Home' A Plus Magazine : April 2013 Contents 4 April 2013
The Hong Kong Institute of CPAs responded to a report by a British competition
watchdog last month, which claimed that the Big Four’s domination of the United
Kingdom’s audit market has hindered competition for audit work from public
companies to the detriment of their shareholders.
The Competition Commission, in its Statutory Audit Ser v ices Market Investi-
gation report, suggested that among possible remedies is mandatory rotation of
In a letter responding to the commission’s report, the Institute commented on
the solution as being inadequate. “ The Institute does not believe that there is evi-
dence to show that mandatory rotation of audit firm or mandatory tendering will
have a positive effect on audit quality or in opening the market for more partici-
pants to provide audit serv ices to large companies,” wrote Chris Joy, the Institute’s
executive director, in the letter.
The Institute also expressed its concern over the legal and practical conse-
quences of the commission’s remedy that outgoing auditors should open audit
files to incoming auditors. “ The cost effectiveness and quality implications of
increasing scope and frequency of independent inspections of auditors needs to
be fully thought through before being mandated,” the letter read.
The commission concluded in the report that Big Four firms hold most of the
big company audits and that those organizations rarely change auditors, which
hurts the competition for public company audit work and results in higher prices,
lower quality, and less innovation and differentiation than would be the case in a
more open market.
While the Institute recognizes that the commission’s investigation related only
to the audits of large listed companies in the U.K ., it pointed out that audit of such
entities is on a global scale. “ Therefore, actions taken by regulatory and other
authorities that affect audit firms and the audit market in one jurisdiction could
have significant repercussions in other jurisdictions.”
Institute comments on British
competition panel report
Mandatory audit rotation “not the answer”
Institute joins IFRS Foundation’s
Accounting Standards Advisory Forum
The IFRS Foundation, the oversight body of the International Accounting Stan-
dards Board, announced the inaugural membership of the Accounting Standards
Advisory Forum last month with the Institute being selected as one of the 12
members of the global accounting standard-setting community.
The forum aims to provide technical advice to the IASB. The Institute will serve
to represent the Asian-Oceanian Standard-Setters Group, bringing directly to the
IASB views from Hong Kong and the wider region.
The Trustees of the IFRS Foundation will review the forum and its membership
after t wo years. The first meeting of the ASAF is scheduled to take place in London
on 8 and 9 April.
Lo Wai-on, CPA (practising)
Complaint: Failure or neglect to observe, main-
tain or otherwise apply Hong Kong Standard on
Auditing 230 Audit Documentation. Lo is the sole
proprietor of a firm of certified public accoun-
tants, W.O. Lo & Co. The Institute received infor-
mation about alleged deficiencies in the firm’s
audit work on an equity interest in an overseas
listed associate included in the financial state-
ments of a private company for the year ended
31 December 2009. After considering the infor-
mation available, the Institute lodged complaints
against Lo under section 34(1A) of the Profession-
al Accountants Ordinance.
Decision and reasons: Lo was reprimanded
and ordered to pay the Institute a penalty of
HK$25,000 and HK$75,000 towards the costs
of the disciplinary proceedings. When making
its decision, the Disciplinary Committee took
into consideration the particulars in support of
the complaint, the nature of the breaches and the
conduct of Lo throughout the proceedings.
Details of the disciplinary findings are available at
the Institute’s website: www.hkicpa.org.hk .
Quality assurance annual
report 2012 available
The Institute’s quality assurance annual report
2012 is now available. The report summarizes
the work of the quality assurance department in
practice review and professional standards moni-
toring programmes in the past year. It also high-
lights educational points which members may
Ladies’ team rows to victory
at indoor championships
Institute members Emily Ng, Mandy Law, Rowena
Yue and Wincy Ho were winners of the women’s
2,000 metres team relay race in the Hong Kong
Open Indoor Rowing Championship on 17 March.
Allen Chan, Gary Lam, Ian Yip and Silvin Cheng of
the men’s team finished in second place.
The Institute notes with deep regret the passing of
Edward Lau Ho-man.
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