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April 15, 2019

HKICPA takes disciplinary action against Deloitte

By Joe Pickard

The Hong Kong Institute of Certified Public Accountants (HKICPA) has fined Deloitte Touche Tohmatsu and three of its staff, Wong Wang Hei, Tsang Yiu Chung, and Lui Chi Wang, for their ‘failure or neglect to observe, maintain or otherwise apply professional standards issued by the Institute’.

Wong and Tsang were ordered to pay HK$60,000 ($7,653) each, Lui to pay HK$80,000, and Deloitte to pay HK$150,000. They were also ordered to jointly pay for the cost of the disciplinary proceedings, totalling HK$121,867.70.

Deloitte Audited the financial statements of Hong Kong listed company China Vision Media Group, now known as Alibaba Pictures Group, and its subsidiaries for the four years ended 31 December 2010-2013 and issued unqualified opinions on those financial statements.

Wong and Tsang were engagement partners of the 2010 and 2011 audits, respectively, and Lui was the engagement partner of the 2012 and 2013 audits.

Convertible bonds issued by the company in an acquisition exercise in 2010 were wrongly valued due to the use of incorrect currency exchange rates. This led to the misstatements in goodwill, gain from disposal of subsidiaries, effective interest expenses and exchange differences in the financial statements for the four years.

During the audits, Deloitte identified the misstatements which were ‘clearly not trivial’. However, the firm did not accumulate the misstatements and communicate them to the company’s management, request that management correct the misstatements or request written representation from management.

Deloitte, Wang, Tsang and Lui admitted to the complaints made against them.

IAB has contacted Deloitte for comment and will update this article once a comment has been received.

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