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IESBA exposure draft on Responding to Non-Compliance with Laws and Regulations

Background
Summary of proposals
Online survey
Submissions by professional accountancy bodies
Reference material
Enquiries

 

The HKICPA has provided its comment letter on this IESBA Exposure Draft on 12 December 2012. Please click here for the HKICPA submission.

 

Background

The International Ethics Standards Board for Accountants (IESBA) issued an Exposure Draft on Responding to a Suspected Illegal Act on 22 August 2012. The HKICPA Standard Setting Department issued, on 24 August 2012, a local Invitation to Comment with comments requested by 31 October 2012.

 

This exposure draft proposes new requirements to both professional accountants in public practice and in business, addressing their responsibilities in disclosing suspected illegal acts committed by clients or employers to an appropriate authority.

 

Please click here for the HKICPA Invitation to Comment and details of the proposed amendments.

 

Summary of proposals

The Exposure Draft (ED) proposes that:

 

For professional accountants in public practice

 

A professional accountant in public practice providing professional services to an audit client would be required to disclose, where the client has not done so, to an appropriate authority, suspected illegal acts that affect financial reporting or fall within the expertise of the professional accountant, and that are of such consequence that reporting would be in the public interest.
 

For an accountant performing a professional service for a non-audit client and an accountant in business

An accountant performing a professional service for a non-audit client, and an accountant in business, would be required to disclose suspected illegal acts to the entity’s external auditor, if any, where the accountant is unable to escalate the matter, or when the client/employing organization respectively has failed to take appropriate action, and the matter is of such consequence that the professional accountant determines that disclosure would be in the public interest.

 

If the response to the matter is not appropriate, the professional accountant would have a right to disclose certain suspected illegal acts to an appropriate authority. The accountant would be expected to exercise the right to disclose. An accountant performing a non-assurance service for a non-audit client would have a right to disclose a suspected illegal act that related to the subject matter of the professional service being provided. A professional accountant in business would have a right to disclose a suspected illegal act that affects the financial reporting of the employing organization.

 

Terminating the professional relationship or resigning from the employing organization would not be a substitute for disclosure to an appropriate authority.

 

The proposed requirements, if formalized as a final standard, are expected to have far-reaching implications on accountants' courses of action in discharging their professional responsibilities. It is also expected to change the existing interaction between professional accountants and their clients as well as between employers and employees being accountants in organizations.

 

Online survey

The Institute's Standard Setting Department has developed an online survey for completion by interested commentators on the proposals. Upon the submission of comment letter by HKICPA to the IESBA, the online survey is closed. 

 

Submissions by professional accountancy bodies

The HKICPA is a member body of Global Accounting Alliance (GAA), which is an alliance of leading professional accountancy bodies in significant capital markets to promote quality services, share information and collaborate on important international issues. Links to the submissions by GAA member bodies on the topic are as follows:

 

Reference material

 

Enquiries

Please contact Ambrose Wong, Associate Director of Standard Setting, by email at ambrose@hkicpa.org.hk for enquiries.

 

Last updated: 11 July 2014

 

 

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