The Hong Kong Institute of Certified Public Accountants (HKICPA) has reprimanded EY, Kowk Chee Tack and Wong Kam Man for their failure to observe and maintain professional standards issued by the institute.

Total fines amount to HK$700,000 ($89,172) and extra legal fees of HK$1.5m have been included. The companies affected under common ownership include Gold Wo International Holdings, Fu Cheong International Holdings and Yue Fung International Group Holding. EY was the reporting accountant for the three companies during the years of 1997-2002.

EY provided audit services for the three companies, whilst Wong was the engagements partner of the Gold Wo engagements and Kwok was the engagement partner of the Fu Cheong and Yue Fung engagements.

The decision to reprimand EY and the two partners has brought a conclusion to a 16 year long case.

The International Accounting Bulletin has received a comment from HKICPA stating: “Suspicion of irregularities emerged with the arrests in 2002. In 2003, the Institute agreed to convene an Investigation Committee. However HKIPCA investigation was put on hold while ICAC conducted prosecution of individuals.”

It was only after the criminal proceedings concluded that the HKIPCA was able to recommence the investigation in 2010 and was only able to obtain the necessary documents in 2013 when the ICAC case closed. After a period of time where the case files were examined thoroughly the disciplinary order was then released in 2018.

The main findings from The Investigation Committee report that EY and Wong were in breach of Statement Auditing Statements (SAS) in relation to Gold Wo engagements for deficient auditing work in the areas of sales and receipts of sales, purchases and related cash disbursements, and long-term investments.

They also failed to adequately review the preceding auditors’ work for 1998 and 1999, to document the work performed as part of the review and to perform relevant analytical procedures.

Similarly the Committee found, in relation to the Fu Cheong engagements and Yue Fung engagements, EY and Kwok were in breach for their deficient audit work in the areas of sales and receipts for sales, and purchases and related cash disbursements.

Overall, EY had expressed unmodified opinions in the accountants’ reports for the three companies. It also expressed unmodified auditor’s opinions on the consolidated financial statements of Gold Wo and its subsidiaries for accounting periods in the years, 2000-2002, of Fu Cheong and its subsidiaries for accounting periods in the years 2000-2001 and of Yue Fung and its subsidiaries for accounting periods ended in the years from 1999-2002.

The three firms were de-listed in 2005 and relevant criminal proceeding were concluded in 2010 where various individuals including members of the company’s management were found guilty of conspiring with others to defraud stakeholders by falsifying financial records and statements.

The International Accounting Bulletin did not receive comment from EY by the time this article was published.


By Mishelle Thurai