe, maintain or otherwise apply the sections 450.10, 450.12 and 450.22 of the Code of Ethics for Professional Accountants.

 

Lai arranged the sending of emails to promote the services of his practice when recipients of the emails had not requested for the information.  In addition, the promotional emails and certain websites advertising Lai's services contained a number of misleading descriptions.  Lai used "CPA" initials in conjunction with names of his de-registered practices, and he made a misleading claim  that his practice could" guarantee" the opening of bank accounts in Hong Kong for its clients.

Reprimand
 
Penalty:
HK$50,000
 
Cost:
HK$10,000
12 December 2016

Lai Man Shing, Stephen
(ENG)

(CHI)

Failure or neglect to observe, maintain or otherwise apply the Fundamental Principle of "Professional Competence and Due Care" in sections 100.5 and 130.1 of the Code of Ethics for Professional Accountants.

 

Lai was engaged to set up a Hong Kong company and provide other services for an overseas client.  He failed to properly carry out the client's instructions in setting up the company.  In addition, Lai did not obtain the client's authorisation before creating an e-Registry account with the Companies Registry and filing a form which bore the client's electronic signature and which indicated the client's consent to act as the company's director.

Reprimand

 

Penalty:
HK$25,000
 
Cost:
HK$10,000

28 November 2016

1) Lam Yiu Hoi,  

    Peter
2) Peter Y.H. Lam

   & Co
(ENG)

(CHI)

Failure or neglect to observe, maintain or otherwise apply Hong Kong Standard on Auditing ("HKSA") 500 Audit Evidence, HKSA 230 Audit Documentation and the Fundamental Principle of Professional Competence and Due Care in the Code of Ethics for Professional Accountants.

 

Lam is the sole-proprietor of Peter Y.H. Lam & Co.  Lam and the firm failed to perform sufficient appropriate audit procedures on prior period accounting errors and certain balances with related companies and a shareholder that were included in the financial statements of a private company.

Reprimand
 
Penalty:
HK$35,000
 
Cost:
HK$10,000

(Penalty and costs jointly paid by respondents)

25 October  2016

1) Wai Siu Hung,  

    Bennett
2)Tong Ka Yan,

    Augustine
3) Ernst & Young


(ENG)

(CHI)

Failure or neglect to observe, maintain or otherwise apply the Fundamental Principle of Professional Competence and Due Care in sections 100.5 and 130 of the Code of Ethics for Professional Accountants.

 

Ernst & Young failed to report a material misstatement in a listed group's financial statements for the year ended 31 December 2014.  A premium arising from the previous acquisition of a non-controlling interest in a subsidiary group was incorrectly transferred to profit and loss on the disposal of the subsidiary group, contrary to IFRS 10.

 

Wai was the engagement partner and Tong was the engagement quality control reviewer.

 

Reprimand
 
Penalty:

Each of 1st  & 3rd Respondent
HK$30,000

2nd Respondent
HK$15,000

 

Cost:

HK$10,000 (paid by three respondents jointly)

19 October 2016

Ng Ka Kuen of UC CPA (Practising) Limited and Ko Shun CPA & Company

(ENG)

(CHI)

Failure or neglect to observe, maintain or otherwise apply the fundamental principle of "Professional Competence and Due Care" under sections 100.5(c) and 130.1 of the Code of Ethics for Professional Accountants.

 

Ng is the sole proprietor of UC CPA (Practising) Limited and Ko Shun CPA & Company (collectively "Respondent").  In auditing the financial statements of a private company ("Company") for each of the years ended 31 December 2009 to 2014, the Respondent failed to report in the auditor's reports the Company's non-compliance with accounting standards relating to financial statement presentation and disclosure and a violation of the Companies Ordinance on payment of dividends whilst the Company had incurred accumulated losses.

Reprimand
 
Penalty:
HK$50,000
 
Cost:
HK$10,000
30 August 2016

1)Hui Kin Fai, Stephen

2)Ernst & Young

(ENG)

(CHI)

Failure or neglect to observe, maintain or otherwise apply paragraphs 6 and 19 of Hong Kong Standard on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. The Respondents failed to perform review procedures on the interim accounts of a listed company with an attitude of professional skepticism. This led to their failure to identify a material accounting error in the accounting for the disposal of a foreign hotel operation.

Reprimand
 
Penalty:
HK$30,000
 (paid by the respondents jointly)

 

Cost:
HK$10,000

26 August 2016

1) Ng Ka  
Kuen

2) UC CPA (Practising) Limited

(ENG)
(CHI)

Failure to observe, maintain or apply the Fundamental Principle of Professional Competence and Due Care prescribed in sections 100.5 and 130 of Code of the Ethics for Professional Accountants.

 

Ng issued a final accountant's report for a solicitors firm that had cease business. The Institute found that :

 

1. A number of breaches reported in the final accountant's report were not supported by tests performed and evidence obtained as documented in the working papers; and

 

2. Ng failed to include in the report certain information that was required to be reflected in the final accountant's report for a solicitors' firm. 

Reprimand

 

Penalty:
HK$20,000
(paid by respondents jointly)
 
Cost:
HK$10,000

15 August 2016

Chan Kam Fuk /
Dominic K.F. Chan & Co.

(ENG)

(CHI)

Failure or neglect to observe, maintain or otherwise apply paragraphs 21, 22 and 26 of HKSAE 3420 Assurance Engagements to Report on the Compilation of Pro Forma Financial Information included in a Prospectus.

 

The complaint concerned the Respondents' incorrect concurrence with the company's non-recognition of deferred tax liabilities arising from the acquisition, which led to a significant understatement of goodwill.  The non-recognition of deferred tax liabilities was inconsistent with the company's accounting policy and the applicable financial reporting framework.

Reprimand
 
Penalty:
HK$30,000
(paid by the respondents jointly)

 

Cost:
HK$10,000

15 August 2016

Chan Wing Keung, Simon

(ENG)

(CHI)

Failure to comply with section 100.5(c), as elaborated in section 130, of the Code of Ethics for Professional Accountants for failure to act diligently in accordance with the Accountant's Report Rules.

 

Chan issued an accountant's report for a solicitors firm ("Firm") under the Accountant's Report Rules (Cap. 159A) ("ARR").  The ARR requires the accountant's report to include the name of the Firm's proprietor registered with the Law Society of Hong Kong and details of the Firm's non-compliance with Solicitors' Accounts Rules (Cap. 159F) ("SAR"). In the accountant's report, Chan failed to state the appropriate name of the Firm's registered proprietor and to disclose the Firm's failure to keep a separate client bank account which is a contravention of the SAR.

Reprimand

 

Penalty:

HK$15,000

 

Cost:

HK$10,000

3 May 2016

 

 

Wong Wing Hong
(ENG)
(CHI)

Failure or neglect to observe, maintain or otherwise apply the Fundamental Principle of "Professional Competence and Due Care" in paragraphs 100.5 and 130.1 of the Code of Ethics for Professional Accountants.

 

Wong was previously in public practice. He was the engagement partner of his firm in the audit of the financial statements of the management fund of a Hong Kong estate for the years ended 31 March 2011 and 2012.  He failed to report in the auditor's reports a material understatement of liabilities in the financial statements.

 

Reprimand
 
Penalty:
HK$10,000
 
Cost:
HK$10,000
29 March 2016

Lam Yat Chung, Paul
(ENG)

(CHI)

Failure or neglect to observe, maintain or otherwise apply the Hong Kong Standards on Auditing (HKSA) 500 "Audit Evidence", HKSA 705 "Modifications to the Opinion in the Independent Auditor's Report" and its preceding standard HKSA 701 "Modifications to the Independent Auditor's Report".

 

Lam was the sole proprietor of a CPA firm.  In auditing the financial statements of a private company for each of the four years ended 31 March 2010 to 2013, he failed to obtain sufficient evidence of a material amount due to directors included in the financial statements.  Lam also failed to modify his audit opinion on the financial statements when he had not obtained sufficient evidence of the said amount.

Order:
Reprimand
 
Penalty:
HK$35,000
 
Cost:
HK$10,000
1 March 2016

PwC
(ENG)

(CHI)

Failure or neglect to observe, maintain or otherwise apply paragraph 13 of Hong Kong Standards on Auditing (HKSA) 250 Consideration of Laws and Regulations in an Audit of Financial Statements and paragraph 6 of HKSA 500 Audit Evidence.

 

PwC audited the consolidated financial statements of a Hong Kong listed company and its subsidiaries for the year ended 31 March 2012. The relevant financial statements contained an understatement of tax expenses arising from the gain on disposal of certain properties held by a PRC subsidiary. PwC failed to detect the error and issued an unmodified opinion in the relevant financial statements.

Reprimand

 

Penalty:
HK$35,000
 
Cost:
HK$39,655.90
(including FRC costs)

18 February 2016

Tong Kwong Lit, Kenneth
(ENG)

(CHI)

Failure or neglect to observe, maintain or otherwise Hong Kong Standards of Auditing (HKSAs), namely 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 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. The following deficiencies were found in the audits:

 

1. Tong inappropriately accepted a failure to make required disclosures concerning an amount due to a related party in the financial statements.

 

2. 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.

 

3. Tong 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. 

Reprimand

 

Penalty:
HK$20,000
 
Cost:
HK$10,000

29 January 2016So Kai Kuen
(ENG)
(CHI)

Failure or neglect to observe, maintain or otherwise apply section 420.3 of the Code of Ethics for Professional Accountants.


The Respondent is a certified public accountant who does not hold a practising certificate. As such, he is not allowed to carry on business in a name that includes the characters "CPA" or "會計師". He arranged four registrations of his business in a name that included those characters. He also placed online advertisements for promoting his services and recruiting staff under a business name that included "CPA" and "會計師".

Reprimand

 

Penalty:
HK$20,000
 
Cost:
HK$10,000

17 August 2015-Failure or neglect to observe, maintain or otherwise apply sections 100.5(a), 100.5(e), 110.2 and 150.1 of the Code of Ethics for Professional Accountants. The Respondent, as Senior Vice President of a gaming operation in Singapore, committed an offence under Singaporean law by giving a misleading statement to inspectors of the Casino Regulatory Authority of Singapore, which statement he knew to be misleading.

Reprimand


Penalty:

HK$10,000

 

Cost:

HK$10,000
17 August 2015-Failure or neglect to observe, maintain or otherwise apply sections 100.5 (c) and 130 of Code of Ethics for Professional Accountants - The Respondents did not act carefully and thoroughly in conducting the audit regarding the calculation of basic and diluted EPS of a listed company and its subsidiaries. Therefore, the basic and diluted EPS were both materially misstated in the published Financial Statements.

Reprimand


Penalty:

HK$25,000

per each

 

Cost:

HK$10,000
30 June 2015

-

Failure or neglect to observe, maintain or otherwise apply Hong Kong Standard on Investment Circular Reporting Engagements 300 – "Accountants' Reports on Pro Forma Financial Information in Investment Circulars" in expressing an unqualified opinion  on the unaudited pro forma financial information of a Hong Kong listed company which contained a material misstatement.

Reprimand


Penalty:

HK$30,000

 

Cost:

HK$10,000

18 June 2015

 -

 

Failure or neglect to observe, maintain or otherwise apply Hong Kong Standard on Auditing 550 "Related Parties"  for failure to evaluate whether "an amount due to a director" had been properly disclosed as a related party transaction in the financial statements of a private company for  three consecutive years.

Reprimand


Penalty:
HK$10,000


Costs:
HK$10,000

27 February 2015-Failure or neglect to observe, maintain or otherwise apply paragraph 450.13 of the Code of Ethics for Professional Accountants – "Practice Promotion" by paying commission to a third party in return for the introduction of audit clients.

Reprimand

 

Penalty:
HK$50,000

 

Costs:
HK$10,000

5 November 2014

-

 

 

Failure or neglect to observe, maintain or otherwise apply section 450 "Practice Promotion" of the Code of Ethics for Professional Accountants by sending out unsolicited promotional materials of a company.  The promotional materials also contained information indicating that the company offered to provide or held itself out as providing audit services.

Reprimand

 

Penalty:
HK$10,000

 

Costs:
HK$10,000

25 July 2014

-

Failure or neglect to observe, maintain or otherwise apply Hong Kong Standard on Auditing 250 "Consideration of Laws and Regulations in an Audit of Financial Statements" as supplemented by Practice Note 900 "Audit of Financial Statements Prepared in Accordance with the Small and Medium-sized Entity Financial Reporting Standard" and Hong Kong Standard on Auditing 700 "Forming an Opinion and Reporting on Financial Statements".

Reprimand

 

Penalty:
HK$10,000

 

Costs:
HK$10,000

14 July 2014

-

Failure or neglect to observe, maintain or otherwise apply Hong Kong Standard on Investment Circular Reporting Engagements 300 – "Accountants' Reports on Pro Forma Financial Information in Investment Circulars" ("HKSIR 300"), which required reporting accountants to document matters which are important in providing evidence to support their opinion and evidence that their work was carried out in accordance with HKSIR 300.

Reprimand

 

Penalty:

HK$30,000

 

Costs:

HK$10,000

10 July 2014

-

 

 

 

Failure to comply with paragraphs 100.5(c) and 130.1 "Professional Competence and Due Care" of the Code of Ethics for Professional Accountants". The complaint concerned the firm's failure to act with sufficient diligence to identify material understatement of liabilities in the audits of financial statements for two consective years.

Reprimand

 

Penalty:

HK$10,000

 

Costs:

N/A

23 April 2014

-

Failure to comply with the then applicable version of sections 100.4(e) / 100.5(e) and 150.1 "Professional Behaviour" of the Code of Ethics for Professional Accountants.  The respondent was censured by the Securities and Futures Commission for failure to comply with the Code of Conduct for Persons Licensed by or Registered with the Commission.

 

Reprimand and payment of HK$10,000.