Accountants braced for crucial vote

Lawmakers on Wednesday will decide whether to vote for a crucial measure that would hold accountants criminally liable if they failed to declare problems with the financial statements of a client company.

Under the Companies Bill, to be put to the vote in two days, auditors would face criminal liability if their accounting report did not 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 that they could not obtain all the information needed for the audit. The criminal liability would be limited to a HK$150,000 fine and would not involve a jail term.

The proposed law change is part of a broader push to raise governance standards and increase investor protection. Separately, the Securities and Futures Commission (SFC) has proposed imposing criminal liability on sponsors of initial public offerings (IPOs) who fail in their due diligence.

While government officials have insisted on pushing ahead with the law change, Paul Chan Mo-po, legislator for the accounting constituency, told the South China Morning Post he had submitted two amendments to the bill.

'First, I want them to scrap the criminal liability provision. Second, even if lawmakers vote for the criminal liability clause, I'd like to amend the provision so that accountants would only face criminal liability if they were found to have approved the accounts despite knowing there were problems.'

Chan said he was lobbying other lawmakers about his amendments. 'The government proposes that accountants face criminal liability even if it's due to a 'reckless' omission. This is too harsh for professionals. Imposing criminal liability on accountants would discourage youngsters from joining the industry,' he said.

Hong Kong Institute of Certified Public Accountants (HKICPA) chief executive Winnie Cheung Chi-woon said the criminal liability provision was unfair. 'If the law is passed in its present form, as the government proposes, accountants may just declare problems for all financial statements to cover themselves so they are not liable. This could make all accounting reports too long and they may end up with unnecessary declarations.'