Your fortnightly technical updates newsletter (3 February 2021)

Members' Handbook

Update No. 255 includes revisions to various auditing and assurance pronouncements in Volume III to conform to HKSA 540 (Revised) Auditing Accounting Estimates and Related Disclosures that became effective for audits of financial statements for periods beginning on or after 15 December 2019.

Standard setting

Invitation to comment

The Institute is seeking comments on the International Accounting Standards Board (IASB) Exposure Draft ED/2021/1 Regulatory Assets and Regulatory Liabilities by 31 May.

January 2021 IASB podcast

The January podcast, focusing on the IASB discussions at its monthly meeting, is now available.

Joint call for research papers on corporate disclosure

In conjunction with Accounting in Europe and The British Accounting Review, the IASB has published a joint call for research papers on the following topics:

compliance with mandatory disclosure requirements
specific areas of interest to the IASB
alternative research approaches

The deadline for submissions is 31 January 2022.

IAASB January board meeting

The audio recording of the International Auditing and Assurance Standards Board (IAASB) January board meeting is now available.

IAASB webpage for the new and approved Quality Management standards

Visit the IAASB’s dedicated webpage for the new and approved Quality Management standards as well as other resources and implementation support.

Fraud, NOCLAR and government support

The Institute of Chartered Accountants in England and Wales (ICAEW) Know-How Guide provides some considerations for auditors when assessing the risks of fraud in relation to COVID-19 government support schemes.

Invitation to comment

The Institute is seeking comments on the International Ethics Standards Board for Accountants (IESBA) Exposure Draft Proposed Revisions to the Definitions of Listed Entity and Public Interest Entity in the Code by 3 April. The proposed revisions broaden the definition of a public interest entity in the International Code of Ethics for Professional Accountants (Including International Standards) (IESBA Code) to include more categories of entities, given the level of public interest in their financial condition, for the purposes of additional independence requirements to enhance confidence in their audits.

Webinar on revisions to the Code of Ethics for Professional Accountants to promote the role and mindset expected of professional accountants

Join the webinar on 19 February to learn more about the revisions to the Institute’s Code of Ethics for Professional Accountants (Code) to promote the role and mindset expected of professional accountants. The Deputy Chair of the IESBA will discuss the revisions including the relationship between compliance with the Code and a professional accountant’s responsibility to act in the public interest; enhancement to the fundamental principles of the Code etc. The webinar will also provide an overview of the IESBA’s Definitions of Listed Entity and Public Interest Entity Project.

Implications arising from government-backed COVID-19 business support schemes

The staff of the UK Financial Reporting Council and the IESBA jointly released a publication on ethical and auditing implications arising from government-backed business support programmes, which have been utilized at unprecedented levels during the COVID-19 pandemic.

A focus on ethics and independence standards

An article from the International Federation of Accountants (IFAC) highlights the importance and continuance relevance of the IESBA Code. It also recaps revisions and restructured changes to the IESBA Code in 2018 and various recent and upcoming revisions.

Advocacy and practice development

Institute submissions

Institute responds to HKEX Consultation Paper: The Main Board Profit Requirement

The Institute issued a submission in response to the Consultation Paper issued by Hong Kong Exchanges and Clearing Ltd. (HKEX), which proposes to increase the Main Board aggregate profit requirement from HK$50 million to HK$125 million or HK$150 million.

The Institute does not support the proposal for a number of reasons. We are aware that the proposal has raised concerns among some sectors of the Institute’s membership, given the impact that it may have on the ability of smaller companies, including local small- and medium-sized enterprises with growth potential, to raise funds, on diversity in the capital market, and on the business of numerous professionals engaged in work on initial public offerings. While we acknowledge the importance of an effective gatekeeping role to facilitate the listing of high-quality companies and those with good potential for growth, we do not agree with the approach proposed in the consultation paper for the reasons explained in the submission. Please also refer to the Institute’s email issued on 28 January for further information.

Institute responds to HKIC’s consultation paper on proposals to enhance the Hang Seng Index

The Institute issued a submission in response to Hang Seng Indexes Company Ltd. (HKIC)'s Consultation Paper Proposal to enhance the “Hang Seng Index” as regards continuing to serve as the most representative and important benchmark of the Hong Kong stock market.

The Institute’s Corporate Finance Advisory Panel (CFAP), in principle, agrees that the Hang Seng Index should be further developed to strengthen its representativeness and diversity, as the principal benchmark of the Hong Kong stock market. In the submission, the CFAP also provides some comments and observations on specific proposals.

Announcements by the Inland Revenue Department

Members may wish to be aware of the following matters:

Announcements by the Government

Members may wish to be aware of the following matters:

AML news and notices

Institute responds to FSTB Public Consultation on Legislative Proposals to Enhance Anti-Money Laundering and Counter-Terrorist Financing Regulation in Hong Kong

The Institute issued a submission in response to the Public Consultation on Legislative Proposals to Enhance Anti-Money Laundering and Counter-Terrorist Financing Regulation in Hong Kong, issued by the Financial Services and the Treasury Bureau (FSTB).

Broadly, the Institute supports the need to introduce regulation for virtual asset service providers and for dealers in precious metals and stones, under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (AMLO), in order to demonstrate Hong Kong’s compliance with Financial Action Task Force’s Recommendations. Meanwhile, the Institute offers comments on some of the specific questions in the consultation paper.

In respect of the proposed miscellaneous technical amendments under AMLO, also covered in the consultation paper, while, in general, the Institute is supportive of the changes, we suggest that the opportunity also be taken to make other amendments to set out, or clarify, in law or guidance certain other relevant matters. Please refer to the Institute’s submission for details.

IFAC and ICAEW release 4th instalment of six-part anti-money laundering educational series

On 25 January, IFAC and ICAEW, released the fourth instalment in its Anti-Money Laundering: The Basics educational series covering asset transfers, one of the primary ways in which criminals layer or integrate the proceeds of crime into the legitimate economy.

The publication is part of a 6-month short series helping accountants to enhance their understanding of how money laundering works, the risks they face, and what they can do to mitigate these risks and make a positive contribution to the public interest.

COVID-19 and evolving risks for money laundering, terrorist financing and cybercrime

A publication by staff of CPA Canada and the IESBA highlights the heightened risks of money laundering, terrorist financing and cybercrime in the COVID-19 environment.

Others

For the current lists of terrorists, terrorist associates and relevant persons/ entities under United Nations sanctions, members should refer regularly to the Institute's AML webpage. Other useful documents and guidance can also be found on the same page.

Useful resources

Publications from other organizations:

COVID-19: Implications for business from McKinsey & Company
How to build resilience – for the next crisis from Financial Management
ESG impact is hard to measure – but it’s not impossible from Harvard Business Review
These are the 3 skills you need to succeed in 2021 from Fast Company
Building a truly effective D&I initiative from Journal of Accountancy

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