Pursuant to sections 3(1) and (2) of the AFRCO, a PIE is a public interest entity, which is either (a) a listed corporation listed on a recognized stock market whose listed securities comprise at least shares or stocks; or (b) a listed collective investment scheme listed on a recognized stock market.
No. An entity with only listed debts without listed shares or stocks is not a PIE under section 3(1) of the AFRCO.
Pursuant to Part 1 of Schedule 1A of the AFRCO, a PIE engagement is an engagement carried out by an auditor that involves the preparation of:
- an auditor’s report on a PIE’s annual financial statements required by the Companies Ordinance (Cap 622), the Listing Rules or any relevant code issued by the Securities and Futures Commission;
- a specified report required to be included in (i) a listing document of a corporation seeking to be listed for the listing of its shares or stocks; (ii) a listing document of a listed corporation for the listing of its shares or stocks; or (iii) a listing document of a collective investment scheme seeking to be listed or a listed collective investment scheme; or
- an accountant’s report required under the Listing Rules to be included in a circular issued by or on behalf of a PIE for a reverse takeover or a very substantial acquisition.
A PIE auditor means a practice unit registered with the AFRC as a registered PIE auditor under Division 2 of Part 3 of the AFRCO or an overseas auditor recognized by the AFRC as a recognized PIE auditor under Division 3 of Part 3 of the AFRCO.
A registered responsible person means any of the following individuals whose name is recorded in the registered PIE auditors register as a responsible person of a registered PIE auditor:
- an engagement partner;
- an engagement quality control reviewer; or
- a quality control system responsible person.
A professional person means a CPA or practice unit.
Pursuant to section 2(1) of the AFRCO, a practice unit is any of the following:
- a CPA (practising) practising accountancy on the accountant’s own account under the accountant’s own name as registered under section 22(2) of the Professional Accountants Ordinance (Cap.50) (“PAO”);
- a CPA firm which is a CPA (practising) who practises accountancy on the accountant’s own account under a firm name registered under Division 2 of Part 2A of the AFRCO or a firm of CPA (practising) that practises accountancy in partnership and is registered under Division 2 of Part 2A of the AFRCO; or
- a corporate practice which is a company registered as a corporate practice under Division 3 of Part 2A of the AFRCO.
As provided in sections 37A and 37B of the AFRCO, FR misconduct generally refers to:
- a contravention of a provision of the AFRCO (subject to certain exceptions);
- a contravention of a condition imposed in relation to the registration or recognition of the PIE auditor concerned;
- a contravention of a requirement imposed under the AFRCO (subject to certain exceptions);
- an act or omission in relation to a PIE engagement that, in the AFRC’s opinion, is or is likely to be prejudicial to the interest of the investing public or the public interest; or
- a “practice irregularity” as defined under section 4 of the AFRCO.
As provided in section 37AA of the AFRCO, CPA misconduct generally refers to:
- a “professional irregularity” as defined under section 3B of the AFRCO, except for FR misconduct or practice irregularity committed by a PIE auditor or a registered responsible person of a registered PIE auditor as defined under section 37A or 37B of the AFRCO;
- punishment by the Court of First Instance for failing to comply with a requirement imposed under the AFRCO;
- where the professional person is a CPA, conviction of an offence under Part V of the Crimes Ordinance (Cap 200); or
- where the professional person is a CPA, conviction in Hong Kong or elsewhere of any offence involving dishonesty.
Examples of a “practice irregularity” include situations where a PIE auditor, registered responsible person or non-PIE auditor, in relation to a PIE engagement or non-PIE engagement:
- falsified or caused to be falsified a document;
- made a statement, in respect of a document, that was material and that the PIE auditor or registered responsible person knew to be false or did not believe to be true;
- has been negligent in the conduct of the PIE auditor’s or registered responsible person’s profession;
- has been guilty of professional misconduct;
- did or omitted to do something that would reasonably be regarded as bringing or likely to bring discredit on the PIE auditor, registered responsible person, the Hong Kong Institute of Certified Public Accountants (“HKICPA”) or the accountancy profession;
- failed or neglected to observe, maintain or otherwise apply a professional standard; or
- refused or neglected to comply with any direction lawfully given by the AFRC, or the provisions of any bylaw or rule made, or any direction lawfully given by the Council of the HKICPA.
The above examples are not exhaustive. Please refer to section 4 of the AFRCO for a full list of matters that constitute a “practice irregularity”.
Examples of a “professional irregularity” include situations where a professional person:
- falsifies or causes to be falsified a document;
- makes a statement, in respect of a document, that is material and that the professional person knows to be false or does not believe to be true;
- fails to observe, maintain or otherwise apply a statement of professional ethics, or standard of accounting, auditing or assurance practices, issued or specified, or deemed to have been issued or specified, under section 18A of the PAO;
- fails to comply with an applicable AML/CTF requirement;
- while being a director of a corporate practice or a trust or company services provider (TCSP) licensee, or a responsible person of a limited partnership fund:
- causes or allows a breach of an AML/CTF requirement by the corporate practice, licensee or fund; or
- fails to take reasonable steps to prevent such a breach;
- fails, without reasonable excuse, to comply with a requirement imposed by a CPA inspector or CPA investigator;
- fails to comply with-
- any regulation made or any direction lawfully given by the AFRC; or
- the provisions of any bylaw or rule made or any direction lawfully given by the Council of the HKICPA;
- is negligent in the conduct of the professional person’s profession;
- is guilty of professional misconduct; or
- is guilty of dishonourable conduct (or, in the case of a corporate practice, does or omits to do something that, if the person were an individual CPA, would reasonably be regarded as being dishonourable conduct).
The above examples are not exhaustive. Please refer to section 3B of the AFRCO for a full list of matters that constitute a “professional irregularity”.