ENG-2006 — Page 124

96 | Financial and Monetary Affairs

directors of wound-up companies, monitors the conduct of outside liquidators and trustees, and monitors the funds held by liquidators in both compulsory and voluntary liquidations.

During the year, the court made 10 324 bankruptcy orders, 1 239 interim orders in individual voluntary arrangements and 552 winding-up orders, compared with last year's respective figures of 9 810, 934 and 849. The assets realised by the Official Receiver during 2006 amounted to $117.9 million, while $219.3 million in dividends was paid to creditors in 3 019 insolvency cases.

Professional Accountancy

Hong Kong had 26 070 certified public accountants at year-end. Of these, 3 558 were certified public accountants (practising), who are in public practice and may perform statutory audits. There were 1 152 firms of certified public accountants (practising) and 207 corporate practices registered at year-end.

The HKICPA operates a largely self-regulatory framework under the Professional Accountants Ordinance. The institute is vested under the ordinance with a wide range of responsibilities, such as registering certified public accountants; maintaining financial reporting, auditing and ethical standards for the profession; and conducting training programmes and qualifying examinations.

When the FRC becomes fully operational in 2007, the FRC will take over from the HKICPA with respect to investigation of cases concerning audit irregularities and accounting non-compliances relating to listed companies. Subsequent to an investigation, the FRC may, in accordance with the Financial Reporting Council Ordinance, refer investigation results to the HKICPA for disciplinary action or to other agencies (e.g. ICAC, Police, Department of Justice, SFC) for follow-up action. This arrangement introduces proper checks and balances in respect of the different roles of 'investigator', 'prosecutor' and 'disciplinary committee'.

Monetary Policy

The monetary policy objective of Hong Kong is currency stability, defined as a stable external exchange value of the currency of Hong Kong, in terms of its exchange rate in the foreign exchange market against the US dollar, at around HK$7.80 to US$1. This clear monetary policy objective is achieved through the linked exchange rate system, which was introduced in October 1983 after a nine-year period during which the Hong Kong dollar floated and the exchange rate was volatile.

―

The linked exchange rate system is characterised by currency

currency board arrangements requiring the Hong Kong dollar monetary base to be at least 100 per cent backed by and changes in it to be 100 per cent matched by corresponding changes in US dollar reserves held in the Exchange Fund at the fixed exchange rate of $7.80 to US$1. In Hong Kong, the monetary base includes the amount of currency notes and coins issued, the Aggregate Balance (the sum of the clearing balances of banks held with the HKMA for the purpose of effecting the clearing and settlement