Your fortnightly technical updates newsletter (8 December 2021)

Members' Handbook

Update No. 266 relates to the issuance of Practice Note (PN) 850 (Revised 2021) Reporting on Flag Days, General Charitable Fund-raising Activities and Solicitation of Signed Authorisation Forms Covered by Public Subscription Permits issued by the Social Welfare Department. Starting from 1 January 2022, the Social Welfare Department (SWD) will regulate the activity of seeking charitable donations through face-to-face solicitation of signed authorization forms (SSAF) in public places for charitable purposes. PN 850 (Revised) has been revised to provide guidance for auditors when reporting on SSAF. Changes are also made to the PN as a result of the amendments by the SWD on the wordings of permit conditions for flag days and general charitable fundraising activities.

Standard setting

Invitation to comment

The Institute is seeking comments on the International Accounting Standards Board (IASB) Exposure Draft ED/2021/10 Supplier Finance Arrangements by 15 February 2022. The proposed amendments to International Accounting Standard 7 Statement of Cash Flows and International Financial Reporting Standard 7 Financial Instruments: Disclosures aim to enhance the transparency of supplier finance arrangements and their effects on a company’s liabilities and cash flows.

Institute submission

The Institute has submitted its comment letter on the IFRS Interpretations Committee tentative agenda decision Demand Deposits with Restrictions on Use.

Webinars on financial reporting

Don’t miss the following webinars in December:

14 December: Considerations in performing impairment assessments
15 December: IFRS Interpretations Committee Agenda Decisions that are relevant to Hong Kong

IFRS Interpretations Committee agenda decisions

The IFRS Interpretations Committee published two agenda decisions:

IASB November 2021 podcast & updates

The IASB November podcast, with its chair and vice-chair highlighting the projects discussed during the November meeting, and a summary of the November meeting, are now available.

Invitation to comment

Do not miss the opportunity to share your views on International Auditing and Assurance Standards Board (IAASB) Exposure Draft Proposed International Standard on Auditing for Audits of Financial Statements of Less Complex Entities by 31 December. Members may be interested in the following resources for the proposed standard:

IAASB’s designated webpage on the proposed standard
Webinar recordings on the proposed standard by the Institute of Chartered Accountants in England and Wales (ICAEW) and Accountancy Europe
An optional response template
Participate in the IAASB’s survey to provide your views

Revised standard for agreed-upon procedures engagements

An article by the International Federation of Accountants (IFAC) highlights key changes to the revised agreed-upon procedures (AUP) standard, which is effective for AUP engagements for which the terms of engagement are agreed on or after 1 January 2022.

Using automated tools and techniques on audit planning

The Technology Working Group of the IAASB released non-authoritative support material to help auditors understand how to plan an audit under International Standard on Auditing 300, Planning an Audit of Financial Statements, when using automated tools and techniques.

Opportunities for assurance on non-financial information

In the recording of a webinar by CPA Australia, experts discuss views on the areas of assurance that are growing in demand and how auditors can upskill to be able to take advantage of these opportunities.

ICAEW audit and assurance resources

The ICAEW has the following materials that may be of interest to members:

A webinar recording on practical tips to topical issues and areas for improvement in coming audits
A webinar recording focusing on risk identification and assessment and how this fits into a broader system of quality management required by International Standards of Quality Management
Audit and Beyond November 2021 for technical articles on key areas of audit focus under the COVID-19 pandemic, new quality management standards etc.

Institute members can also subscribe to ICAEW’s International Standards for free to access a wide range of resources on auditing and ethics.

Ethics case studies from the Institute

The Institute has published the second of two case studies in A Plus, developed by the Institute’s Ethics Committee, highlight the importance of scepticism for professional accountants in practice. The first case study published previously covered a situation in business.

Vision for high-quality sustainability assurance

The IFAC has published its vision for high-quality assurance of sustainability information. It addresses the importance of global standards, regulation that supports decision-useful disclosure, and the value of an interconnected approach to sustainability and financial information reporting and assurance.

HKEX publishes net-zero guide for business and announces new ESG data display

The Hong Kong Exchanges and Clearing Limited (HKEX) has recently published guidance that introduces the essential steps for businesses to develop a pathway to net zero. The HKEX has also introduced a new equities section on its online portal, Sustainable & Green Exchange, that displays environmental, social and governance (ESG) metrics of Hong Kong-listed companies.

Value Reporting Foundation publishes its Integrated Thinking Principles

The Value Reporting Foundation has published Integrated Thinking Principles to provide a structured approach for considering how to create the right environment within an organization to introduce integrated thinking, and reviewing what may go wrong.

Advocacy and practice development

Best Corporate Governance and ESG Awards

The presentation luncheon for the Institute’s revamped Best Corporate Governance and ESG Awards was held on 6 December, with Dr. Kelvin Wong, Chairman of the Financial Reporting Council, as the guest of honour and over 190 participants from some of Hong Kong leading listed companies and public sector organizations. The Institute heartily congratulates all the award winners, particularly the 10 awardees of the inaugural Most Sustainable Companies/ Organizations Awards. See the press release and judges’ report for further information and insights.

Institute conducts research into ESG assurance

To understand the current situation of ESG assurance in Hong Kong, in parallel with the Awards, the Institute conducted research on the ESG reporting of all the December 2020 year-end listed companies. The Institute found that, among the almost 1,900 companies included in the research, just under 5% of them had obtained external assurance and, in most cases, it was only a limited scope assurance. Among companies with large market capitalization, this figure increased to around 20%. For further details of the findings and other observations, read the full report.

New ORO policy on unrealized assets

The recently issued Official Receiver’s Office (ORO) letter advises that with immediate effect when trustees apply to the court for their release from their trusteeship with unrealized assets, the trustees are required to provide to the Official Receiver full information of any unrealized assets and reasons why such assets cannot be realized.

Further details are contained in the letter and any questions on it may be addressed to Mr. Michael Cheung, Chief Insolvency Officer of the ORO, at 2867 2515.

Announcements by the Inland Revenue Department

Members may wish to be aware of the following matters:

Announcements by the government

Members may wish to be aware of the following matters:

AML notices

The United Nations Sanctions (Mali) Regulation 2019 (Amendment) Regulation 2021 was gazetted on 23 November. Please also refer to United Nations Sanctions (Mali) Regulation 2019.

The list of terrorists and terrorist associates designated by the United Nations Security Council, published pursuant to the United Nations (Anti-Terrorism Measures) Ordinance (Cap.575), was gazetted on 25 November. See the relevant UNSC press release.

The list of individuals, groups, undertakings and entities published under section 25 of the United Nations Sanctions (ISIL and Al-Qaida) Regulation (Cap.537CB) was updated on 25 November. See the relevant UNSC press release.

For the current lists of terrorists, terrorist associates and relevant persons/ entities under United Nations sanctions, members should refer regularly to the Institute's AML webpage. Other useful documents and guidance can also be found on the same page.

Useful resources

Publications from other organizations:

When autonomy helps team performance – and when it doesn’t from Harvard Business Review
AI and machine learning for complex business decision-making by CPA Canada
What 4 experts say about the role of finance in a digital business model from Financial Management
Surprising tech skills in demand for accounting and finance from In the Black
6 lessons from audit experts who adopted AI early from Journal of Accountancy

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