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Clause 8 of the Professional Accountants (Amendment) Bill 1995 specifies the conditions that an incorporated auditing practice must meet in order to register and remain registered. In addition to meeting requirements relating to insurance cover and the contents of memoranda and articles of association, corporate practices will also need to comply with requirements relating to members and directors. Except in the case of a two-member incorporated practice, all directors and members must be registered as professional accountants. Members and directors of an incorporated practice may not themselves be corporations. These provisions are intended to ensure that incorporated practices remain independent and under the control of accountants. In the case of a two-member incorporated practice, one member may with the permission of the HKSA Council, be a non-accountant. However, under these circumstances, provision is made to ensure the accountant member retains control of the practice. An incorporated practice that ceases to comply with the registration requirements may be deregistered or conditions may be attached to its continued registration.
Clause 16 of the Bill extends the ambit of disciplinary offences to incorporated practices as well as adding new offences specific to such practices. Clauses 18 to 20 extend appeal and general offence provisions to cover the new regime for incorporated practices. Clause 23 enables the HKSA Council to make rules relating to insurance and related requirements.
Most of the remaining provisions are consequential extensions of existing provisions of the Ordinance, suitably adapted to apply to companies.
Other measures have been taken in conjunction with the proposed legislation to ensure that the interests of the public remain adequately protected. These include:
(a)
(b)
firstly, agreement by the HKSA to consult the Administration fully on the rules relating to incorporation of auditing practices and on any future changes to them; and
secondly, measures to ensure that the director of an incorporated practice responsible for a particular audit is clearly identified. In addition to pursuing a claim against an incorporated practice, an aggrieved party, depending on the circumstances, may also be able to pursue a claim against the principal concerned if the negligent individual assumed a personal duty of care. Identification of the auditor concerned should facilitate such action.
The proposals will strike a reasonable balance between protecting blameless auditors from undue liability resulting from the professional negligence of their partners, and safeguarding the interests of audit clients and other interested parties.
End/Wednesday, July 5, 1995