XN000022-1992-04-16 — Page 11

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THURSDAY, APRIL 16, 1992

THE CERTIFICATES SUBMITTED BY AUDITORS UNDER THE PRESENT SECTION 63 FOCUS ONLY ON THE ACCURACY OF COMPILATION OF THE RETURNS OF THE INSTITUTIONS, RATHER THAN ON THE RELIABILITY OF THE UNDERLYING SYSTEMS.

NEITHER ARE AUDITORS REQUIRED TO CERTIFY THE QUALITY OF OTHER INTERNAL CONTROL SYSTEMS TO ENABLE, FOR EXAMPLE, ADEQUATE PROVISIONING AND COMPLIANCE WITH THE OTHER DUTIES IMPOSED BY THE ORDINANCE.

ALSO THE COMMISSIONER'S EXISTING POWER TO APPOINT A SECOND AUDITOR UNDER SECTION 59 COVERS AUDIT OF ACCOUNTS ONLY, BUT NOT REVIEW OF THE INSTITUTION'S INTERNAL CONTROL SYSTEMS. IT IS ALSO UNCLEAR ΤΟ WHOM THE SECOND AUDITOR IS TO REPORT.

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THE SPOKESMAN SAID CLAUSES 2 4 AND 5 WERE INTENDED TO PROVIDE THE LEGAL FRAMEWORK TO STRENGTHEN AUDITORS' ROLE IN REPORTING ON THE INTERNAL CONTROL SYSTEMS OF AUTHORISED INSTITUTIONS.

ΤΟ

ON

CLAUSE 4 PROVIDES A GENERAL POWER то THE COMMISSIONER REQUIRE AN INSTITUTION TO PROVIDE HIM WITH. A REPORT BY AN AUDITOR MATTERS PERTINENT TO THE EXERCISE OF HIS FUNCTIONS UNDER THE ORDINANCE.

"THIS WOULD INCLUDE A REPORT ON VARIOUS ASPECTS OF AN INSTITUTION'S INTERNAL CONTROLS. SUCH REPORTS WOULD BE COMMISSIONED ON A SELECTIVE BASIS," THE SPOKESMAN SAID.

CLAUSE 5 ENABLES THE COMMISSIONER TO REQUIRE

REPORTS, WHICH WOULD BE CARRIED OUT ON A REGULAR, ANNUAL BASIS, ON SPECIFIC ASPECTS OF INTERNAL CONTROLS - THOSE WHICH ENABLE AN INSTITUTION TO COMPILE ITS PRUDENTIAL RETURNS CORRECTLY, COMPLY WITH ITS DUTIES UNDER THE BANKING ORDINANCE AND, FOR HONG KONG INCORPORATED INSTITUTIONS

ONLY, MAINTAIN ADEQUATE PROVISIONS.

OTHER MATTERS THAT MAY BE THE SUBJECT OF A REPORT BY THE AUDITORS INCLUDE WHETHER THERE APPEARS TO HAVE BEEN ANY MATERIAL CONTRAVENTION BY THE INSTITUTION OF ITS DUTIES UNDER THE ORDINANCE,

THE SPOKESMAN SAID A NUMBER OF OTHER CHANGES TO THE ORDINANCE WERE BEING SOUGHT.

CLAUSE 3 SEEKS ΤΟ STREAMLINE THE ARRANGEMENTS WHEREBY THE COMMISSIONER REPORTS A BANKING CRISIS TO THE GOVERNOR IN COUNCIL UNDER SECTION 52(1)(D) WITH A VIEW TO TAKING APPROPRIATE ACTION, FOR EXAMPLE THE PRESENTATION OF A WINDING UP PETITION TO THE HIGH COURT.

TO THE TO

AS AN ALTERNATIVE TO THE NORMAL SEVEN DAYS' NOTICE INSTITUTION CONCERNED, THIS PROVISION WOULD ALLOW THE COMMISSIONER GIVE A SHORTER NOTICE, PROVIDED HE HAD THE CONSENT OF THE FINANCIAL SECRETARY TO DO SO AND THAT TO DO SO WAS REASONABLE IN THE CIRCUMSTANCES.

THE COMMISSIONER WOULD STILL BE REQUIRED TO GIVE WRITTEN NOTICE THE INSTITUTION CONCERNED AND ΤΟ TAKE ACCOUNT OF ITS REPRESENTATIONS IN THE REPORT TO THE GOVERNOR IN COUNCIL.

TO

"THE FLEXIBILITY