Accountants join probe of own roles
The Hong Kong Society of Accountants (HKSA) has agreed with the Stock Exchange of Hong Kong to investigate its members' role in cases of suspected accounting malpractice conducted by listed companies.
Kam Pok-man, chairman of the HKSA, said the society is set to finalise details of an arrangement with the stock exchange for referring cases of fraud and accounting malpractice.
The guidelines settle a year-long dispute between the two regulatory bodies which started when the exchange challenged auditors' professional standards, after a series of incorrect statements by troubled listed companies.
The statements of huge reported losses aroused concern about fraud and accounting malpractice.
The dispute intensified after the exchange criticised the HKSA, the regulatory body for more than 10,000 accountants, for not properly supervising its members and allowing conditions in which accounting malpractice at listed companies could flourish.
A formal communication channel between the exchange and the HKSA would now be established, Mr Kam said.
This would allow the HKSA to review suspicious cases and resolve disputes between the HKSA and the exchange much faster, he said.
Last year, the exchange referred 11 suspected cases to the HKSA for further investigation, including one involving insolvent red chip Guangnan (Holdings), whose auditor Deloitte Touche Tohmatsu also came under scrutiny over its auditing of several companies in difficulties.
But the HKSA dismissed all the exchange's complaints, claiming they were 'too simple' and 'not specific'.
Mr Kam said earlier there was not enough evidence to support a 'reasonable suspicion or belief' and a lack of information made investigation difficult.
Under the new case-referral arrangement, the exchange would have to show evidence of why it had a 'reasonable suspicion', said Mr Kam.
'There would be a set of criteria that they have to meet in order to substantiate a case with reasonable suspicion,' he said.
'We would be able to speed up our investigation process if the exchange was more precise and specific when they refer their suspected case to us.' If the system is put in place, the HKSA would have to take immediate action after cases were referred from the exchange, instead of undergoing months of fact-finding according to the procedures of Professional Standards Monitoring Committee.
Mr Kam said the HKSA had drafted the arrangement and was now awaiting the exchange for feedback.
He expects the details will be finalised by the end of this month.