Your fortnightly technical updates newsletter (23 February 2022)

Standard setting

●FINANCIAL REPORTING

Invitation to comment

The Institute is seeking comments on a tentative agenda decision published by the IFRS Interpretations Committee on Negative Low Emission Vehicle Credits by 14 March.

Live webinar: Briefing session on FRC Interim Inspection Report

and Annual Investigation Report

In this live webinar on 28 February, speakers will highlight the major findings that the Financial Reporting Council (FRC) has identified and the FRC’s recommendations on how audit quality and the quality of financial reporting can be improved. Participants can take home with them recommendations on actions to avoid recurrence of common accounting non-compliance and auditing irregularities or misconduct.

February IFRS Interpretations Committee Update

The IFRS Interpretations Committee Update provides a summary of discussions at its February meeting. Topics discussed include negative low emission vehicle credits, targeted longer-term refinancing operations III Transactions and profit recognition for annuity contracts.

●AUDITING AND ASSURANCE

Live virtual workshops: New quality management standards series

This three-part series in March and April will cover key requirements, applications and illustrated examples on how small and medium practitioners could meet the requirements of the new quality management standards.

New implementation guide for ISA 220

The International Auditing and Assurance Standards Board (IAASB) released a first time implementation guide for International Standard on Auditing (ISA) 220 (Revised), Quality Management for an Audit of Financial Statements to help stakeholders understand the requirements and properly implement the standard as intended. Practitioners are required to have quality management systems designed and implemented in accordance with ISA 220 by 15 December 2022.

The IAASB also released the implementation guides for International Standard on Quality Management (ISQM) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements and ISQM 2, Engagement Quality Reviews in 2021. The suite of quality management standards will come into effect on 15 December 2022.

IAASB February board meeting

The audio recording of the IAASB February board meeting is now available.

ICAEW new series of webcasts on auditing accounting estimates

To support auditors in addressing challenges of auditing accounting estimates when implementing the revised ISA 540 Auditing Accounting Estimates and Related Disclosures, the Institute of Chartered Accountants in England and Wales (ICAEW) has produced a series of webcasts that use practical illustrations to consider key issues in common audit areas. The first webcast of the series tackles an often-overlooked area of accounting estimates – fixed assets and depreciation.

ICAEW has also set up a new resource hub on articles, helpsheets and other practical resources and tools to support the implementation of ISA 540 (Revised) that may be of interest to members.

Interested members can also subscribe to ICAEW’s International Standards platform for free gain access to a wide range of resources on auditing and ethics.

●ETHICS

Invitation to comment

The Institute is seeking comments on the International Ethics Standards Board for Accountants Exposure Draft Proposed Technology-related Revisions to the International Code of Ethics for Professional Accountants (Including the International Independence Standards) (the International Code) by 20 May. The proposed revisions aim at enhancing the International Code’s robustness and expanding its relevance in an environment being reshaped by rapid technological advancements. The proposed amendments will also guide the ethical mindset and behaviour of professional accountants in business and in public practice as they deal with changes brought by technology in their work processes and the content of the services they provide.

Live webinar: Revised non-assurance services and fee-related provisions of the Code

Join the webinar on 9 March where the speaker will explain key provisions of the revised non-assurance services (NAS) and fee-related independence standards of the Code of Ethics for Professional Accountants that will come into effect in December 2022. The revisions significantly strengthen the guardrails around auditor independence in two important areas that have the potential to create incentives influencing auditor behaviour — NAS provided to audit clients and fees. The webinar will also deep dive into specific provisions such as new self-review threat prohibition for public interest entities (PIE) audit clients and new requirements for firm communication with those charged with governance for PIE audit clients, among others.

Ethical leadership in an era of complexity and digital change: Introduction

As ethical leaders and trusted advisors, professional accountants rely on professional skills, values, ethics and attitudes to serve their organizations and clients. This exploratory paper by the International Federation of Accountants, Chartered Professional Accountants Canada and the Institute of Chartered Accountants of Scotland examines how complexity in the professional environment, digital disruption, and mis/disinformation impact the work of professional accountants.

Advocacy and practice development

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●CORPORATE FINANCE

HKIC’s consultation regarding a new "comprehensive" China index

On 15 February, Hang Seng Indexes Company Limited (HKIC) issued a consultation paper to seek views from the market, about creating a new "Comprehensive" China Index that includes constituents from the Hang Seng China Enterprises Index and A-shares companies. The deadline for responding to the consultation paper is 31 March.

●INSOLVENCY

Letter from the ORO regarding PAPT

The Institute has received a letter from the Official Receiver’s Office (ORO), inviting insolvency practitioners (IPs) to comment on whether the payment arrangements for property transactions (PAPT) proposal developed by the banking industry and the Hong Kong Monetary Authority (HKMA) should apply to relevant transactions entered into by a receiver, trustee or liquidator in insolvency cases. Please refer to (i) the consultation paper issued by the Hong Kong Association of Banks and the DTC Association; and (ii) HKMA’s circular for details. The deadline for responding to the ORO’s request is 4 March. Members are welcome to submit any views or comments to the Institute, quoting their membership number and contact details, to the Advocacy & Practice Development on or before 25 February.

Letter from the ORO regarding the impact of COVID-19 pandemic

The Institute has received a letter from the ORO, advising on actions that should be taken where IPs and appointment takers may face difficulties in complying with specified timelines or other requirements, due to the impact of the COVID-19 pandemic, and encouraging them to exercise professional judgment in relation to the flexibility in administering cases. Please also refer to the guidance set out in the ORO’s previous letter dated 14 April 2020 for details.

New Online Service for Debtors: Appointment Booking for Attestation Services

With effect from 18 February, ORO has launched a new service for the debtors who intend to file “Debtor’s Bankruptcy Petition” and wish to have it attested before an authorized staff of the ORO to reserve the attestation service online via the GovHK Portal. Please refer to the ORO’s website for details.

●TAXATION

Announcements by the Inland Revenue Department

Members may wish to be aware of the following matters:

• A letter to tax representatives, further extending the due date for filing 2020/21 Profits Tax returns for loss cases with Accounting Date Code "M" to from 28 February to 31 March 2022

• Legislative Council question on promoting popularisation of electric vehicles

• Latest arrangements of public services for IRD’s Business Registration Office

• Stamp Duty statistics

●LEGISLATION & OTHER INITIATIVES

AML notices

The list of individuals and entities published under section 29 of the United Nations Sanctions (Somalia) Regulation 2019 (Cap. 537CG) was updated on 19 February. See the relevant UNSC press release. For the current lists of terrorists, terrorist associates and relevant persons/ entities under United Nations sanctions, members should refer regularly to the Institute's AML webpage. Other useful documents and guidance can also be found on the same page.

Useful resources

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Publications from other organizations

• Three keys to a resilient postpandemic recovery from McKinsey

• 5 ways finance professionals can tell better stories from Financial Management

• Are you proficient at each step in the leadership process? from SmartBrief

• 3 ways to create cohesive remote and hybrid teams from Entrepreneur

• Embracing technology in the audit from Journal of Accountancy