Usually media shy accountants
have uncharacteristically become the talk of the town
in the last few months. First, the Enron affair plunged
the reputation of the accountancy profession to a low
point. Then the World Congress of Accountants in Hong
Kong brought us back on a roller coaster upward track.
But before we have time to bask in that glory for too
long, the ICAC made the shocking arrests of several
top executives of three listed companies and cast the
net wide enough to include two accountants too. The
censorious media immediately cried foul, putting accountant
leaders back on damage control mode. But no matter which
way our fortune turns, it must have registered in the
minds of the public that accountants are an increasing
important group of people in Hong Kong.
The curtain of the World Congress was drawn against
the backdrop of the aftermath of Enron; a general
lost of confidence in accountants; the looming threats
of the Sarbane-Oxley Act and a groundswell of global
opinion calling for tighter controls on the accountants¡¦
profession. However, being stunned by the dramatic
appearances of premier Zhu and much impressed by the
silky smooth operation of the Congress programmes,
the public seemed content to temporarily forget the
accounting issues at hand. Instead they turned their
attentions to what the premier has to say about Mr
Tung, the budget deficit and his promises to support
the economy of Hong Kong. However, premier Zhu¡¦s simple
but powerful remarks on 'no false accounts' unwitting
left a very vivid impression.
Press takes up the call
There is no wonder why the newspaper headlines were
dotted with sensational captions like the 'Hong Kong
version of Enron' and 'No False Accounts for Hong
Kong' in the few days after the ICAC arrests. However,
with the benefit of valuable experiences shared in
the World Congress, the HKSA and your LegCo representative
were well prepared to come up with swift responses.
As your political representative, I was bombarded
with embarrassing questions from the press on the
very day it happened. It is not easy to properly communicate
our defence when reporters can hardly distinguish
the difference between the functions of the HKSA Council,
our Investigation Committee and the Disciplinary committee.
Some of them even think that we are like the military
with our own marshall laws and accountants¡¦ courts
to try accountants who had committed serious crimes.
They wonder why our legal sanctions are so light.
Some simply joined the well-rehearsed game of calling
for greater regulations and stiffer penalties whenever
they see any sign of trouble. Few will give you a
chance and listen objectively to the proper arguments.
In order to buy some time for the HKSA Council to
formulate a proper response, I consistently explained
in the first few days after the arrests, in numerous
forums and interviews, that we should clearly distinguish
between criminal prosecution and disciplinary proceedings
of unprofessional conducts. The reported cases have
revealed neither details of non-compliance of auditing
or accounting standards nor our ethnical guidelines.
It appeared to be a classical case of suspected corruption
and false accounting which are both serious criminal
offences. They are by nature outside the scope of
our self-regulatory frame work. The ICAC will investigate
the matter and the Courts will hand down the sentence
for any wrong doings. If the accountants are found
guilty of criminal offences, then the Professional
Accountants Ordinance is clear on this point, they
should be suspended from membership. There is absolutely
no room for accountants protecting accountants by
means of some secretive internal procedure.
However, we must admit that the series of scandalous
events revealing that irregularities and false accounting
are at play have already tainted the public¡¦s confidence
in the profession. A very conscious effort will need
to be made quickly to restore that confidence. As
a matter of fact, ¡¥self-regulation¡¦ of accountants
is well defined and narrow in scope. Quite a few pieces
of legislation like the Serious Organised Crime Ordinance;
the Prevention of Bribery Ordinance; the Securities
and Futures Ordinance and the Companies Ordinance
all provide means and powers for the Government to
appoint inspectors to investigate the conducts of
accountants and the records kept by us. In the recently
reported case, the ICAC has all the powers it needs
to investigate and to prosecute, if necessary, the
accountants in question. The Government does not have
to depend on the HKSA to regulate its own house in
this instance. The present system has served the community
well and should not be discarded before a better system
Crimes and dishonest acts cannot be totally prevented
even with the best and most elaborate regulations.
Personally, I hold a very liberal view on how our
self-regulation can operate. I wrote on the same subject
some two years ago in this column; it was entitled
¡¥Barking, Biting Watchdogs¡¦. I fully subscribe to
the conclusions of a recent study which recommended
increasing the number of lay members in many of the
HKSA Committees including the Disciplinary Committee
and to open its proceedings to the public. Given that
the [Disciplinary] Committee is already open to public
scrutiny, I envisage no problem in further increasing
the number of lay members from two to three out of
a total of five and thereby concede the majority on
With regard to the investigation Committee, I also
keep a very open view as to the involvement of lay
members in the supervision and monitoring of its works.
However, I do not think that adding lay members to
the Committee can actually solves the underlying problems
of delays in processing its works.
Complex cases brought to the attention of the appropriate
committees of the HKSA are time-consuming and require
vast physical and intellectual resources. The lack
of statutory powers and financial resources available
to a non-state organisation such as ours is very real.
For example, that we cannot compel information from
involved parties who are non-members can be a serious
limitation to the efficacy of any investigation. Worse
still, our frequent complainants like the Stock Exchange
and the Securities and Future Commission, who have
their own wider powers to obtain information, may
not always find it appropriate to pass such information
to us. In a more complex commercial transaction, it
might not always be easy for us to obtain the same
information, which makes it difficult for us to fully
appreciate the complaints made, quickly and efficiently.
Unfortunately in our case, following due process under
these restrictions takes a long time.
I have urged the leaders of the HKSA to seriously
consider a more comprehensive and effective way to
tackle these difficulties once and for all. In my
view, an independent Board of Investigation under
the auspicious of the Financial Services Bureau with
adequate resources and wider powers to obtain evidences
is clearly a preferred long-term option in the investigation
of accountants¡¦ conduct in listed Companies.