The mainland has a seemingly endless capacity for faked products - from luxury handbags to baby formula.
Unfortunately, Hong Kong seems to be catching up in the fake stakes with the recent appearance of bogus accounting firms that have cheated several small local companies.
The story doing the rounds in the accountancy sector is that these companies have hired accountants who claim to be CPA members. They are attractive because they offer to do tax filings at a low price. The customers naturally think a company having CPA after its name means it is run by one of the 32,000 certified public accountants operating in the city.
However, after companies have filed returns prepared by these bogus CPAs the Inland Revenue Department has discovered serious mistakes. The department, of course, has to ask these firms to re-submit and this time they have to hire real CPA firms to do the job.
The Hong Kong Institute of Certified Public Accountants said last year alone more than 20 companies used 'CPA' when in fact they were not members regulated by the HKICPA and did not hold proper qualifications.
The victims of these scammers usually are small companies attracted by cut-price accounting or are mainland firms which need advisory services. So far, no listed companies have fallen prey.
Industry insiders have told White Collar that these bogus firms have impressive offices and some even have advertised in the media to promote their services, which makes it difficult for the victims to identify who are the real accountants.
The situation has also exposed a loophole in Hong Kong's regulation of the accountancy profession.
The law bans non-CPA companies from using the term 'CPA (Practising)' as part of their company name, which is intended to block anyone pretending to be a certified public accountant.
But it does not ban companies just using 'CPA', paving the way for companies to set up the bogus accounting firms.
'This shows that clients should not hire an accounting firm just because they are cheap. They should check if they are bogus,'' Paul Chan Mo-po, the legislator representing the accountancy sector, said.
To plug the loophole, Chan has proposed a law change banning non-qualified companies from using 'CPA' in their company name. It will be submitted to the Legislative Council for debate in the fourth quarter.
The HKICPA is also acting to try to prevent bogus firms from continuing to cheat customers.
Institute president Philip Tsai said the body had reported the bogus accounting firms to the police and was also trying to set up meetings with the Companies Registry and Inland Revenue Department to allow checks to ensure firms claiming CPA affiliations were in fact members of the HKICPA.
The problem is that since these bogus CPAs are not members of the HKICPA, the association has no power to ban them from using CPA as part of their name. The loophole needs to be plugged, and urgently.