I write responding to a recent Monitor column in Business Post with the headline 'Clubby professions feel chill wind of change'.
The article was directed at the call by the Hong Kong Society of Accountants (HKSA) to mandate the appointment by Hong Kong listed companies of a professionally qualified accountant at senior management level to take charge of the financial reporting functions of the company.
We regret that the Post could not see the positive arguments in a well-intentioned and sensible proposal, but has instead represented the proposal in the light of a self-serving profession.
With the increasing complexity and international nature of financial transactions, financial reporting has become more and more complex and requires expert knowledge. It would seem perfectly sensible to expect that each publicly listed company should have a suitably qualified person with the necessary skills and experience in its senior management team, preferably at board level, to take charge of such an important function.
Of course, the profession has an interest in making the proposal, but it is not job-oriented.
We believe that members of the accounting profession are generally recognised as experts in accounting and financial reporting matters, and we have suggested that membership of the HKSA is a suitable qualification.
We do not rule out persons other than HKSA members. However, where the preparer of the accounts is a member of the HKSA, he/she is directly accountable to the society for his/her professional conduct.
This gives added protection to users of listed company accounts and is therefore clearly in the public interest.
From the standpoint of internal financial management, it is important to recognise that the making of sound corporate decisions requires the availability of good quality financial information.
We would suggest that having a qualified person in the job of maintaining and controlling the quality of financial information within the company, who participates in the management decision making process, is essential for effective corporate decision making.
The financial reporting function is too often left in the hands of lower management, and too much reliance is placed on external auditors to correct errors and present the information correctly. I refer to a statement in a separate report in the Post of the same date: 'From a public interest angle, it is the external audit requirement . . . which would assure the quality of financial statements prepared by the company, rather that the qualification of the persons responsible for the finance function within the company.' This type of remark illustrates a misunderstanding of the legal responsibilities of auditors.
We would point out that it is the management and directors of companies who are responsible for the preparation of the accounts and financial reports, not the external auditors.
In that respect, the qualification of the persons responsible for the financial reporting function in the company is fundamental to giving assurance of the quality of the company's financial information to shareholders and investors at large as well as to the board and the auditors.
The auditor cannot and should not be expected to assume the management's function in this respect.
LOUIS L.W. WONG Registrar Hong Kong Society of Accountants