Part E – Referencing to the CO in the auditor's report

Question E1 – For financial years ended before 3 March 2014 but auditor's report dated on or after that date.

How should an auditor make reference to the predecessor CO (Cap.32) in their auditor's report on financial statements for financial years ended before 3 March 2014 (e.g. a financial year ended 31 December 2013, 31 January 2014 or 28 February 2014), when the auditor's report is dated on or after 3 March 2014?

 

Question E2 (Updated 30 September 2014) – For financial years ended on or after 3 March 2014 but before 3 March 2015 ("cross over periods") (e.g. financial year ended on 31 March 2014, year ending on 30 June 2014 or 31 December 2014 or 28 February 2015)

How should an auditor make reference to the Companies Ordinance ("CO") in their auditor's report on financial statements for cross over periods ended on or after 3 March 2014 but before 3 March 2015 (e.g. year ended on 31 March 2014, year ending on 30 June 2014 or 31 December 2014 or 28 February 2015)?

 

Question E3 – For financial years ended on or after 3 March 2014 but before 3 March 2015 ("cross over periods") (e.g. financial year ended on 31 March 2014, year ending on 30 June 2014 or 31 December 2014 or 28 February 2015)

How should an auditor make reference to the CO in their auditor's report on the summary financial statements for cross over periods ended on or after 3 March 2014 but before 3 March 2015 (e.g. year ended on 31 March 2014, year ending on 30 June 2014 or 31 December 2014 or 28 February 2015)?

 


Question E1 – For financial years ended before 3 March 2014 but auditor's report dated on or after that date

 

How should an auditor make reference to the predecessor CO (Cap.32) in their auditor's report on financial statements for financial years ended before 3 March 2014 (e.g. a financial year ended 31 December 2013, 31 January 2014 or 28 February 2014), when the auditor's report is dated on or after 3 March 2014?

 

Answer 

Transitional and savings provisions set out in paragraph 80 of Schedule 11 apply to financial years which both begin before 3 March 2014 and end on or after 3 March 2014. Given this, it is acceptable for an auditor's report dated on or after 3 March 2014 on financial statements for financial years ended before 3 March 2014 (for example: the financial year ended 31 December 2013, 31 January 2014 or 28 February 2014) to make no reference to the new CO. Audit reports may continue to refer to the predecessor CO , as was in force throughout the financial year in question, as the "Hong Kong Companies Ordinance" for audit reports issued under HKSA 700 (Clarified) and refer to "section 141D of the Hong Kong Companies Ordinance" for reports issued with reference to PN900 (Clarified) "Audit of Financial Statements Prepared in Accordance with the Small and Medium-sized Entity Financial Reporting Standard".

 

Auditors may alternatively choose to refer in their reports to the "predecessor Hong Kong Companies Ordinance (Cap. 32)" for the avoidance of doubt. This alternative practice is equally acceptable provided the date of the auditor's report itself is on or after the commencement date of the new CO (i.e. 3 March 2014).

 

Consequently, the opinion paragraph in Illustration 1 of HKSA 700 (Clarified) "Forming an Opinion and Reporting on Financial Statements" can read as follows:

 

"In our opinion, the financial statements give a true and fair view of the state of the Company's affairs as at 31 December 20X1, and of its [profit][loss] and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the [Hong Kong Companies Ordinance/predecessor Hong Kong Companies Ordinance (Cap. 32)]*."
* Delete as appropriate

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Question E2 (Updated 30 September 2014) – For financial years ended on or after 3 March 2014 but before 3 March 2015 ("cross over periods") (e.g. financial year ended on 31 March 2014, year ending on 30 June 2014 or 31 December 2014 or 28 February 2015)

 

How should an auditor make reference to the Companies Ordinance ("CO") in their auditor's report on financial statements for cross over periods ended on or after 3 March 2014 but before 3 March 2015 (e.g. year ended on 31 March 2014, year ending on 30 June 2014 or 31 December 2014 or 28 February 2015)?

 

Answer

I.If the auditor's report usually only refers to "Companies Ordinance" (and not a specific section reference)

The auditors may regard this as a generic reference and leave it unchanged (i.e. not using the word "predecessor" either).

 
II.If the auditor's report referred to section 141 in previous years

As section 141 of the predecessor CO (Cap. 32) was repealed with effect from 3 March 2014, it is therefore incorrect to simply continue referring to "section 141 of the Companies Ordinance" in a report for a cross over period that ended on or after 3 March 2014 but before 3 March 2015. This means that any audit report that would have referred to section 141 explicitly needs to be reworded if covering a cross over period.

 

For example, the auditor should refer to section 80 of Schedule 11 to the new Hong Kong Companies Ordinance (Cap. 622) in their auditor's report, because section 141 of the predecessor CO only continues to have life through that section.

 

Consequently, the first paragraph of the "auditor's responsibility" section can read as follows:

 

"Our responsibility is to express an opinion on these financial statements based on our audit. This report is made solely to you, as a body, in accordance with section 141 section 80 of Schedule 11 to the Hong Kong Companies Ordinance (Cap.622), and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report."


 

III.If the auditor's report referred to section 141D in previous years

Applying the same rationale as mentioned in II. above and with reference to the specific requirements, any auditor's report that would have referred to section 141D explicitly needs to be reworded if covering a cross over period.

 

For example, the auditor should refer to section 77 of Schedule 11 to the new Hong Kong Companies Ordinance (Cap. 622) in their auditor's report, because section 141D of the predecessor CO only continues to have life through that section.

 

Consequently, the relevant paragraphs and title in the auditor's report can read as follows:

 

  • second paragraph of the "directors' responsibility for the financial statements" section

 

"In addition, section 77 of Schedule 11 to the Hong Kong Companies Ordinance (Cap.622), with reference to section 141D of the predecessor Hong Kong Companies Ordinance (Cap.32) requires that the balance sheet together with the notes thereon should be prepared in accordance with the requirements of section 77 of Schedule 11 to the Hong Kong Companies Ordinance (Cap.622), with reference to the Eleventh Schedule to that the predecessor Hong Kong Companies Ordinance (Cap.32)."

 

  • first paragraph of the "auditor's responsibility" section:

 

"Our responsibility is to express an opinion on these financial statements based on our audit. This report is made solely to you, as a body, in accordance with section 141D section 77 of Schedule 11 to the Hong Kong Companies Ordinance (Cap.622), with reference to section 141D of the predecessor Hong Kong Companies Ordinance (Cap.32) and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report."

 

  • Title for reporting on other matters under section 141D of the Hong Kong Companies Ordinance

 

"Report on other matters under section 77 of Schedule 11 to the Hong Kong Companies Ordinance (Cap. 622) with reference to section 141D of the predecessor Hong Kong Companies Ordinance (Cap. 32)"


 

IV.If the modified auditor's report refer to sections 141(4) and 141(6)

An auditor is required to report by exception on matters stated in sections 141(4) and 141(6) of the predecessor CO. As mentioned in II. above and with reference to the specific requirements, any audit report that would have referred to sections 141(4) and (6) explicitly needs to be reworded if covering a cross over period.

 

For example, the auditor should refer to section 80(1) of Schedule 11 to the new Hong Kong Companies Ordinance (Cap. 622) in their auditor's report, because sections 141(4) and (6) of the predecessor CO only continue to have life through that section.  In addition, the auditor should also refer to the specific sections of 141(4) and (6) of the predecessor CO in their auditor's report for which the auditor specifically reports on.

 

Consequently, the title for this reporting in the auditor's report can read as follows:

 

"Report on matters under section 80(1) of Schedule 11 to the Hong Kong Companies Ordinance (Cap.622), with reference to sections 141(4) and 141(6) of the  predecessor  Hong Kong Companies Ordinance (Cap.32)"

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Question E3 – For financial years ended on or after 3 March 2014 but before 3 March 2015 ("cross over periods") (e.g. financial year ended on 31 March 2014, year ending on 30 June 2014 or 31 December 2014 or 28 February 2015)

 

How should an auditor make reference to the CO in their auditor's report on the summary financial statements for cross over periods ended on or after 3 March 2014 but before 3 March 2015 (e.g. year ended on 31 March 2014, year ending on 30 June 2014 or 31 December 2014 or 28 February 2015)?

 

Answer 

Section 141CF(1) of the predecessor CO (Cap. 32) and section 5 of the predecessor Hong Kong Companies (Summary Financial Reports of Listed Companies) Regulation (Cap.32M) ("Regulation") were repealed effective from 3 March 2014.  It is therefore incorrect to simply continue referring to these two sections in a report for a cross over period that ended on or after 3 March 2014 but before 3 March 2015. This means that any audit report that would have referred to them explicitly needs to be reworded if covering a cross-over period.

 

For example, the auditor should refer to section 83 of Schedule 11 to the new Hong Kong Companies Ordinance (Cap. 622) in their auditor's report, because both section 141CF of the predecessor CO and the predecessor Regulation only continue to have life through that section.  In addition, the auditor should also refer to the specific sections of 141CF(1) of the predecessor CO and section 5 of the predecessor Regulation in their auditor's report for which the summary financial report specifically complies with.

 

Consequently, the paragraph under the "directors' responsibility" section can read as follows:

 

"Under the Hong Kong Companies Ordinance, the directors are responsible for the preparation of a summary financial report in accordance with section 83 of Schedule 11 to the Hong Kong Companies Ordinance (Cap.622), with reference to section 141CF(1) of the predecessor Hong Kong Companies Ordinance (Cap.32) (referred to as "section 141CF(1) of the Hong Kong Companies Ordinance" thereafter). In preparing the summary financial report, section 141CF(1) of the Hong Kong Companies Ordinance requires that the summary financial report be derived from the annual financial statements and the auditor’s report thereon and the directors' report for the year ended 31 December 20X1, be in such form and contain such information and particulars as specified in section 83 of Schedule 11 to the Hong Kong Companies Ordinance (Cap.622), with reference to section 5 of the Hong Kong Companies (Summary Financial Reports of Listed Companies) Regulation (Cap.32M) (referred to as "section 5 of the Hong Kong Companies (Summary Financial Reports of Listed Companies) Regulation" thereafter), and be approved by the board of directors "

 

There is no change to the wording in the "Opinion" paragraph.

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Last revision date: 30 September 2014
Please refer to our cover page for background information on the Q&As