Transcription
HKICPA takes disciplinary action against a certified publicaccountant (practising)(HONG KONG, 29 May 2018) On 20 April 2018, a Disciplinary Committee of the HongKong Institute of Certified Public Accountants reprimanded Chan Kin Cheong(membership number A28137). In addition, Chan was ordered to pay a penalty ofHK 60,000 and costs of disciplinary proceedings of HK 34,175.Chan is the sole proprietor of Dynamic Dragons & Co., CPA and TCY CPA Limited(collectively "the Practices"). He is responsible for the Practices' quality control systemand the quality of the Practices' audit engagements. When carrying out a practice review,the reviewer found that the Practices failed to implement adequate quality controlsystems. Also, a number of significant deficiencies were found in the reviewedengagements. In addition, Chan was found to have provided false and/or misleadinganswers in the practice review and in the electronic self-assessment questionnaire.After considering the information available, the Institute lodged a complaint against Chanunder section 34(1)(a)(vi) of the Professional Accountants Ordinance.Chan admitted the complaint against him.The Disciplinary Committee found that Chan failed or neglected to observe, maintain orotherwise apply (i) the fundamental principle of integrity under paragraphs 100.5(a),110.1 and 110.2 of the Code of Ethics for Professional Accountants; (ii) Hong KongStandard on Quality Control 1 Quality Control for Firms that Perform Audits and Reviewsof Financial Statements, and Other Assurance and Related Services Engagements; and(iii) Hong Kong Standard on Auditing 500 Audit Evidence.Having taken into account the circumstances of the case, the Disciplinary Committeemade the above order against Chan under section 35(1) of the ordinance.About HKICPA Disciplinary ProcessThe Hong Kong Institute of Certified Public Accounts (HKICPA) enforces the highestprofessional and ethical standards in the accounting profession. Governed by theProfessional Accountants Ordinance (Cap. 50) and the Disciplinary CommitteeProceedings Rules, an independent Disciplinary Committee is convened to deal with acomplaint referred by Council. If the charges against a member, member practice orregistered student are proven, the Committee will make disciplinary orders setting outthe sanctions it considers appropriate. Subject to any appeal by the respondent, theorder and findings of the Disciplinary Committee will be published.1
For more information, please lations/compliance/disciplinary/- End -About HKICPAThe Hong Kong Institute of Certified Public Accountants (HKICPA) is the statutory bodyestablished by the Professional Accountants Ordinance responsible for the professionaltraining, development and regulation of certified public accountants in Hong Kong. TheInstitute has more than 42,000 members and 18,000 registered students.Our qualification programme assures the quality of entry into the profession, and wepromulgate financial reporting, auditing and ethical standards that safeguard HongKong's leadership as an international financial centre.The CPA designation is a top qualification recognised globally. The Institute is a memberof and actively contributes to the work of the Global Accounting Alliance andInternational Federation of Accountants.Hong Kong Institute of CPAs’ contact information:Gemma HoManager, Public RelationsPhone: 2287-7002Email: gemmaho@hkicpa.org.hkTerry LeeDirector, Marketing and CommunicationsPhone: 2287-7209Email: terrylee@hkicpa.org.hk2
�昌先生（會員編號： �罰款60,000 港元及紀律程序費用 34,175 港元。陳先生是展龍會計師樓及 TCY CPA Limited ��資料後，根據《專業會計師條例》第 34(1)(a)(vi) 應用 (i)Code of Ethics forProfessional Accountants 中第 100.5(a)條、110.1 條及 110.2 條有關「Integrity」的基本原則；(ii)Hong Kong Standard on Quality Control 1 "Quality Control for Firms thatPerform Audits and Reviews of Financial Statements, and Other Assurance and RelatedServices Engagements"；及(iii)Hong Kong Standard on Auditing 500 "Audit �會根據《專業會計師條例》第 ��準。公會根據香港法例第 50 會計專業。公會會員超過 42,000 名，學生人數逾 18,000。1
際金融中心的領導地位。CPA �：terrylee@hkicpa.org.hk2
Proceeding No. : D 16-1225PIN THE MATTER OFA Complaint made under section 34(I) ofthe Professional Accountants Ordinance(Cap. 50)BETWEENThe Practice Review Coriumittee of the HongKong Institute of Certified Public AccountantsCOMPLAINANTandMr. Chan Kiri Cheong (A28137)RESPONDENTBefore a Disciplinary Conitiiittee of the Hong Kong Institute of Certified PublicAccountants ("the Committee")Members:Mr. CHAT I Raymond (Chairman)Mr. HO Kam Wing, RichardMiss CHAN Chui Bit, CmdyMr. SHEN Ka Yip, TimothyMr. DoO William Junior GuilhermeORDER AND REASONS FOR DECISIONI.This is a complaint made by the Practice Review Coriumittee of the HongKong Institute of Certified Public Accountants ("the Institute") againstMr. Chan Kin Cheong, a practising certified public accountant ("theRespondent").
2.By a letter dated I June 2017 to the Council of the Institute ("theComplaint"), the Practice Review Coriumittee ("the Complainant")complained that the Respondent failed or neglected to observe, maintainor otherwise apply professional standards under section 34(I)(a)(vi) of theProfisssionalAccountants Ordii rice ("FAO").3.On 19 July 20 17, the Respondent confirmed his adjntssion of thecomplaints against him and he did not dispute the facts as set out in theComplaint. The parties jointly proposed that the steps set out inparagraphs 17 to 30 of the Disciplinary Coriumittee Proceedings Rules bedispensed with and that the adjnttted complaints could be disposed of onthe basis of the adjntssion nude.4.In view of the Respondent's admission, the Committee acceded to theparties' joint application to dispense with the steps set out in paragraphs17 to 30 of the Rules and directed the parties to make written submissionson sanctions and costs.5.On 4 January 2018 and 5 January 2018, the Complainant and theRespondent made their respective submissions on sanctions and costs. 6.The Respondent is a sole proprietor of Dynamic Dragons & Co. , CPA("Dynamic") and TCY CFA Limited ("TCY") (collectively the"Practices"). He is responsible for the quality control system of thePractices.2
7.The Practices did not employ any staff. The audit work of Dynanitc andTCY was carried out by "Service Co D" and "Service Co C" respectively.These services companies received remuneration for the services theyprovided to the Practices. The Respondent confirmed that he did not haveany interest or directorship in these companies.8The Respondent confirmed that the Practices apply the same qualitycontrol system and audit methodology. Accordingly, the practice reviewcovered both Practices9.The practice review was conducted by a reviewer from the Institute'sQuality Assurance Department ("Reviewer"). The results of the practicereview had been reported to the Complainant which is responsible forexercising the powers under Part IVA of the FAO.10.The Reviewer selected the following two completed audit engagementsfor review(a)Client Y, a private entity, for the year ended 31 March 2015. Therelevant auditor's report was issued by TCY on 9 November 2015.(b)Client O, a private entity, for the year ended 31 March 2015. Therelevant auditor's report was issued by Dynamic on 19 June 20 15 .11.The Reviewer found that a number of deficiencies in the Practices' qualitycontrol system and audit engagements. In addition, it was found that the3
Respondent had not been straightforward in his representations to theReviewer.12.A Reviewer's Report dated 12 October 2016 outlining the practice reviewfindings was produced. In the Respondent's responses to the draft reportdated 12 June 20 16, he did not dispute the facts and observations made bythe Reviewer.13.Copies of the working papers in relation to Client Y and Client O wereproduced. The Respondent confirmed that they represented the completedocumentation for the audit engagements.14.Based on the Reviewer's Report and the Respondent's responses, theComplainant considered the Respondent had breached professionalstandards and decided to raise a complaint against the Respondent. TheComplainant issued its decision letter to the Respondent on I I November2016.15.The relevant facts and observations based on which a complaint wasraised were provided to the Respondent on 26 April2017. In his responsedated 6 May 2017, the Respondent did not dispute those facts andobservations.Relevant Professional Standards16.The following relevant professional standards are relevant and applicable:(a)Code of Ethics for Professional Accountants ("COE");4
(b)Hong Kong Standard on Quality Control I "Quality ControlforFirms that Perform, 434diis ondRevie}vs of Financial 810ieme, lis,Qnd Other Assurance and Reloied Services Engagements"("HKSQC I"); and(c)Hong Kong Standard on Auditing 500 ', 43!att Evidence " ("HKSA500, ,).The Coin laintsFirst Complaini17.Section 34(I)(a)(vi) of the PAO applies to the Respondent in that he hadfailed or neglected to observe, maintain or otherwise apply a professionalstandard namely, paragraphs 100.5(a), 110.1 and 110.2 of the COE inrespect of the false and/or This leading answers he provided in the practicereview and in the 2014 practice review self-assessment questionnaire("EQS") regarding Dynamic.Second Complaini18.Section 34(I)(a)(vi) of the PAO applies to the Respondent for havingfailed or neglected to observe, maintain or otherwise apply a professionalstandard namely, HKSQC I, in that being the sole proprietor responsiblefor the Practices' quality control system, his Practices had notimplemented adequate quality control policies and procedures in respectof independence requirements and engagement perlorn rice.5
Third Complaini19.Section 34(I)(a)(vi) of the PAO applies to the Respondent in that he hadfailed or neglected to observe, maintain or otherwise apply a professionalstandard namely, paragraph 6 of HKSA 500 in that he had failed to designand/or perform audit procedures that are appropriate for the purpose ofobtaining sufficient appropriate audit evidence in relation to the audit ofthe financial statements of Client Y for the year ended 31 March 20 15 byTCY.Facts and circumstances in su20.ort of the First Coin laintAccording to the fundamental principle of integrity under paragraphs100.5(a), 110.1 and 110.2 of the COE, a professional accountant isrequired to be straightforward and not knowing Iy be associated withinformation which contains false or misleading statements; or informationfurnished recklessly.21.At the start of the practice review visit, the Respondent told the Reviewerthat the Practices used some planning and completion progratmnes andchecklists based on the Institute's Audit Practice Manual for their auditengagements.22.The Reviewer later discovered that the Respondent had completed certainprogrammes and checklists only for the engagements selected in advancefor review. During the practice review visit, the Reviewer spot checkedother audit engagement files and noted that no prograinmes and checklistswere used by the Practices.6
23.After further discussion, the Respondent adjnttted that the relevantprogrammes and checklists were prepared just before the practice reviewand that the audit engagement teams did not prepare audit planning andcompletion documents during the audits.This shows that theRespondent had knowing Iy made untrue statements to the Reviewer, inbreach of the fundamental principle of integrity.24.Certain answers provided by the Respondent in the 2014 EQS regardingDynamic were false and'or nitsleading. For example, the EQS reportedthe following:(a)Dynamic did not get business referrals of audit clients fromindependent service providers. However, it later trailspired that allDynamic's audit clients were referred by Service Co D;(b)Dynamic or other parties with close business relationships withDynamic did not provide non-assurance services to its audit clients,However, Dynamic did provide tax computation services to all itsaudit clients' Further, Service Co D (which, as a service companywhich performed audit work for and referred business to Dynamic,had a close business relationship with Dynamic) providedsecretarial and accounting services to Dynaintc's audit clients'(c)Dynamic had completed a monitoring review in March 20 14.However, this was incorrect as it was adjnttted that it only carriedout the first monitoring reviews of the quality control system and a7
completed engagement in June 2014 and December 2014,respectively.25.Such false and/or misleading answers in the EQS indicate that theRespondent had knowing Iy submitted false or nitsleading answers in theEQS and/or furnished information recklessly in the EQS, in breach of thefundamental principle of integrity under paragraphs 100.5(a), 110.1 and110.2 of the COE.Facts and circumstances in su26.ort of the Second Coin laintHKSQC I requires all firms of professional accountants to establish andmaintain an adequate system of quality control which meets therequirements under the standard. Paragraph 16 of HKSQC I requires apractice to establish and maintain a system of quality control that includespolicies and procedures that address, amongst other
Chan is the sole proprietor of Dynamic Dragons & Co., CPA and TCY CPA Limited (collectively "the Practices"). He is responsible for the Practices' quality control system and the quality of the Practices' audit engagements. When carrying out a practice review, the reviewer found that the Practices failed to implement adequate quality control systems. Also, a number of significant deficiencies .
