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July 15, 2019

Hong Kong accountant disciplined over audit failings

A Disciplinary Committee of the Hong Kong Institute of Certified Public Accountants (HKICPA) has reprimanded Chan Kam Fuk, a certified public accountant (practising) and Dominic K. F. Chan & Co for their failure or neglect to observe, maintain or otherwise apply professional standards issued by the Institute. The Committee further ordered the respondents to pay a penalty of HKD 80,000 and costs of the disciplinary proceedings of HKD 36,630.

Chan is the sole proprietor of Dominic K. F. Chan & Co. which issued an unmodified auditor's opinion on the consolidated financial statements of a Hong Kong listed company, Art Textile Technology International Company Limited (now known as Art Group Holdings Limited), and its subsidiaries for the year ended 30 June 2015.

The Institute received a referral from the Financial Reporting Council about irregularities in the audit of the company’s financial statements. The financial statements disclosed basic and diluted loss per share that incorrectly included profits attributable to non-controlling interests. In addition, the diluted loss per share wrongly took into account potential ordinary shares which had an anti-dilutive effect.

The Disciplinary Committee found that the respondents were in breach of the fundamental principle of Professional Competence and Due Care in sections 100.5(c) and 130.1 of the Code of Ethics for Professional Accountants. The Committee noted that amounts of loss or earnings per share reflect the performance of a company and are key indicators for steering equity investment decisions, so their accuracy is crucial. The Committee also noted that the respondents had a past record of non-compliance with professional standards in reporting on a listed company's financial information.

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