Your fortnightly technical updates newsletter (10 August 2022)

Members' Handbook

Update No. 276 includes updates to the Code of Ethics for Professional Accountants (the Code) for the new and revised provisions relating to:

Revisions to the Code Addressing the Objectivity of an Engagement Quality Reviewer and Other Appropriate Reviewers;
Revisions to the Non-Assurance Services Provisions of the Code;
Revisions to the Fee-related Provisions of the Code; and
Quality Management-related Conforming Amendments to the Code.

The above revisions to (1) Part 4A will become effective for audits and reviews of financial statements for periods beginning on or after 15 December 2022; (2) Part 4B will become effective for assurance engagements beginning on or after 15 December 2022; and (3) Conforming and consequential amendments to other sections of the Code will become effective as of 15 December 2022.

Standard setting

Last call for Institute workshops on IFRS/HKFRS 17 Insurance Contracts

Limited seats are still available for the following face-to-face workshops on International Financial Reporting Standards (IFRS)/ Hong Kong Financial Reporting Standards (HKFRS) 17 Insurance Contracts:

26 August: Life insurance (Part 1) – Overview and deep dive application
5 September: Life insurance (Part 2) – Deep dive application
13 September: General insurance (Part 1) – Overview and deep dive application
21 September: General insurance (Part 2) – Reinsurance, interaction with other standards, and presentation and disclosures

E-learning on HKFRS 13 Fair Value Measurement

This archived webinar covers the key principles in HKFRS 13, including special considerations on non-financial assets and liabilities, measurement of fair value of unquoted equity instruments and fair value disclosure requirements. It explains how those principles and requirements apply to certain specific examples. Speakers also share the audit considerations on fair value measurement and practice review findings.

IASB July 2022 podcast

The International Accounting Standards Board (IASB) podcast, with its chair and executive technical director highlighting the projects discussed during its July meeting, and a summary of the July meeting, are now available.

IASB sets out its 2022-2026 priorities

The IASB has published its Third Agenda Consultation Feedback Statement and Snapshot outlining its priorities for the next five years. The three main strategic priorities are to:

maintain the strategic direction and balance of the IASB’s activities while slightly increasing efforts to develop digital financial reporting and improving the understandability and accessibility of IFRS Accounting Standards;
progress current projects; and
add intangibles, statement of cash flows and climate-related risk in financial statements to the work plan.

Invitation to Comment

The Institute is seeking comments on the following:

The Exposure Draft, Circular on Reporting for Certification of Funds under Schedule 16D to the Inland Revenue Ordinance (Cap. 112) by 13 August. It provides guidance to practising members when undertaking engagements to report on a fund’s compliance with the Guideline on Certification of Funds Issued by the Monetary Authority under Schedule 16D to the Inland Revenue Ordinance (Cap. 112).
The Exposure Draft, Technical Bulletin AATB 3 (Revised) Implementation Guidance on Revised Hong Kong Standard on Investment Circular Reporting Engagements (HKSIR) 400 Comfort Letters and Due Diligence Meetings by 19 August. It proposes additional guidance to reporting accountants when, if criteria to issue comfort letters under HKSIR 400 (Revised) are not met, a report based on agreed-upon procedures are provided to a requesting party.
The International Auditing and Assurance Standards Board (IAASB) Exposure Draft on proposed narrow scope amendments to International Standard on Auditing (ISA) 700 (Revised), Forming an Opinion and Reporting on Financial Statements and ISA 260 (Revised), Communication with Those Charged with Governance by 4 September. The proposed amendments will help operationalize recently approved changes to the International Ethics Standards Board for Accountants’ (IESBA) International Code of Ethics for Professional Accountants (including International Independence Standards) related to listed and public interest entities. The changes to the Code require firms to publicly disclose when the independence requirements for public interest entities have been applied in an audit of financial statements.

Reminder: Insurance (Financial and Other Requirements for Licensed Insurance Broker Companies) Rules (Cap. 41L) savings and transitional arrangements

The Insurance (Financial and Other Requirements for Licensed Insurance Broker Companies) Rules (Cap. 41L) (“Broker Rules”) came into force on 23 September 2019. The Broker Rules set out the requirements applicable to licensed insurance broker companies for minimum share capital, net assets, professional indemnity insurance, the keeping of proper books and records, and contents for audited financial statements and auditor’s report subject to specified Savings and Transitional Arrangements.

When performing audit engagements for licensed insurance broker companies, auditors should consider relevant requirements in the Broker Rules including the Savings and Transitional Arrangements as summarized in the reminder issued by the Insurance Authority.

e-International standards survey

The International Federation of Accountants (IFAC) is seeking user feedback via a brief survey by 31 August that will help shape phase two of its digital platform, e-International Standards (eIS). The eIS provides direct access to the standards developed by the IAASB, the IESBA, and the International Public Sector Accounting Standards Board (IPSASB), alongside key support, reference, and guidance materials, available to contextualize the language and provide enhanced transparency.

Implementation Guide for ISA 315 (Revised 2019), Identifying and Assessing the Risks of Material Misstatement

This first-time implementation guide published by the IAASB focuses on the more substantial changes that were made to ISA 315 (Revised 2019) and will help stakeholders understand and apply the revised standard as intended.

Reporting going concern matters in the auditor’s report

This non-authoritative publication issued by the IAASB addresses some of the common questions related to reporting going concern matters in the auditor’s report and focuses on the use of and interrelationship of the Material Uncertainty Related to Going Concern and Key Audit Matters sections, and the Emphasis of Matter paragraphs, in an auditor’s report prepared in accordance with the ISAs.

IAASB’s comment letter to the International Sustainability Standards Board (ISSB)

The IAASB has submitted a comment letter to the ISSB on its exposure drafts on sustainability- and climate-related disclosures. In its comment letter, the IAASB noted the importance of reliable, high-quality, globally consistent sustainability reporting that investors and regulators are able to trust.

More companies obtaining independent assurance on sustainability

The research study by the IFAC, American Institute of CPAs (AICPA) and Chartered Institute of Management Accountants (CIMA) shows that the number of global companies obtaining independent assurance on their environmental, social and governance (ESG) information has increased continuously. It also states that sustainability reporting and assurance will only reach its full potential when it is based on a harmonized global system led by the ISSB’s comprehensive baseline of disclosure. The research study also encourages auditors to be engaged in ESG assurance as they are professionally qualified and licensed accountants who have the requisite expertise, objectivity, integrity and commitment to professional standards that are essential for instilling trust in ESG reporting.

HKICPA resource centre

Access resources and publications at the Institute’s revamped Resource Centre to the Code which will keep you updated on the latest ethics pronouncements.

ISSB July 2022 podcast & update

The first episode of the ISSB podcast, with its chair and vice-chair discussing the highlights from the inaugural July meeting, and a summary of the July meeting, are now available.

IFRS Foundation completes consolidation with VRF

The IFRS Foundation has completed the consolidation of the Value Reporting Foundation (VRF) into the IFRS Foundation. It follows the commitment made at COP26 to consolidate staff and resources of leading global sustainability disclosure initiatives to support the IFRS Foundation’s new ISSB’s work to develop a comprehensive global baseline of sustainability disclosures for the capital markets.

Advocacy and practice development

Announcements by the Inland Revenue Department (IRD)

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 List of individuals and entities published under section 31 of the United Nations Sanctions (Democratic People's Republic of Korea) Regulation (Cap.537AE), was updated on 27 July. 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:

How to improve your risk management framework from In the Black
How will ESG impact be measured? from CFO.com
How well does your company use analytics? from Harvard Business Review
How the metaverse is so much more than a gaming world from Entrepreneur

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