RESTRICTED
WORLD TRADE S/WPPS/W/7/Add.13
9August 1996
ORGANIZATION
(96-3166)
Working Party onProfessional Services Original: English
COMMUNICATION FROM HONG KONG
Response tothequestionnaire ontheaccountancy sector
Thefollowing communication iscirculated attherequest ofHong Kong.
________
I. GENERAL
1. What aretheprofessional titlesofaccountants inyourcountry? Arethese professional titles
protected? Please specify how.
Members oftheHong Kong Society ofAccountants ("Society") areregistered under the
Professional Accountants Ordinance asprofessional accountants .Aprofessional accountant
shallbedesignated asanAssociate oraFellow oftheSociety, asthecasemaybe,andbe
entitled tousetheinitials "A.H.K.S.A. "or"F.H.K.S.A. "afterhisname. Onlyaprofessional
accountant holding apractising certificate issued bytheSociety maybedescribed asaCertified
Public Accountant (CPA) andisallowed toperform statutory audits inHong Kong. The
Professional Accountants Ordinance hasspecial provisions guarding against theunauthorised
useofthese professional titles.
2. Howistheaccountancy sector regulated inyourcountry: bylaw,professional self-regulation,
acombination ofboth?
Theaccountancy sector inHong Kong isregulated byprofessional self-regulation under the
provision oftheProfessional Accountants Ordinance.
3. Arethere anyprovisions toprotect company names, whether national orforeign, inyour
country?
ThereareprovisionsintheProfessionalAccountantsOrdinanceandtheProfessionalAccountants
By-laws guarding against theuseofthedesignation "Certified Public Accountant" byindividuals
orfirms. Only professional accountants holding apractising certificate issued bytheSociety
mayusethisdesignation andonlyCPAs mayregister withtheSociety afirmofcertified public
accountants. Theabove alsoapply inthecaseofcorporate practices (Please refertotheanswer
forQ.21). Forinternational orforeign firmname, please refertotheanswer forQ.33.S/WPPS/W/7/Add.13
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4. What aretheprofessional bodies inyourcountry? Aretheyrecognised bylawasaregulatory
ordisciplinary bodyfortheaccountancy profession inyourcountry, orarethese functions
fulfilled byother institutions (please specify)?
TheHong Kong Society ofAccountants istheonlystatutory bodyresponsible forthelicensing
andregulationoftheaccountancyprofessioninHongKong.Theapplicablelawsandregulations
aretheProfessional Accountants Ordinance, theProfessional Accountants By-laws andthe
Disciplinary Committee Proceedings Rules.
5. How many members dothese professional bodies have? What istheestimated proportion
ofthose:
At30April 1996, theSociety has10,816 members. Append below istheestimated proportion
ofmembers engaged indifferent business sectors:-
inpublic practice – 3,432 (31.7%)
inindustry orcommerce – 5,223 (48.3%)
inthepublic sector – 756 (7%)
ineducation – 226 (2.1%)
unoccupied – 26 (0.2%)
others – 1,153 (10.7%)
6. What isthescope ofactivities regularly practised byaccountants inyourcountry?
Thefollowing areactivities regularly practised byaccountants inHong Kong:-
– statutory audit
– public sector audit (including government, non-profit making organisations and
quasi-government organisations etc.)
– other audit (including partnership, special purpose andother non-statutory audits)
– accounting
– insolvency practice
– taxadvice
– taxrepresentation
– consulting, business andcorporate advisory services; andother company secretarial,
share registration services etc.
7. Which ofthese activities areregulated inyourcountry?
Thefollowing areregulated activities inHong Kong:
– statutory audit
– public sector audit (specific accounts only)
– insolvency practice (partonly, please refertoQ.8).
8. Which ofthese activities arereserved bylawtoaccountants, shared byaccountants withother
professions (please specify), orevenforbidden toaccountants inyourcountry, e.g.byfull
prohibition orbynotallowing cumulation ofcertain activities which areconsidered
incompatible ormutually exclusive?
Statutory auditing service isreserved bylawtoCPAs. Aprovisional liquidator appointed under
section 228A oftheCompanies Ordinance inHong Kong mustbeaprofessional accountantS/WPPS/W/7/Add.13
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orasolicitor. Savewiththeabove-mentioned, allother activities mentioned inQ.6maybe
performed byaccountants inHong Kong.
II. QUALIFICATION REQUIREMENTS
9. What arethequalification requirements forthese activities inyour country interms of
university/higher education degree, practice andprofessional exam? Specify thenumber
ofyears required foreach element, andthedifferences according totheactivities (audit,
insolvency, tax,etc.)covered bythequalification.
Toqualify asaprofessional accountant, aperson should:
(a) atleastbetwenty-one years ofage;
(b) beofgood character;
(c) haveeithercompletedtheHKSA/ACCA (HongKongSocietyofAccountants/Chartered
Association ofCertified Accountants) JointExamination Scheme orbeafullmember
ofanoverseas institute recognised bytheSociety formembership admission purpose;
and
(d) haveacquired threetofiveyears'practical experience (notnecessarily localexperience)
depending oneducational background.
Tobecome aCPA, aperson should haveaperiod ofnotlessthanfouryears offull-time
approved accounting experience ofwhich atleastoneyearispost-qualifying experience i.e.
acquired afterbecoming amember ofabody accepted bytheCouncil oftheSociety orafter
registration asaprofessional accountant withtheSociety. Asubstantial proportion ofthe
approved accounting experience mustbeinauditing andatleastoneyearofsuchexperience
mustbegained inHong Kong within three years prior tothedateofapplication. Inaddition,
theapplicant should havepassed examinations onHong Kong Company LawandTaxation.
10. Arethere anypre-conditions tomeet tostarttheprofessional education: minimum age,
particular diploma ortitle,prior education, registration withaprofessional body, payment
ofafee,other (please specify)?
Anyone whowishes tosittheprofessional examinations isrequired tojointheSociety asa
Registered Student.
Aperson whowishes toberegistered asaRegistered Student withtheSociety should atleast
be18years oldandaholder ofaGeneral Certificate ofEducation (English) with2Advanced
Level passes and3Ordinary Level passes (including English andMathematics), orequivalent.
Aholder ofarecognised degree ordiploma isalsoeligible forstudent registration.
Aperson whoisovertheageof21butdoesnotmeettheminimum entry requirement may
jointheSociety asaMSER (Mature Student Entry Route) Candidate totaketheMSER
examinations which comprises 2papers, i.e.Accounting Framework andManagement
Information. (*These twopapers arerespectively equivalent toPapers 1and3oftheSociety 's
professional examinations forregistered students.) Onsuccessful completion ofthetwopapers,
thecandidate willbeautomatically transferred tothemain Register ofStudents andwillbe
awarded exemption from Papers 1and3oftheSociety 'sprofessional examinations.S/WPPS/W/7/Add.13
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Registered Students arerequired topayanannual subscription, andexemption andexamination
fees.
11. What arethesubjects tobecovered bytheeducation: accounting, audit, tax,general law,
economics, ethics, information technology, other (please specify)?
TheSociety runsaJoint Examinations Scheme withtheChartered Association ofCertified
Accountants oftheUK. Theexamination syllabus covers 14papers asfollows:
Stage 1---Foundation Stage
Module A
1 Accounting Framework
2 Legal Framework
Module B
3 Management Information
4 Organisational Framework
Stage 2---Certificate Stage
Module C
5 Information Analysis
6 Audit Framework
Module D
7 TaxFramework
8 Managerial Finance
Stage 3---Professional Stage
Module E
9 Information forControl andDecision Making
10 Accounting andAudit Practice
11 TaxPlanning
Module F
12 Management andStrategy
13 Financial Reporting Environment
14 Financial Strategy.
Although theSociety andACCA operate aJoint Examination Scheme, thetwobodies are
completely separate inrespect ofmembership admission policy. While students whohave
completed theJointExamination areeligible formembership ofboththeSociety andACCA,
theywillhavetoapply toeachofthetwobodies separately andhavetosatisfy respective
conditions (e.g.practical experience) imposed bythetwobodies formembership admission
purpose.S/WPPS/W/7/Add.13
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III. TECHNICAL STANDARDS AND ETHICS
12. Inrelation towhich activities donational standards exist(audit, accounting, insolvency,
other)? Please specify theirmain policy objectives.
National standards existforauditing andaccounting. Themainpolicy objectives aretoprovide
locally enforceable standards ofaccounting andauditing which areconsistent withinternational
standards.
13. Which bodyorinstitution develops thesestandards andmonitors theirimplementation? What
aretheconsequences ofabreach ofthestandards (fortheprofessional, forclients, etc.)?
TheSociety develops accounting andauditing standards andmonitors theirimplementation.
Theconsequences ofabreach ofthestandards bymembers oftheSociety depend onthe
seriousness ofthebreach andcaninclude reprimands, suspension ofpractising certificate,
suspension ofmembership orexclusion from membership.
Theconsequences ofmaterial breaches ofaccounting standards byclients willusually bea
qualified audit report.
14. Aretheinternational standards developed byIFAC (International Education Standards and
Guidelines, International Standards onAuditing) andIASC (International Accounting
Standards) recognised orusedinyourcountry? Ifyes,please explain how. Ifno,please
explain why.
TheSociety isamember ofIFAC andIASC andundertakes touseitsbestendeavours toensure,
totheextent possible under local circumstances, thatinternational accounting andauditing
standards arecomplied withinHong Kong. Currently, allHong Kong accounting andauditing
standards areinmaterial respects incompliance withinternational standards. Inaddition, it
istheSociety 'spolicy touseinternational standards asabaseforthedevelopment offuture
standards inHong Kong.
15. Inrelation towhich activities does aparticular ethical code exist (audit, accounting,
insolvency, other)? Please specify itsmain policy objectives.
Theethical codecomprises ethical statements andguidelines issued bytheSociety andcovers
general principles applicable toallprofessional accountants aswellasspecific statements and
guidance applicable toauditing, management consulting, taxation, insolvency aswellas
accounting andgeneral responsibilities ofmembers notinpractice. Themainpolicy objectives
aretodevelop asetoflocally enforceable ethical provisions which aremeant topromote and
maintain ahighstandard ofprofessional conduct andtogiveguidance toourmembers onvarious
aspects ofprofessional ethics.
16. Which bodyorinstitution develops thiscodeandmonitors itsimplementation? What are
theconsequences incaseofbreach oftheethical codebyaprofessional orafirm?
TheSociety develops thecodeofethics andmonitors itsimplementation. Theconsequences
ofabreach ofthecodedepend upontheseriousness ofthebreach andcaninclude reprimands,
suspension ofpractising certificate, suspension ofmembership orexclusion frommembership.
These sanctions apply tofirms alike.S/WPPS/W/7/Add.13
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17. Arethere restrictions onmarketing, solicitation, advertising?
Yes. There arerestrictions onmarketing, solicitation andadvertising bypractising members
andfirms. Principally, these areasfollows:
a) aCPA oraCPA firmmaynotadvertise theirservices;
b) cold-calling anddirect mailing areprohibited;
c) aCPAmaynotgivecommissions, feesorrewards tothirdparties (other thanhisown
employees oranother CPA) fortheintroduction ofaclient;
d) other publicity ispermitted subject tocertain guidelines.
18. Arethere restrictions onfee-setting (minimum/maximum levels imposed, indicative scale,
etc.)?
There arenorestrictions onfeesetting except thatpercentage andcontingency feesarenot
permitted forauditing orsimilar work norinrespect ofpreparation oftaxreturns.
IV. LICENSING REQUIREMENTS AND PROCEDURES
19. Apart fromthequalification requirements, whatarethelicensing requirements forindividuals
inyourcountry?
Aperson qualifies toberegistered withtheSociety asaprofessional accountant ifheiseither
afullmember ofanoverseas institute byexamination which isrecognised bytheSociety for
membership purpose, (alistoftheseoverseas institutes isfound intheNotes oftheapplication
form), orhaspassed theSociety 'sprofessional examinations. Membership applicants arealso
required tocomply withtheapproved accounting experience requirement of3-5years depending
onone'sacademic qualification.
Toqualify forapractising certificate, onemust beamember oftheSociety, beordinarily
resident inHong Kong, passexaminations onHong Kong Company LawandTaxation, and
havenotlessthanfouryears'full-time auditexperience, (30months incaseofpost-qualification
experience), atleastoneyearofwhich mustbegained inHong Kong within three years from
thedateofapplication. Notlessthanoneyearofsuchfull-time audit experience shallhave
beenacquired aftertheapplicant hasbecome amember oftheSociety oranoverseas institute
which isrecognised bytheSociety formembership purpose.
20. Arethere anyconditions imposed tobeeligible formembership oftherelevant professional
body(ies)? Please specify.
Apart from those indicated inQ.19, there arenoother conditions imposed ontheeligibility
ofaperson formembership oftheSociety.
21. Arethere specific licensing requirements forprofessional firms?
Only professional accountants mayregister afirmofCPAs withtheSociety. Basically CPA
firms should berunbyCPAs, butprofessional accountants whoarenotCPAs maybeadmitted
aspartners ofaCPA firmsubject tocertain rules, e.g.thenumber of"non-CPA partners"
isrestricted tonotexceeding one-third ofthetotalnumber ofpartners ofaCPA firm.S/WPPS/W/7/Add.13
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"Non-CPA partners" arenotpermitted tosignaudit reports astheydonotholdpractising
certificates.
22. Cananapplication forlicensing befiledatanytimeoftheyearorarethere specific dates
torespect? Howlongdoesittaketocomplete thewhole licensing procedure? Please specify
incaseofdifferences between individuals andfirms.
Anapplication fortheregistration asaprofessional accountant oraCPAfirmorfortheissue
ofapractising certificate canbefiledatanytimeoftheyear. Such applications willbe
considered bytheSociety 'sRegistration andPractising Committee which meets atleastonce
every three months. Itnormally takes sixweeks tocomplete thewhole licensing procedure
depending onthedateofsubmission ofanapplication. Theabove applies toindividuals and
firms alike.
23. Arethere differences interms oflicensing requirements and/or procedures, according to
theactivities covered bythelicence (audit, insolvency, etc.)? Please specify. What kind
ofdocumentation isnecessary/accepted? Aredocuments issued inother countries acceptable?
Please specify.
Alicence i.e.apractising certificate isonlyrequired fortheprovision ofauditing services.
Details ofthenecessary documents insupport ofsuchapplications canbefound intheNotes
oftheapplication form. There isnodiscrimination against documents issued inothercountries.
24. What happens when thelicensing conditions arenolonger respected bytheindividual or
thefirm?
There areprovisions intheProfessional Accountants Ordinance empowering theCouncil of
theSociety toremove thename ofaprofessional accountant oraCPAfirmfromtheregister
oftheSociety andtocancel apractising certificate.
V. RECOGNITION OFQUALIFICATIONS
25. Arethereanypossibilitiesfortakingaccountofqualificationsacquiredbyforeignprofessionals
inanother country? Arethere bilateral agreements withother countries inthisrespect?
26. Arethere anyautomatic recognition ormutual recognition agreements between your
professional bodies andtheircounterparts inother countries? Ifso,please specify themain
characteristics ofsuchagreements; ifnot,please explain why.
27. Where possibilities oftaking account offoreign qualifications exist, isafulllocalexamination
oralocaltraining exceeding 12months required? Please specify. Isalocallicence always
necessary topractice aregulated accountancy activity? Please specify when thisisnotthe
case.
28. Whataretheaccreditation/licensingrequirementsimposedonforeignprofessionalsauthorised
topractice intheirhome country? Maycertain (regulated) activities becarried outonthe
basis ofaforeign licence?
[Secretariat Note: Thefollowing textresponds toquestions 25to28inclusively: ]
There arenobilateral agreements, automatic recognition normutual recognition agreements
(MRAs) between theSociety andother overseas accountancy bodies. However, fullmembers
ofoverseas accountancy bodies recognised bytheSociety formembership purpose mayregisterS/WPPS/W/7/Add.13
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asmembers oftheSociety provided thattheywerequalified through examinations andsatisfy
theSociety 'spractical experience requirements.
Werecognise thequalifications offered by14overseas accountancy bodies. Wehaveattempted
tonegotiate MRAs withsome ofthese bodies butourentry academic qualification, which is
not"graduate entry", hasputsuchnegotiations toaquick stop. Wehavenotapproached other
overseas accountancy bodies asthere islittledemand forsuchMRAs tobenegotiated.
Aswearehaving anoverall review ofouraccreditation programme which willbegin in1999
(andwhich willrequire graduate entry), wehavereserved ourposition untilthenewsystem
istobeputinplace.
Individuals admitted asmembers oftheSociety byvirtue ofrecognised foreign qualifications
arerequired tositandpassexaminations onHong Kong Company LawandTaxation ifthey
wishtotakeoutapractising certificate andperform statutory audits inHong Kong. Onlyholders
ofavalid practising certificate issued bytheSociety mayperform statutory audits inHong
Kong.
VI. REGULATIONS GOVERNING THE ESTABLISHMENT OFACOMMERCIAL
PRESENCE
29. Arethere anyrestrictions ontheform under which onecanestablish (partnership,
incorporation, other)? Please specify.
Atpresent, apublic accounting practice inHong Kong maybeestablished intheform ofa
sole-proprietorship orpartnership CPA/PA firmbyregistering withtheSociety.
InJuly1995, theLegislative Council ofHong Kong passed legislation enabling auditpractices
inHong Kong toincorporate. Thelegislation hasnotyettaken effect pending theappointment
ofaneffective datewhile therules andregulations aretobeprepared, which isexpected to
befinalised soon. Under theprovisions ofthenewlegislation, onlymembers oftheSociety
willbeeligible tobedirectors andshareholders ofacorporate practice; alldirectors mustbe
shareholders andviceversa; thedirectors andshareholders maynotthemselves becorporations;
notlessthantwo-thirds ofthedirectors andmembers ofacorporate practice mustbeCPAs,
andnotlessthantwo-third ofthevoting shares mustbebeneficially heldbyCPAs. However,
inthecaseofasolepractitioner corporate practice, oneoftheshareholders may, withthe
permission oftheHKSA Council, beaperson whoisneither aCPAoramember oftheSociety.
Insuchcases, theother shareholder, whomustbeaCPA, mustholdalltheshares except one
andthenon-member shareholder mustholdtheremaining share intrustoftheCPAshareholder.
Another condition laiddown forcorporate practices isthatevery corporate practice isrequired
totakeoutProfessional Indemnity Insurance.
30. Arethere restrictions onforeign direct investment andownership, including restrictions
applying tonotlocally qualified individuals orfirms? Please specify.
Regulations governing theestablishment ofacommercial presence asdetailed inanswer to
Q.29 above apply tobothlocalandforeign individuals andfirms. There isnorestriction on
financial links withforeign firms orinternational firms/networks.S/WPPS/W/7/Add.13
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31. Isthere arequirement ofaminimum number orpercentage oflocal directors, managers
orstaff(please specify)?
Norules ofthesaidnature apply tomanagers orstaff. However, themajority ofpartners
ordirectors ofaCPApractice needtobelocalalthough non-resident partners ordirectors are
permissible.
32. Arethererestrictionsontheabilityoflocallyestablishedfirmstodevelopinternationalrelations
(membershipofaninternationalnetwork,associationwithforeignfirms,etc.)?Pleasespecify.
No.
33. Istheuseofinternational orforeign names restricted forfirms?
No,butonlythoseforeign/international firms which areunder thejurisdiction ofanaccountancy
bodyrecognised bytheSociety formembership purposes areallowed toregister inHong Kong
andanofficial letter ofconsent from theexisting international orforeign firms giving their
authorization fortheproposed localpartners toregister thefirmname inHong Kong isrequired.
VII. REGULATIONSGOVERNINGTHEENTRYANDTEMPORARYSTAYOFNATURAL
PERSONS FOR THE PURPOSE OFSUPPLYING ACCOUNTANCY SERVICES
34. Istheentry andstayofprofessionals subject tolabour market testsoranyother restrictions?
Please specify.
[and]
35. Isthere anyprocedure facilitating thetemporary entry andstayofprofessionals tosupply
accountancy services? Please explain.
Anemployment visaisrequired forforeign individuals whoarenotUKcitizens orwhoare
notHong Kong residents toenter andstayinHong Kong forthepurpose ofsupplying
accountancy services.
36. Arethere anyrestrictions onhiring oflocalprofessionals byforeign firms andprofessionals?
Please explain.
No.
VIII. NATIONALITY/RESIDENCY REQUIREMENTS
37. Isacondition ofnationality/citizenship imposed topractice certain activities, tostartan
education, toobtain alicence, tobecome member ofaprofessional body, etc.? Please specify.
No.S/WPPS/W/7/Add.13
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38. Isacondition ofestablishment, prior residency orresidency imposed topractice certain
activities, toobtain alicence, tobecome member ofaprofessional body, etc.? Please specify
theconditions andthedefinition ofestablishment, residency, etc.when relevant. Isitpossible
tohaveaprofessional establishment inmore thanonecountry?
Noresidency requirements arerequired formembership oftheSociety. However, aCPA
isrequired tobeordinarily resident inHong Kong. Aperson shallbetreated asordinarily
resident inHong Kong ifhehasbeenpresent inHong Kong fornotlessthan180daysinthe
preceding 12months fromthedateofapplication forapractising certificate. Insofarasthe
licensing requirements inHong Kong aremet,itisalways possible foraforeign accountancy
firmtoestablish anaccountancy practice inHong Kong. There aremany international
accountancy firms having anestablishment inHong Kong.