Dear member,

I wrote to the HKICPA Council to express concerns over some of the recent decisions of the Institute which are highly controversial, even wrong-headed.

On the PC regime reform consultation, the proposals to expand the location of ordinary residence in Hong Kong to include both Hong Kong and Mainland China and to recognise auditing experience in Mainland China as local experience could bring about a surge in the number of Mainland practitioners who do not possess the level of IFRS application experience but nonetheless can sign off on Hong Kong audit reports. I find the proposals objectionable from the standpoint of consistency in quality and other practical considerations. The scope of recognition contemplated by the proposals needs to be appropriately narrowed down with the prerequisite that the applicant must also have Hong Kong permanent resident status or the right to work in Hong Kong.

On the proposal to allow PC holders to practise only in the name of a firm/corporate practice, the Institute has failed to explain how the change will be effective, let alone being "essential", to address the difficulty, as perceived by the Institute, in carrying out practice reviews to monitor the quality of the audits performed by individual PC holders. There would be practically no difference between a solo practitioner operating as a firm versus an individual PC holder practising in his/her own name. The proposal would only be asking those practicing in their own name to double their payments to the Institute.

On the botched consultation on financial reporting by private companies, the flop was brought about because of the Institute's "gun jumping" to proceed with the consultation at the time when the IFRS for SMEs (now known as IFRS for Non-publicly Accountable Entities) have not even been finalized.

On the decisions to disband two long-time committees under the Council, namely the Small & Medium Practitioners (SMP) Committee and the Professional Accountants in Business (PAIB) Committee, the strong reaction and resentment from members is fully understandable as the decisions were made without proper consultation and explanation.

I raised the issue of transparency with the Council. Transparency and due process are elements that will hold the Institute accountable to members. When the Institute deliberates on important policy issues, it is of utmost importance for the Institute to engage members fully. The process has to be open, fair and transparent. The Institute can improve its engagement process by making Council meetings more open to members. It should also set standard policies and practices on how to initiate and conduct consultations, and on how to process comments received and make them accessible to members.

In closing, I asked the Institute to do more to help members ride through this unprecedented time of financial crisis.

To read the full letter, follow this link.

Sincere regards,

Paul M P Chan