Auditors want law change scrapped

The accounting industry faces an uphill struggle as it battles to convince lawmakers to scrap a law change under which accountants could face criminal liability.

The Hong Kong Institute of Certified Public Accountants (HKICPA) is lobbying lawmakers to scrap the provision, but government and the pro-Democrat legislators are determined to push the reform through.

A government spokesman said the new proposal was an important step towards enhancing the reliability of financial statements and improving the regulatory regime for auditors. Auditors have been in the spotlight in recent months after the Financial Reporting Council put 13 listed companies on watch for alleged auditing problems.

Under the Companies Bill, to be put to the vote on June 27, auditors would face criminal liability if, in the event of accounting fraud, their report failed to include a declaration that the financial statements were materially not in agreement with the auditor's accounting records. They would also face criminal liability if they failed to declare they could not obtain all the information or explanations needed for the audit.

'These two statements are crucial to assisting the users of a company's financial statements to take an informed view about the financial statements,' the government spokesman said.

But HKICPA president Keith Pogson said the measure was too harsh and the institute was working with lawmakers to urge them to change the proposal to scrap the criminal liability clause, or to modify the prosecution threshold for auditors from the current suggestion of 'knowingly or recklessly' not raising the alarm, to 'dishonestly or with intent to defraud'. 'At the very least, the requirement should be that the act of omission was done knowingly and was not only an oversight,' Pogson said.