Council announcements. Supporting the Community Chest. Public service appointments. Statistics update. Society News

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1 Council announcements The Council approved the Society s response to the IFAC Accountants in Business Survey. The Council approved the issue of SSAP 36 Agriculture as a definitive statement which shall become operative for financial statements covering periods beginning on or after 1 January The Council approved the following nominations/ appointments: Mr Paul Chan, a Council member, to serve on the IASB s proposed new Advisory Panel on Accounting and Financial Reporting by Small and Medium Entities and in Emerging Markets generally. Prof Judy Tsui, a Council member, to serve on the Joint Training Committee of Hong Kong Exchange and Clearing Ltd. Mr Lee Kai-fat, the Society s registrar and secretarygeneral, as the authorised representative for the LegCo Functional Constituency/Election Committee sub-sector in place of the former registrar of the Society. Mr Dennis Wong as a member of the Practice Review Consultancy Steering Group in place of Ms Elizabeth Law. Messrs Charles Booth, Stephen Briscoe and Philip Smart as course directors for the second offering of the Diploma in Insolvency Programme. The Council also approved the appointment of the following 16 members to the new HKAAT Board: 12 existing Board members being Messrs George Ho, Dennis Chung, Joseph SW Yau, William Chan, James Kong, Jack Ng, Patrick Ng, Kenneth Pang, David Tam, Wan Shiu Kee, Joseph YK Yau and Yeung Che Keung. Four HKSA Council members being Messrs Edward Chow, Wilson Fung, Doug Oxley and Dr Stella Cho. Public service appointments Mr Canning Fok ( ) has been appointed a member of the Hong Kong Logistics Development Council with immediate effect until 31 December Mr Tse Hing-wai ( ) has been appointed the liquidator of the Cheung Sha Wan Road Police Rank & File Married Quarters Consumers Co-operative Society Ltd on 27 August Messrs Dermot Agnew and Liu Kwong-sang ( ) have been appointed members of the Panel of Adjudicators under the Control of Obscene and Indecent Articles Ordinance for three years with effect from 5 September Mr Charles Yang ( ) has been appointed a member of the Chinese Medicines Board for three years with effect from 13 September Mr Anthony Wu ( ) has been re-appointed a member of the Insurance Advisory Committee for two years with effect from 15 September Mr Kenneth Lam ( ) has been re-appointed a member of the Board of Governors of the Prince Philip Dental Hospital for two years with effect from 1 October Supporting the Community Chest To show our support and care for the community, the Society participated again in this year s Community Chest Dress Casual Day which took place on 30 September. A total of 61 Society staff members took part in this event to successfully raise $7,300 to donate to the Community Chest. Together with the Society s additional contributions of one dollar for each dollar raised by staff, the total funds raised reached $14,600. The donations will be contributed to the Community Chest to benefit 143 social welfare agencies serving more than 800,000 people in need in Hong Kong. The HKSA staff who participated in this event all enjoyed being able to contribute to such a worthy cause. The idea of a dress casual day to raise funds for charity originated from the United States. The Society has actively supported this activity since the Community Chest introduced it in Hong Kong in Statistics update As of 15 October 2002, the Society s statistics were as follows: 20,063 Members 3,133 Practising Certificate Holders 1,078 Firms 117 Corporate Practices NOVEMBER 2002 THE HONG KONG ACCOUNTANT 5

2 New registrations The Council recently approved the registration of the following firms/ corporate practices effective from October 2002: Firm CNG & Co, Certified Public Accountants!"#$% JBL & Co!"# KY Chan & Co!"#$ Kensington & Co!"#$% Louis Yeung & Co!"#$%& YS Chong & Co!"#$ Corporate practice Name of sole practitioner /partners Ng Chi Kin, David Ko Tak Wing Chan Kin Yip Cheung Sai Pang Yeung Jar Wing, Louis Chong Yun Sze Name of directors Declaration of being ordinarily resident in Hong Kong It is important for all Practising Certificate (PC) holders to note that they are required to file their Declaration of Being Ordinarily Resident in Hong Kong, which was distributed to them with their annual renewal package in early November 2002, for the purpose of renewing their PCs for This is one of the statutory requirements in regard to the issue and renewal of a PC. The Council is bound by the provisions of the Professional Accountants Ordinance not to issue a practising certificate to an existing practising certificate holder who has paid the annual registration fees, but has not filed the required Declaration to satisfy the Council that he or she is ordinarily resident in Hong Kong. Under such circumstances, since the PC holder concerned does not hold a valid PC for that year, he or she is not eligible to sign statutory audit reports as of 1 January of that year. Starting from this year, members may check their renewal status, including payment and declaration filing status, by viewing the Members Only section on the Society s website at: Pentagon CPA Ltd!"#$%&'() Tony Nedderman and Company Ltd!"#$ WKL & Partners C.P.A. Ltd!"#$%&'() Chow Yin Yung, Esther Poon Wai Yip, Petrus Nedderman, Anthony Lousich, Russell Warren (Non-member director) Kwan Chi Fai Wong Kin Lun Cessation of 2003 pocket diary To commemorate the Society s 30th anniversary in 2003, we will be producing a special complimentary souvenir for all members. This souvenir will replace our 2003 pocket diary in light of the Society s possible name and logo change during th AGM Early closing The Society s 30th AGM will be held at 5:30 pm on 13 December 2002 in the Chatham Room of the Conrad Hong Kong. The Notice of Meeting, together with the nomination forms for the election of Council members, will be sent to all members. Election schedule Action Deadline Closing day for nomination of 5:30 pm, 25 November 2002 Council members Nomination of Council members posted 29 November 2002 to members Issue of ballot papers to members 3 December 2002 Last day to return ballot papers to 5:30 pm, 11 December 2002 the Society The Society s office and library will close early at 4:00 pm on Tuesdays 24 and 31 December 2002 for Christmas Eve and New Year s Eve respectively. President s engagements On behalf of the Society, President Mr Alvin Wong attended the following events during late October to early November: Hong Kong Institute of Housing s annual dinner on 24 October. Hong Kong Institute of Architects annual ball on 2 November. Hong Kong Association of Property Management Companies annual dinner on 11 November. 6

3 Updates on new practical experience requirements A new voluntary Authorised Employer (AE)/Authorised Supervisor (AS) Scheme has been introduced as part of the new practical experience requirements for membership admission on 1 September It has been well received by employers and supervisors who have prospective Society members under their employment or supervision, as evidenced by the large number of AE and AS applications received. Applications are being assessed by cohort against criteria laid down by the Society. A training course has been organised for the first cohort of successful ASs. Please refer to hk/membership/registrationmatters/registration for the list of appointed ASs. A training programme for the assigned supervisors and liaison officers nominated by successful AEs will be staged in November. The training will provide detailed guidance on the roles and responsibilities of an AS/AE. The new framework is detailed in the Prospective Members Training Guidelines (PMTG), issued after two public consultations in September 2000 and May this year. It aims to strengthen the tripartite relationships between prospective members, their employers and the Society. The new framework more clearly defines the knowledge and skills, and competency-based standards that prospective members need to possess to satisfy the Society s admission requirements for membership. An authorised training environment, namely the AE/AS Scheme, is also prescribed in the PMTG as an important element in developing professional competencies. The Society accredits AEs and ASs to establish a more structured system to train and supervise prospective members according to the prescribed competencies. Through this arrangement, prospective accountants will receive more effective guidance in their training, and be in a better position to know in which areas they need more coaching. The Society is committed to working closely with all interested parties and will adopt a staged approach in the implementation of the new arrangements to make it more user-friendly and beneficial for employers, prospective members under Reply Slip training and the Society before its mandatory adoption on 1 January Members are cordially invited to register as an AS to train prospective accountants by completing and returning the AS application form. Organisations are invited to apply as an AE. Details of the AE/AS Scheme and respective application forms can be found in the printed copies of the PMTG, which can be obtained by returning the reply slip below. The Scheme details are also available for viewing and can be downloaded from the Society s homepage at membership/registrationmatters/ registration. To : Director of Education & Training Fax no.: Hong Kong Society of Accountants Please tick the appropriate box(es): Prospective members training guidelines I am a HKSA member a registered student Others. Please specify organisation : HKSA membership/student no. (if applicable): I would like to obtain a copy of the above Guidelines. Please post it to me. My mailing label is as follows: Name: Address: CFO Forum measuring corporate governance A lively and stimulating CFO luncheon forum was held on 26 September 2002 at the Conrad Hotel with Mr Calvin Wong, managing director for Governance Services of Standard & Poor s (S&P), as the guest speaker. The subject of Mr Wong s talk was Measuring Corporate Governance. The luncheon, attended by 76 members and guests, was organised by the Society s Financial Management Committee (FMC) and chaired by Mr Edward Chow, the Society s vice-president and chairman of FMC. Mr Wong introduced a new service developed by S&P to objectively analyse, evaluate and benchmark a company s corporate governance practices against international best practice. The various related corporate governance services and products include corporate governance scores and evaluations, customised research and training, and global transparency and disclosure survey. He followed this by describing the corporate governance analytical framework. At an individual company level, this covers: ownership structure and concentration financial stakeholder rights and relations 8

4 Mr Calvin Wong talking to participants of the CFO Forum. Mr Calvin Wong (right) receiving a souvenir from Mr Edward Chow. financial transparency and information disclosure, and board/management structure and process. He explained that the framework drew on the OECD Principles on Corporate Governance. At the country level, the framework covers a country s market, legal and informational infrastructure as well as its regulatory environment. He also discussed how the corporate governance scores could help investors, companies, intermediaries, and regulators and policymakers. The latter part of his talk involved a case study on ORIX Corporation Japan. This illustrated S&P s corporate governance scoring methodology. Having pointed out the common characteristics in Japanese corporate governance systems, he went on to analyse the strengths and weaknesses of ORIX in relation to the various components of the corporate governance analytical framework. The presentation ended with an interesting Q&A session during which Calvin addressed a range of questions, including market and institutional investors recognition of corporate governance, the differences and the connections between credit rating and corporate governance scores, and whether the standing of a company s auditors would be taken into account when measuring corporate governance. With regard to this last question, he said the emphasis was more on processes, checks and balances, etc, but if necessary, consultations might be conducted locally as to the reputation of the auditors. NOVEMBER 2002 THE HONG KONG ACCOUNTANT 9

5 HKAAT president Mr George Ho (fourth from right) pictured with presidents of nine accounting professional bodies. Group photo of the honourable guests at the 53rd National Day celebration dinner. HKAAT news 53rd National Day celebration dinner The Board joined the 53 rd National Day celebration dinner hosted by the Society of Chinese Accountants and Auditors on 26 September The occasion provided an excellent opportunity for the Association to network with other accounting professional bodies. The president Mr George Ho, vice-president Mr Dennis Chung, and Board members Messrs James Kong, Jack Ng, Kenneth Pang, David Tam, Joseph Y K Yau and Yeung Che Keung, as well as Committee members Ms Maria Chan, Mr Andy Li and Ms Heidi Yeung enjoyed the entertaining activities and the dinner. Examination pass rates The Association is pleased to announce candidates performance in the most recent Accounting Technician Examinations. A total of 3,756 students sat 6,497 papers in the June 2002 diet. The pass rates are shown in the table below. PowerPoint seminar A technical seminar on using Microsoft PowerPoint was organised on Saturday, 31 August 2002, at UR4, Computer Laboratory in the SCOPE Admiralty Learning Centre and attended by 34 participants. Mr Simon Lee, Instructor at the Chinese University of Hong Kong, was the speaker and Mr Dennis Mak, member of the Student Affairs Committee, was the chairperson at the seminar. The seminar was divided into two parts. Mr Lee gave a brief introduction to Microsoft PowerPoint, then demonstrated its applications. During the seminar, each participant had access to a computer, providing them with the opportunity to practice by following Mr Lee s instructions. This enabled them to build a useful understanding and knowledge of the software. Participants showed a keen interest throughout; many questions were raised both during the question and answer session and after the seminar. The Association would like to take this opportunity to thank Mr Lee and Mr Mak for their valuable contribution in making this seminar a success. Paper No. of candidates Pass rates Financial Accounting % Business Communication % Cost Accounting % Information Technology Applications in Accounting % Hong Kong Taxation 1,102 44% Hong Kong Business Law % Advanced Accounting 1,398 43% Auditing 1,095 60% Mr Dennis Mak (left) presenting a souvenir to Mr Simon Lee on behalf of the Association. (From left to right) David Tam and Kennedy Liu during the interview. Metro Finance (FM104) interview Mr Kennedy Liu, HKSA Council member, and Mr David Tam, HKAAT Board member, were invited to talk about the new Professional Bridging Examinations (PBE) on a Metro Finance radio interview held on 31 July During the programme, Messrs Liu and Tam explained the qualification route for sub-degree holders to become professional accountants through the Accounting Technician Examinations, the PBE and the HKSA Qualification Programme. The programme, To Infinity & Beyond!" was broadcast on 18 August 2002 in the morning and repeated at night on Metro Finance (FM104). 10

6 Code of Ethics Exposure Draft released for consultation An Exposure Draft (ED) of the proposed HKSA Code of Ethics (Hong Kong Code) has been released for consultation until 15 December The ED is available at the HKSA website at:< org.hk/professionaltechnical/ethics/ exposuredraft/code_of_ethics.pdf>. The proposed Hong Kong Code is closely modelled on the Code of Ethics for Professional Accountants (International Code) issued by the International Federation of Accountants (IFAC). The adoption of the International Code is a key step by the HKSA to achieving convergence of local standards with international standards. The ED represents the result of the HKSA Ethics Committee s hard work over the past seven months under the chairmanship of Mr Mark Fong. It is also worth mentioning that the Ethics Committee has taken an active part in the review of the revised s 8 of the International Code on auditors independence throughout its consultation process which spanned over two years. The composition of the Ethics Committee was expanded during the year with the appointments of four lay members drawn from a wide section of the community. The new lay Committee members are Rita Liaw, executive director of Ethics Development Centre nominated by the ICAC; Chua Guan-Hock, a barrister nominated by Hong Kong Bar Measures to mitigate threats to auditors independence Threats to auditors independence self-interest threat self-review threat advocacy threat familiarity threat intimidation threat Safeguards to mitigate threats created by the profession, legislation or regulation within the client within the audit firm s own systems and procedures Association; Denis Brock, a solicitor nominated by the Law Society of Hong Kong; and Herbert Hui, a listed company director nominated by The Hong Kong Institute of Directors. The proposed Hong Kong Code adopts a principles-based (conceptual framework) approach to auditors independence such that auditors are required to exercise professional judgment, rather than following certain prescriptive rules, to identify threats to independence, to evaluate the significance of those threats, and, if the threats are other than clearly insignificant, to apply safeguards to eliminate or reduce the threats to an acceptable level such that independence of mind and independence in appearance are not compromised. The ED identifies five categories of threats to auditors independence and three categories of safeguards that auditors should put in place to mitigate threats in order to preserve their independence (see table). It gives many examples describing specific circumstances and relationships that may create threats to auditors independence and how they can be dealt with. One of the examples quoted is familiarity threat that may arise when the same lead engagement partner is on an audit of a listed company for a prolonged period since he may have become too familiar with the affairs of the client and, as a result, may have lessened his professional skepticism. Possible safeguards to reduce this threat to an acceptable level are for the lead engagement partner to rotate off the engagement after a pre-defined period, normally no more than seven years, and for him not to resume the lead engagement partner role until a further period of time, normally two years, has elapsed. In situations where no safeguards are available to reduce the threat to an acceptable level, such as performing valuation of matters material to the financial statements of an audit client where the valuation involves a significant degree of subjectivity (self-review threat), or promoting, dealing in, or underwriting of an audit client s shares (advocacy threat), the engagement to provide these non-audit services should be declined by auditors. The ED includes a proposed Statement of Policy of the HKSA Council which sets out the authority of the proposed Hong Kong Code and the disciplinary provisions in the Professional Accountants Ordinance for failure to comply with the ethical requirements. The Hong Kong Code will be applicable to both members and registered students of the HKSA. On finalising the proposed Hong Kong Code, most of the existing Professional Ethics Statements (PES) will be withdrawn, and the remaining PES, being additional local guidance on the application of the Hong Kong Code, will be updated to become Additional Guidance. In issuing the ED for consultation, the HKSA is aware that IFAC has a plan to restate the International Code on a principles-basis in its entirety in line with that adopted for the section on auditors independence and to expand the section on the ethical requirements for employed professional accountants. The HKSA will review and issue further consultation on any proposed changes that may be made to the International Code in due course with the aim of attaining convergence of our standards with current international standards at all times. Comments on all aspects of the ED are welcome. Specific comments are requested on the appropriateness of: a move to a conceptual framework approach to auditors independence (s 8), the inclusion of examples of specific circumstances and relationships that may create threats to auditors independence (Appendix to s 8), and further liberalisation of the existing practice promotion rules (s 14). Comments on the ED are invited to be sent by post, fax or to: Deputy Director (Assurance) Hong Kong Society of Accountants 4/F, Tower Two Lippo Centre 89 Queensway Hong Kong Fax: (+852) commentletters@hksa.org.hk STEPHEN CHAN IS DEPUTY DIRECTOR (ASSURANCE), HKSA AND IS SECRETARY TO THE HKSA ETHICS COMMITTEE 12