【Accounting Regulation】The Financial Services and the Treasury Bureau fined nearly HKD 550,000 in three cases for violations of registration requirements and independence standards, urging the industry to seriously fulfill responsibilities and maintain professional integrity.

The Accounting and Financial Reporting Council (AFRC) publicly reprimanded all regulated persons involved in three cases related to violations of statutory registration requirements and breaches of the Code of Ethics for Professional Accountants concerning independence, imposing a total fine of HKD 546,000.

• In the first case, a total fine of HKD 315,000 was imposed, including HKD 210,000 against Zhongzhi Trust, HKD 70,000 against Wong Ka Bo, and HKD 35,000 against Lo Ka Kei;

• In the second case, a HKD 70,000 fine was imposed on Tang Wai Leung, along with approximately HKD 61,700 for investigation fees and expenses paid to the AFRC;

• In the third case, a HKD 161,000 fine was imposed on Yeung Chi Fai, along with about HKD 32,500 for investigation fees and expenses paid to the AFRC.

Chang Ying, a network accounting firm, Long Qing, and its two related practitioners, Wong Ka Bo and Lo Ka Kei, were involved in the first two cases. During the 2020 audit of China San San Media Group (08087), Chang Ying authorized practitioner Tang Wai Leung to act as a project quality monitoring reviewer. However, Tang was neither a project nor a quality monitoring reviewer registered with Chang Ying, nor had he ever registered as such with any firm, violating statutory registration requirements and auditor independence rules.

The AFRC found that Chang Ying had a network relationship with another accounting firm, Chang Qing, confirmed by internal documents signed by employees of that firm, which regarded Chang Qing as part of its network. The two firms also shared significant professional resources, including using the same company email domain and regularly exchanging staff for audit and assurance projects. Additionally, Chang Qing director Yang Wan Sheng served as the company secretary of China San San Media Group, creating an independence threat when Chang Ying was subsequently engaged for related audits.

The AFRC also discovered that Wong Ka Bo, as Managing Director of Chang Ying, failed to take appropriate action after identifying threats to independence. Meanwhile, Chang Ying director and Chang Qing Managing Director Lo Ka Kei did not assess the threats to independence posed by the project team. Both violations of statutory registration requirements and auditor independence rules.

During his tenure as a company secretary without a valid practicing certificate, Yeung Chi Fai signed audit reports for 15 private companies. He also served as secretary for six private companies while conducting their financial statement audits, breaching independence requirements.

The fundamental ethical principle of independence requires strict adherence by professional accountants. Chief Investigator Cheng Ming Ku emphasized that independence is a core ethical principle. Auditors must remain vigilant and take appropriate measures to identify, assess, and address threats arising from self-interest and self-review, including those related to relationships within firms and their networks.

He reminded that auditors must continuously evaluate threats and implement safeguards directly addressing the root causes when taking measures to mitigate identified threats. Any breach of independence, whether intentional or unintentional, damages the auditor’s professional judgment and objectivity. Such conduct is regarded as serious by the AFRC and must be dealt with strictly.

The Disciplinary and Enforcement Department head, Leung Wai Shan, stated that the AFRC has issued disciplinary actions multiple times for registration violations. It is a fundamental requirement for practitioners to ensure their registration is valid and that they hold valid practicing certificates before performing audits. Any non-compliance is unacceptable. The AFRC urges the industry to take responsibilities seriously to uphold professional integrity.