HKSA under fire over 'clerical error' fine

PUBLISHED : Thursday, 14 December, 2000, 12:00am
UPDATED : Thursday, 14 December, 2000, 12:00am


Hong Kong's accountancy regulator has come under attack in the Court of Appeal after fining a member HK$250,000 for a 'mere clerical error' in a case tainted by allegations of bias.

Peter Chan Po-fun is challenging the decision by the Hong Kong Society of Accountants (HKSA) to impose the fine for such an error in a company audit.

He previously tried to block disciplinary proceedings by the society at the High Court.

Mr Chan was found by an HKSA committee in August to have used the wrong formula in relation to the audit of the financial statements of a private firm.

This was after an anonymous informer, claiming to be an assessor from the Inland Revenue Department, wrote to the HKSA last July about the audit.

Although the informant was found not to be an employee of the tax bureau, the society continued investigating the audit.

Mr Justice Michael Hartmann upheld the society's right to do so in June this year, dismissing Mr Chan's initial attempt to quash the HKSA investigation.

The society subsequently found Mr Chan professionally negligent and he received a reprimand. He was also ordered to pay the society HK$250,000 as a penalty.

The severity of the fine has come under attack, with Mr Chan stressing that it is disproportionate.

It is also in strong contrast to previous cases in Hong Kong of disciplinary proceedings against accountants.

If punishment is due, the majority do not receive a fine at all, Mr Chan contends.

The penalty also fails to take into account his unblemished record of 50 years.

Moreover, he argues there was no dishonesty or similar unprofessional behaviour involved in the case and that no one was deceived.

The court challenge also focused on a member of the disciplinary committee that found Mr Chan negligent - a senior partner at BDO Binder, one of the firms being investigated by the society for the controversial GKC (Holdings) audit.

There have been a number of investigations launched amid alleged discrepancies in high-profile audits, the GKC case - which also involves Big Five firm Deloitte Touche Tohmatsu - having been unsuccessfully challenged in court.

The HKSA probe in this case falls within the remit of the society's director of professional conduct - the same HKSA official who acted as 'prosecutor' in Mr Chan's disciplinary case.

Although it is not suggested the BDO Binder partner was personally involved in affairs relating to GKC, his partners were.

For this reason, it is argued that his position on the committee is tainted by his involvement in the accountancy firm.

This resulted in a real danger of bias, it is argued - a fair-minded member of the public would understand that the partner would not want to antagonise the HKSA 'prosecutor' for fear of affecting the firm's standing.

The Court of Appeal has reserved its decision.