Professional Accountants (Amendment) Bill 2018 Public Consultation

18 Oct 2018
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Professional Accountants (Amendment) Bill 2018 Public Consultation
Office of the Hon Kenneth Leung
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Foreword

The Hon Kenneth Leung will introduce the Professional Accountants (Amendment) Bill 2018 (the “Bill”) in the Legislative Council (“LegCo”) to tackle the problem of misleading business descriptions by businesses not registered as practice units under the Professional Accountants Ordinance (Cap. 50) (the “PAO”).

A public consulting exercise has been launched and will end on November 21st. The general public is invited to find out more about the proposed amendments below and fill in the survey at the bottom of the page.

Introduction
Company searches have revealed that there are companies registered with the Companies Registry which are currently using terms such as “Professional Accounting and Secretary”, “Professional Accounting and Secretarial Services”, “Professional Accounting and Taxation”, and “Accounting and Professional Services” which may cause confusion and lead the public to believe that such companies are qualified under the PAO to provide professional auditing services.

It is in the public interest to enable the general public to identify easily whether a person or a company is a practice unit which is qualified to provide professional auditing service under the PAO. It is also important to prohibit unqualified companies and individual from providing auditing services, as this practice may damage the reputation and integrity of the accountancy profession in Hong Kong.

The purpose of this Bill is to prohibit the use of descriptions by individuals, firms or companies which may mislead the public into believing that they are certified public accountants or practice units registered with the Hong Kong Institute of Certified Public Accountants (the “Institute”), when in fact they are not. It seeks to amend section 42 of the PAO to prohibit—

a) a person who is not a certified public accountant from using additional specified descriptions which are similar in meaning to “professional accountant” or “certified public accountant” in the person’s business, trade, calling or profession; and

b) a body corporate or a firm, not being a practice unit registered under the Ordinance, from using in its name additional specified descriptions which are similar in meaning to “professional accountant” or “certified public accountant”, or any written words, initials or abbreviations of words, if it intends to cause or may reasonably cause any person to believe that the body corporate or the firm is a practice unit.

The amendments also propose to increase the level of fine payable for breaches of section 42(1) of the Ordinance, except for breaches of section 42(1)(l) of the Ordinance, from level 4 (HK$25,000) to level 5  (HK$50,000) .

Legislative Timeline

15 November 2016 – A version of the proposed amendment bill was presented to and approved by the members of the LegCo Panel on Financial Affairs.

28 August 2017 – The Competition Commission stated that it does not consider the Bill to have raised any competition concerns.

14 December 2017- Approval to support the proposed bill was sought from members of the Institute and obtained at its annual general meeting.

5 January 2018 – After efforts to refine the amendment bill with the Institute, the new bill, entitled Professional Accountants (Amendment) Bill 2018, was presented to and approved by members of the LegCo Panel on Financial Affairs.

21 May 2018 – The Bill received the Law Draftsman’s Certificate.

8 October 2018 – The Bill received the Chief Executive’s written consent.

A public consultation will begin on 18 October for one month until 21 November.

The Professional Accountants (Amendment) Bill 2018 is projected to be tabled in LegCo in mid-November 2018 and will then go through the standard procedures of an amendment bill.

Impact of the Amendment Bill

Descriptions not allowed to be used in the business name of the individual or entity
Under existing PAO After amendments to PAO
Not a Certified Public Accountant registered under the PAO(i) professional accountant, certified public accountant, certified accountant, CPA, 專業會計師, 會計師, 註冊會計師 (ii) professional accountant, certified public accountant, certified accountant, CPA, 專業會計師, 會計師, 註冊會計師, registered accountant, professional accounting, registered accounting, certified accounting, certified public accounting, 專業會計, 註冊會計, 認可會計, 執業會計 (ii)
Non-Practising Certified Public Accountant (“CPA”) (i) certified public accountant, CPA, 會計師 (iii) certified public accountant, CPA, 會計師 (iii)
Practising Certified Public Accountant  (“CPA (practising)”)(i) Nil Nil
Limited company not being a corporate practice or partnership not being a CPA firm (including companies/ partnerships owned by CPAs or CPAs (practicing)) certified public accountant, CPA, 會計師 (iv) certified public accountant, CPA, 會計師, professional accountant, certified accountant, registered accountant, professional accounting, registered accounting, certified accounting, certified public accounting, 專業會計師, 註冊會計師, 專業會計, 註冊會計, 認可會計, 執業會計
Corporate practice or CPA firm (v) Nil Nil

The level of fine payable for breaches of section 42(1) of the Ordinance, except for breaches of section 42(1)(l) of the Ordinance, will be increased from level 4 (HK$25,000) to level 5 (HK$50,000).


Notes:
(i) This refers to the person carrying on business as an individual or sole proprietor.

(ii) For individuals, the prohibition applies to the use of the descriptions not only in the trade or business name of the individual, but also in connection with his trade or business, e.g. advertising his business using the descriptions.

(iii) Descriptions disallowed for use by non-practising Certified Public Accountants in their trade or business name pursuant to section 42(1)(ia) of the PAO and section 420 of the Institute’s Code of Ethics for Professional Accountants (“COE”).  Section 42(1)(i)(ii) of the PAO also prohibits them from using descriptions like “certified public accountant (practising)”, “執業會計師” or “核數師” etc. in conjunction with their name.

(iv) Descriptions disallowed for use by limited companies not being a corporate practice pursuant to section 42(1)(ha)(iv) of the PAO and by partnerships not being a CPA firm pursuant to section 42(1)(h) (which also prohibits the use of “professional accountant” or “certified accountant” etc.) or section 42(1)(ia)/section 420 of COE.  Sections 42(1)(ha)(iii) and 42(1)(i)(ii) prohibit such limited companies and partnerships respectively from using descriptions like “certified public accountant (practising)”, “執業會計師” or “核數師” etc. in conjunction with their name.

(v) A CPA firm refers to a firm of certified public accountants (practising) registered with the Institute under the PAO.

Individuals who are not a certified public accountant registered under the PAO

Individuals who are not certified public accountants would no longer be able to use the specified descriptions in connection with their business, and they cannot include the descriptions in their company name.  For example, it will be a criminal offence for an individual, Chan XX, who is not a certified public accountant, to provide any services using the business name “Chan XX, Professional Accounting Services” or advertise that he provides “professional accounting services”.

Limited companies or firms which are not corporate practices/ CPA firms

Limited companies or firms which are not registered with the Institute as corporate practices/ CPA firms would no longer be able to use the specified descriptions in their name.  For example, it will be a criminal offence for a company which is not a corporate practice to provide any services under its name “ABC Professional Accounting Services Limited”.

Members of the Institute

As an individual carrying on business, certified public accountant (i.e. a member of the Institute) will not be affected by the proposed PAO amendments, and he may continue to carry on business as a sole proprietor in his own name using the specified descriptions.

CPA firms or corporate practices of the Institute

A CPA firm or corporate practice registered with the Institute will not be affected by the proposed PAO amendments.

Individuals or entities affected by the amendments will have to change their business name before the amendments take effect.

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