Communication paper on the Revision of Practice Review ...app1.hkicpa.org.hk/qa/practice_reviews/comm_doc/PRC_CommPaper.pdfCommunication paper on the Revision of Practice Review Programme

Revision ofPractice ReviewProgramme &Practice ReviewQuestionnaire

Communication paper on the

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Sections

1. Introduction

Revision of the Practice Review Programme

(i) Adoption of a risk-based approach 1.1 to 1.3

(ii) The International Federation of Accountants’ 1.4 to 1.6Statement of Membership Obligations 1

Communication paper 1.7 to 1.8

Timetable 1.9

2. Principles for the development of the revised Programme

Definition of risk 2.1 to 2.6

Other principles under the revised Programme 2.7 to 2.9

3. Development of the revised Programme

Considerations 3.1 to 3.5

Selection primarily on the basis of risk 3.6 to 3.8

The Questionnaire 3.9 to 3.18

The review methodology 3.19 to 3.21

4. Invitation for feedback on the proposed Questionnaire 4.1 to 4.3

Members of the Practice Review Consultancy Steering Group andSecretariat

Appendix: Proposed Questionnaire

Content

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1

1. Introduction

Revision of the Practice ReviewProgramme

Adoption of a risk-based approach

1.1 The Hong Kong Institute of Certified Public

Accountants’ Practice Review Programme

(“Programme”) commenced in 1992

following the introduction of a new

Part IVA of the Professional Accountants

Ordinance. The statutory provisions deal

with matters relating to the establishment

and appointment of members of the

Practice Review Committee, which is

responsible for the operation of the

Programme, and cover other matters such

as the conduct of practice reviews, powers

of the Practice Review Committee, powers

of reviewers, referrals of disputes, immunity

and secrecy. The purpose of practice review

is to ensure that practice units maintain,

observe and apply professional standards,

such that the quality of their work is

maintained and enhanced.

1.2 Practice units which are subject to practice

review are defined in the Professional

Accountants Ordinance as firms, corporate

practices or individuals practising in their

own names. The “random” selection

method was adopted when practice review

was first introduced in 1992. The intention

was that all practice units would be

reviewed on a cyclical basis. Experience

however has shown that this cannot be

achieved as the number of practice units

is growing and there are now about 3,000

practice units.

1.3 With a view to making the Programme

more efficient and effective, the Council

of the Institute decided to revise the

Programme which will adopt a risk-based

approach.

The International Federation of Accountants’

Statement of Membership Obligations 1

1.4 In April 2004, the International Federation

of Accountants (“IFAC”) issued its

Statement of Membership Obligations 1

(“SMO 1”). SMO 1 sets out the obligations

of member bodies of IFAC in relation to

quality assurance review programmes.

1.5 SMO 1 is effective for reviews commencing

on or after 31 December 2005.

1.6 The revised Programme will comply with

the provisions in SMO 1.

Hong Kong Institute of CPAsCommunication paper on the Revision ofPractice Review Programme & Practice Review Questionnaire

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2. Principles for the developmentof the revised Programme

Definition of risk

2.1 The revised Programme will adopt a risk-

based approach. This approach will apply

in each component of the revised

Programme including the selection of

practice units for reviews and the

development of review methodology.

2.2 Definition of risk under the risk-based

approach is originated from HKSQC 1 with

which the revised Programme will monitor

practice units’ compliance.

2.3 Paragraph 11 of HKSQC 1 states:

“Of particular importance is the need for

the firm’s leadership to recognize that the

firm’s business strategy is subject to the

overriding requirement for the firm to

achieve quality in all the engagements that

the firm performs. Accordingly:

(a) The firm assigns its management

responsibilities so that commercial

considerations do not override the

quality of work performed;

(b) The firm’s policies and procedures

addressing performance evaluation,

compensat ion, and promot ion

(including incentive systems) with

regard to its personnel, are designed

to demonstrate the firm’s overriding

commitment to quality; and

2

Communication paper

1.7 This communication paper aims at

providing information about the progress

on the revision of the Programme and

inviting feedback on the proposed self-

assessment questionnaire (“Questionnaire”)

developed for the revised Programme.

1.8 The Institute plans to issue another

communication paper later this year

after the substantial completion of the

development of the revised Programme.

Timetable

1.9 The In s t i tu te i s cons ide r ing the

commencement date within 2006 for

implementation of the revised Programme,

which will take into account factors such

as the effective dates of Hong Kong

Standard on Quality Control 1 “Quality

Control for Firms That Perform Audits and

Reviews of Historical Financial Information,

and Other Assurance and Related Services

Engagaements” (“HKSQC 1”) and Hong

Kong Standard on Auditing 220 “Quality

Control for Audits of Historical Financial

Information”. Members will be kept

informed of the implementation date when

this has been more precisely determined.

Hong Kong Institute of CPAsCommunication paper on the Revision of

Practice Review Programme & Practice Review Questionnaire

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(c) The firm devotes sufficient resources for

the development, documentation and

support of its quality control policies

and procedures.”

2.4 The Institute considers that it is a reasonable

presumption that an individual practice unit

cannot set rules for the market of audit and

assurance engagement services but instead

adjusts to the driving forces, imposed by the

environment, in the market. Each practice

unit will need to assess environmental risks

which will affect how a practice unit sets its

business strategy for the compliance with

paragraph 11 of HKSQC 1.

2.5 In setting the business strategy, including

commercial considerations, a practice unit

needs to ensure that the environmental

risks are addressed by having the policies

and procedures, and sufficient resources in

place for the policies and procedures.

2.6 Risk under the risk-based approach in the

revised Programme is defined to include a

practice unit’s ability or otherwise to address

the environmental risks, the existence

or otherwise of the necessary policies

and procedures it puts in place, and the

existence or otherwise of sufficient

resources of it to put in place the necessary

policies and procedures.

Other principles under the revisedProgramme

2.7 Practice review is primarily preventive in

nature with the scope, under paragraph

4(g) of SMO 1, of reviewing whether a

practice unit has an adequate system of

quality control, is in compliance with such

system and has adhered to professional

standards and regulatory and legal

requirements in performing engagements.

2.8 Pract ice rev iew under the rev ised

Programme will be primarily proactive in its

approach because, under the risk-based

approach, practice units with higher risk

profiles will be prioritised for reviews.

2.9 Under the revised Programme, practice

review will be a reasonable level assurance

engagement under Hong Kong Framework

for Assurance Engagements and Hong

Kong Standard on Assurance Engagements

HKSAE 3000 “Assurance engagements

other than audits or reviews of historical

financial information” based on the

following:

• Paragraph 15 of SMO 1 which states

that:

“... the program should be designed to

obtain reasonable assurance that:

3Hong Kong Institute of CPAsCommunication paper on the Revision ofPractice Review Programme & Practice Review Questionnaire

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(i) The firm has an adequate system

of quality control for its practice

relating to audits of financial

statements of listed entities (and

of other entities or engagements

the member body includes);

(ii) The firm complies with that

system; and

(iii) The firm and engagement teams

have adhered to professional

standards and regulatory and legal

requirements in performing audits

of financial statements selected for

review.” (emphasis added)

• The system of quality control under

paragraph 15 of SMO 1 i s in

accordance with that of HKSQC 1,

which states in its paragraph 3 that:

“The firm should establish a system of

quality control designed to provide it

with reasonable assurance that the firm

and its personnel comply with

professional standards and regulatory

and legal requirements, and that

reports i s sued by the f i rm or

engagement partners are appropriate

in the circumstances.” (emphasis added)

• “Reasonable assurance” is defined in

paragraph 6(m) of HKSQC 1 to mean

a high, but not absolute, level of

assurance.

• It is considered that the level of assurance

for practice review should also have

regard to its unique role in the regulatory

framework which supports Hong Kong

as an international financial centre, and

the comparative practice review

programmes in other countries.

4Hong Kong Institute of CPAs

Communication paper on the Revision ofPractice Review Programme & Practice Review Questionnaire

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3. Development of the revisedProgramme

Considerations

3.1 The revised Programme is developed within

the existing legislative framework as set out

in Part IVA of the Professional Accountants

Ordinance. However, where necessary,

changes to the legislation will be introduced.

3.2 The risk-based approach will ensure a suitable

annual coverage of different sizes of practice

units such that the scope, depth and

frequency of practice review work will

enhance the credibility of the revised

Programme to the public and other

regulators.

3.3 The revised practice review methodology,

documentation and supporting systems of

the revised Programme will comply with the

requirements of SMO 1.

3.4 The revised Programme is being tailored

to Hong Kong environment after due

consideration of the practices adopted

overseas.

3.5 The practice review methodology will enable

a practice review to be completed as efficient

as possible, but documentation of findings

will be sufficient enough, if needed, to enable

a complaint to be raised by the Practice

Review Committee.

Selection primarily on the basisof risk

3.6 The definition of risk, which is discussed in

sections 2.1 to 2.6 above, applies in the

selection of practice units for reviews.

3.7 Under the revised Programme, practice

units will be selected for reviews primarily

based on their risk profiles identified from

a desktop review process which analyses

a pract ice unit ’s responses in the

Quest ionnai re and other re levant

information. A small sample of practice

units will also be selected for reviews on a

random basis to ensure that all practice

units will have a chance of being selected

for practice review.

3.8 The impact of individual risk factors to the

risk profiles of practice units could be

d i ffe rent depend ing on how the

environmental risks affect the practice units

in question. A guideline which will assist

the Practice Review Committee to assign

risk scores to practice units is under

development.


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The Questionnaire

3.9 There are two phases in the development

of the revised Programme. The first phase

invo lves the deve lopment of the

Questionnaire.

3.10 The Institute has sought external expertise

in the development of a revised Programme

adopting a risk-based approach.

3.11 The Practice Review Consultancy Steering

Group (“Steering Group”) has been

established by the Council of the Institute

to identify the appropriate candidates to

act as the consultant, and to monitor and

steer the work of the consultant for the

development of the revised Programme.

3.12 On the basis of the Steering Group’s

recommendation, the Institute appointed

Joint Monitoring Unit Limited (“JMU”) of

the United Kingdom as the consultant to

ass i s t in the deve lopment of the

Questionnaire.

3.13 JMU has over ten years of experience of

adopting a risk-based approach and

using questionnaire as the tool to collect

informat ion about pract ice uni ts ’

risk profiles.

3.14 The development of the Questionnaire

has been completed, subject to further

refinements identified from a pilot-

testing exercise.

3.15 The Questionnaire has to be completed

annually by all practice units.

3.16 A copy of the proposed Questionnaire

approved by the Council of the Institute

is at the Appendix to this communication

paper. The Questionnaire will collect the

following 3 main categories of information

about a practice unit:

• Organisation and management of the

practice unit.

• Quality control policies and procedures

established by the practice unit in

relation to audit and assurance work.

• Client profile of the practice unit.

3.17 The proposed Questionnaire contains

around 100 questions. Most of the

questions require a “yes/no” answer, but

some questions such as those on the

organisation and management of the

practice unit and client profile information

require quantitative data. Some questions

require narrative answers which do not

carry risk scores.



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3.18 The Questionnaire may also serve as a

tool for practice units to self-assess their

own system of qual i ty controls as

required under HKSQC 1.

The review methodology

3.19 The second phase development of the

rev ised Programme re lates to the

development of the review methodology,

the related documentation and the

support systems.

3.20 The Institute has adopted a global tender

from interested parties for the position of

consultant to assist the second phase

development, and the Inst itute of

Chartered Accountants of England & Wales

has been selected as the consultant.

3.21 The principles, which are discussed

in sections 2.1 to 2.9 above, apply in the

second phase development of the revised

Programme.

4. Invitation for feedback on theproposed Questionnaire

4.1 As part of the pilot-testing exercise, the

Institute welcomes your feedback on the

proposed Questionnaire enclosed at the

Appendix to this communication paper.

4.2 Please let the Institute have your feedback,

if any, on the proposed Questionnaire on

or before 30 September 2005 by sending

it to:

Stephen ChanExecutive DirectorHong Kong Institute of CPAs4th Floor, Tower 2, Lippo Centre89 QueenswayHong Kong

(Fax No.: 2865 6603; Email: [email protected])

If you have any questions concerning this

communication paper, please address

them to Stephen Chan.

4.3 Th i s commun i ca t i on pape r and

the proposed Questionnaire are also

available at the Institute’s website

www.hkicpa.org.hk/qa/practice_reviews/

comm_doc/PRC_CommPaper.pdf

July 2005


mailto:[email protected]

http://www.hkicpa.org.hk/qa/practice_reviews/comm_doc/PRC_CommPaper.pdf

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Practice Review ConsultancySteering Group

Kenneth Morrison (Chairman)

William Crowe

Philip Fung

H. M. Lam

Robin Radcliffe

Dennis Wong

Paul F. Winkelmann

Secretariat

Stephen ChanExecutive Director (since April 2005)

Colin ChauDirector of Compliance (up to January 2005)

Roger LeeAssistant Director, Quality Assurance



PracticeReviewSelf-AssessmentQuestionnaire

APPENDIX

Feedback on the attached proposed Questionnaire is required to bereceived by the Institute on or before 30 September 2005.

Feedback may be sent by mail, fax or e-mail to:

Stephen ChanExecutive DirectorHong Kong Institute of CPAs4th Floor Tower Two, Lippo Centre89 QueenwaysHong Kong

Fax number (852) 2865 6603Email: [email protected]

mailto:[email protected]

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1

Pages

Section 1. Declaration 2

Section 2. Organisation and management of the practice 3 - 9

Section 3. Quality control in the practice 10 - 26

Section 4. Client profile information 27 - 29

Glossary of Terms A1 - A11

Content

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ISSUE DATE

PRACTICE REVIEW SELF-ASSESSMENT QUESTIONNAIRE

Name of Practice: (“Practice”)

Mode of Practice: A Certified Public Accountant (Practising) practising on his / her own account

A Firm of Certified Public Accountants (Practising)

A Corporate Practice

Practising Certificate Number (for a CPA (Practising) practising on his / her own account) OR

Practice Registration Number (for a Firm of CPA (Practising) or a Corporate Practice) :

Accounting Reference Period:

From Day Month Year

To Day Month Year

Note: Questions contained in this Questionnaire relate to situations within theAccounting Reference Period.


Practice ReviewSelf-Assessment Questionnaire

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1. DECLARATION

I / We confirm that the Practice has applied all reasonable efforts to ensure the factual accuracy

of the information provided in this Questionnaire. To the best of my / our knowledge and

belief, the information provided in this Questionnaire is complete and accurate.

I / We confirm that the Practice will retain the information and supporting documentation used

in the completion of this Questionnaire and that the information and supporting documentation

will be made available for examination by a practice reviewer during a site visit.

Signed for and on behalf of the Practice:

The inclusion of inaccurate information or omission of providing information in thisQuestionnaire may be regarded as a serious matter that may lead to disciplinary action.

Family Name:

Other Name(s):

Position:

HKICPA Membership Number:

Practising Certificate Number:

Date: Day Month Year

2Hong Kong Institute of CPAsPractice ReviewSelf-Assessment Questionnaire

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2. ORGANISATION AND MANAGEMENT OF THE PRACTICE

2.1 Office location(s) Example

Address: 4th Floor, Tower Two, Lippo Centre, 89 Queensway

Telephone: 2287 7228 Facsimile: 2865 6776

Email: [email protected]

Is there a full time resident Practising Principal in the office?

YES NO

Office 002

Address:

Telephone: Facsimile:

Email:


YES NO

Office 004

Address:


Email:


YES NO

Office 006

Address:


Email:


YES NO

Office 008

Address:


Email:


YES NO

Office 010

Address:


Email:


YES NO

Office 001 (Registered Office)

Address:


Email:


YES NO

Office 003

Address:


Email:


YES NO

Office 005

Address:


Email:


YES NO

Office 007

Address:


Email:


YES NO

Office 009

Address:


Email:


YES NO



✓

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Please list the name(s) of all the Principal(s) and Authorised Signatory(ies) of the Practice as

defined in the Glossary of Terms for this Questionnaire.

Please provide detailed breakdown of the time spent on audit and assurance work during the

Accounting Reference Period by Principal(s) and Authorised Signatory(ies):

2.2 Name(s) and Details of Principal(s) and Authorised Signatory(ies)

Family Name Hours Charged toClients on Audit /Assurance Work

Resident Office(Office Number

in Part 2.1)

PractisingCertificateNumber

HKICPAMembership

Number

Other Name (s)

2.2.1 Practising Principal(s)

Example Doe John A99999 P99999 005 800

Total


2.2.2 Non - practising Principal(s)

Example Doe Mary A77777 005 100

Total

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Family Name Hours Charged toClients on Audit /Assurance Work

Resident Office(Office Number

in Part 2.1)


HKICPAMembership

Number

Other Name (s)

2.2.3 Authorised Signatory(ies)

Example Doe Peter A66666 P66666 005 200

Total



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2.3 Practising Principal(s) and Authorised Signatory(ies) of the Practiceworking in other practices

If a Practising Principal(s) and/or an Authorised Signatory(ies) also practisesin other practices, please provide the registration number of those practices below


Involvement in other practices

Practice ARegistration number*

Practice BRegistration number*

(* HKICPA Membership Number if the Principal is a Certified Public Accountant (Practising) practising on his / her own account)

Example P99999 A99999 M99999

2.3.1 Principal(s)

2.3.2 Authorised Signatory(ies)


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2.4 Number and Details of Staff

2.4.1 Does the Practice have Staff?

2.4.2 For a Practice WITH Staff, please provide the following analysis of Staff by

office location:

Resident Office(Office Numberin Part 2.1)

Audit Staff

Qualified Not QualifiedOther Staff

TotalNumber of Staff

001

002

003

004

005

006

007

008

009

010

Total

NoYes



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2.5 Office(s) WITHOUT a full time resident Practising Principal /Authorised Signatory

2.5.1 Does the Practice have office(s) WITHOUT a full time resident Practising Principal /

Authorised Signatory?

If the answer is “YES”, please complete questions 2.5.2 to 2.5.8.

If the answer is “NO”, please select “N/A” for questions 2.5.2 to 2.5.8.

2.5.2 Is there a process to ensure that audit / assurance work is properly supervised

by a Practising Principal(s) / Authorised Signatory(ies) ?

2.5.3 Does a Practising Principal(s) / Authorised Signatory(ies) approve all audit /

assurance plans before commencement of the audit / assurance work?

2.5.4 Is there a process to ensure all important meetings held with audit / assurance

clients are attended by a Practising Principal(s) / Authorised Signatory(ies) ?

2.5.5 Does a Practising Principal(s) / Authorised Signatory(ies) review and sign off all

audit / assurance files before the audit / assurance reports are signed and

released to clients?

2.5.6 Does the Practice have procedures in place to ensure that all outgoing

correspondence to clients which contain opinion(s) binding the Practice is signed

by a Practising Principal(s) / Authorised Signatory(ies) ?

2.5.7 Is there formal delegation, to a named individual(s), of responsibility for day to

day running of the office(s) in the absence of a Practising Principal(s) / Authorised

Signatory(ies) ?

If the answer is “YES”, please complete question 2.5.8.

If the answer is “NO”, please select “N/A” for question 2.5.8.

2.5.8 Is that individual(s) a member of the HKICPA?

NoYes N/A

NoYes N/A

NoYes

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

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NoYes N/A

NoYes N/A

NoYes N/A



2.6 Use of Sub-contractors

2.6.1 Does the Practice use sub-contractors to perform any audit / assurance work?



2.6.2 Are there written arrangements specifying responsibilities, supervision and

requirements regarding independence, confidentiality and competence of the

sub-contractors?

2.6.3 Is there a process to ensure that sub-contractors understand the Practice’s

latest policies and procedures when engaged to undertake work on behalf of

the Practice?

2.6.4 Are sub-contractors trained in the Practice’s audit / assurance procedures before

being allowed to undertake work on behalf of the Practice?

2.6.5 Are sub-contractors required to follow the procedures of the Practice including

the Practice’s audit / assurance procedures in respect of all audit / assurance

work undertaken on behalf of the Practice?

2.6.6 Do sub-contractors also practise in their own names or as Principals in other

practices?

2.6.7 Do sub-contractors provide non-audit services in their own names to audit /

assurance clients of the Practice?

NoYes

NoYes N/A

NoYes N/A

NoYes N/A

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3. QUALITY CONTROL IN THE PRACTICE

3.1 Quality control procedures applied by the Practice

3.1.1 Has the Practice established a system of quality control designed to provide it

with reasonable assurance that the Practice and its personnel comply with

professional standards and regulatory and legal requirements, and that reports

issued by the Practice are appropriate in the circumstances?

(Under HKSQC 1, a system of quality control consists of policies designed to

achieve the above objectives and the procedures necessary to implement and

monitor compliance with those policies.)



3.1.2 Does the Practice’s system of quality control include policies and procedures

that address each of the following elements:

(a) Leadership and responsibilities for quality within the Practice?

(b) Ethical requirements?

(c) Acceptance and continuance of client relationships and specificengagements?

(d) Human resources?

(e) Engagement performance?

(f) Monitoring?

3.1.3 Are the Practice’s quality control policies and procedures documented and

communicated to the Practice’s Principal(s), Authorised Signatory(ies) and Staff?

NoYes


NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

DRAFT

3.2 Leadership and responsibilities

If the answer is “YES” for question 3.1.2(a), please complete questions 3.2.1

and 3.2.2.

If the answer is “NO” for question 3.1.2(a), please select “N/A” for questions

3.2.1 and 3.2.2.

3.2.1 Has the Practice’s chief executive officer, or if appropriate the Practice’s

managing board of partners or directors, assumed ultimate responsibility for

the Practice’s system of quality control?

3.2.2 Has the chief executive officer (or equivalent) of the Practice been assigned

operational responsibility for the system of quality control?

If YES, the individual(s) to whom that responsibility has been assigned:

(a) Has/Have the sufficient and appropriate experience and ability?

(b) Has/Have the necessary authority to assume that responsibility?

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A



DRAFT


3.3 Ethical requirements

If the answer is “YES” for question 3.1.2(b), please complete questions 3.3.1

to 3.3.18

If the answer is“NO” for question 3.1.2(b), please select “N/A” for questions

3.3.1 to 3.3.18

Independence, integrity, objectivity and related matters

3.3.1 Does the Practice have arrangements in place to ensure that all Principal(s),

Authorised Signatory(ies) and Audit Staff who are engaged in audit / assurance

work maintain the following principles as set out in the HKICPA Statements of

Professional Ethics / Code of Ethics for Professional Accountants?

(a) Principle of confidentiality

(b) Principle of independence

3.3.2 Does the Practice require the completion of declarations of independence by

all Principal(s), Authorised Signatory(ies) and Audit Staff at the time of joining

the Practice and annually thereafter?



3.3.3 Have all declarations due at the most recent annual declaration date been

completed and assessed?

3.3.4 Is it the responsibility of the Engagement Principal to ensure that the

engagement team is independent of the audit / assurance client?



3.3.5 Does the Engagement Principal provide the Practice with relevant information

about client engagements, including the scope of services, to enable the Practice

to evaluate the overall impact, if any, on the independence requirements?

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

DRAFT



3.3.6 Is the assessment of independence performed as part of the Practice’s quality

control monitoring process?

3.3.7 Does the Practice maintain and regularly circulate to all Principal(s), Authorised

Signatory(ies) and Audit Staff a “prohibited investment” list?

If the Practice does not have prohibited investments, please select “N/A” for

this question.

3.3.8 Does the Practice have a nominated individual with responsibility for reviewing

and assessing the annual declarations?

If the answer to question 3.3.2 is “NO”, please select “N/A” for this question.

3.3.9 Does the Practice have an established procedure for the resolution of potential

independence issues that come to light ?

Identification of threats to independence and mitigating controls

3.3.10 Does the Practice have procedures in place to identify the following situations

covered in the HKICPA Statements of Professional Ethics / Code of Ethics for

Professional Accountants where there may be a potential threat to

independence?

(a) Fees - undue dependence on a client

(b) Actual or threatened litigation

(c) Personal relationships

(d) Financial involvement with or in the affairs of clients

(e) Loans

(f) Goods, services or hospitality

(g) Provision of other services to audit / assurance clients

(h) Using the same senior personnel on an audit / assurance engagement

over a long period of time

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

DRAFT

NoYes N/A


3.3.11 If the Practice has identified any situations listed above where there has been a

potential threat to independence, does the Practice have procedures in place

that adequately mitigate the threat by employing the safeguards set out in the

HKICPA Statements of Professional Ethics / Code of Ethics for Professional Accountants?

If none of the situations covered in the HKICPA Statements of Professional

Ethics / Code of Ethics for Professional Accountants has been identified, please

select “N/A” for this question.

3.3.12 If the Practice has clients of listed entities, does the Practice require the rotation

of the Engagement Principal after a pre-defined period, normally no more

than seven years, for all audits of financial statements of listed entities?

If the Practice does not have clients of listed entities, please select “N/A“ for

this question.

3.3.13 Does the Principal(s) or Staff have signing powers or other payment

authorisation on any bank accounts in the name of audit / assurance clients?



3.3.14 Does the Principal(s) or Staff who has the signing power also have the authority

to make management decisions of the audit / assurance client?

3.3.15 Does the Principal(s) or Staff who has the signing power have any input to the

audit / assurance process?

3.3.16 Is the signing power only exercised with the express written authority of the

client?

3.3.17 Is the exercise of the signing power restricted (in writing) to specific purposes?

3.3.18 Is the signing power used only for payroll purposes?

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

DRAFT

3.4 Acceptance and continuance of client relationshipsand specific requirements

If the answer is “YES” for question 3.1.2(c), please complete questions 3.4.1 to 3.4.3.

If the answer is “NO” for question 3.1.2(c), please select “N/A” for questions

3.4.1 to 3.4.3.

3.4.1 Has the Practice established policies and procedures for the acceptance and

continuance of client relationships and specific engagements designed to

provide assurance regarding:

• Integrity of the client;

• Capabilities, competence, time and resources within the Practice; and

• Compliance with ethical requirements,

(a) before accepting an engagement with a new client?

(b) when deciding whether to continue an existing engagement?

(c) when considering acceptance of a new engagement with an existing client?

3.4.2 Where issues have been identified under question 3.4.1 above and the Practice

has decided to accept or continue the client relationship or a specific

engagement, has the Practice documented how the issues were resolved?

If there were no issues identified under question 3.4.1, please select “N/A” for

this question.

3.4.3 Has the Practice established policies and procedures to apply on withdrawal

from an engagement or client relationship that include:

(a) discussions with the appropriate level of client management and those

charged with governance regarding the reasons for withdrawal and the

appropriate action to be taken?

(b) consideration of professional, regulatory or legal requirements?

(c) documentation of significant issues, consultations and conclusions?

NoYes N/A



NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

DRAFT

3.5 Human resources

If the answer is “YES” for question 3.1.2(d), please complete questions 3.5.1

to 3.5.4.

If the answer is “NO“ for question 3.1.2(d), please select “N/A” for questions

3.5.1 to 3.5.4.

3.5.1 Has the Practice established policies and procedures designed to provide

assurance that it has sufficient and competent personnel to perform its

engagements in accordance with professional standards, regulatory and legal

requirements that address the following issues:

• Recruitment;

• Performance evaluation;

• Capabilities;

• Competence;

• Career development;

• Promotion;

• Compensation; and

• The estimation of personnel needs?

3.5.2 Capabilities and competence

(a) Has the Practice’s CPA(s) complied with Statement 1.500 “Continuing

Professional Development” issued by the Institute?

(b) Are records maintained by the Practice to evidence the compliance withStatement 1.500 for all CPA(s)?

(c ) Has specifically tailored training been provided to take account of theaccounting, auditing and other technical requirements of:

(If the Practice does not perform engagements identified in (i) to (v) below,please select “N/A” for questions (i) to (v) below)

(i ) Engagements of listed entities?

(ii) Engagements of regulated entities?

(iii) Other specific types of engagements such as prospectuses and profitforecasts, interim reports or WebTrust services?

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A


DRAFT

(iv) Clients whose business is predominantly conducted on the internet?

(v) Computer auditing?

(d) Has specifically tailored training been provided to take into account of allnew accounting, auditing and assurance standards issued during the

Accounting Reference Period?

3.5.3 Performance evaluation, compensation and promotion procedures

(a) Are the Practice’s policies and procedures regarding performance evaluation,

compensation, promotion procedures and ethical principles communicated

to all Practising Principal(s), Authorised Signatory(ies) and Staff?

(b) Does the Practice provide performance and career development evaluation

and counselling for:

• Principal(s)?

• Authorised Signatory(ies)?

• Staff?

(c) Is a written record kept of any evaluation or counselling interviews?

(d) Is a written record kept of action taken as a result of evaluation or counselling

interviews?

3.5.4 Assignment of engagement teams

(a) Has the Practice established policies and procedures to ensure that

Principal(s), Authorised Signatory(ies) and Staff assigned to engagements

have the necessary capabilities, competence, time and authority to perform

their roles and the engagement in accordance with professional standards,

regulatory and legal requirements?

(b) Are the responsibilities of the Engagement Principal clearly defined and

communicated to that Engagement Principal?

(c) Are the identity and role of the Engagement Principal communicated to

key members of client management and those charged with governance?

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A



DRAFT

3.6 Engagement performance

If the answer is “YES” for question 3.1.2(e), please complete questions 3.6.1to 3.6.21.

If the answer is “NO” for question 3.1.2(e), please select “N/A” for questions3.6.1 to 3.6.21.

Audit methodology and procedures

3.6.1 Does the Practice use an Audit Manual?

If the answer is “YES” , please complete questions 3.6.1(a)(i) to (v).

If the answer is “NO” , please select “N/A” for questions 3.6.1(a)(i) to (v).

(a) Is the Audit Manual:

(i) Commercially available?

If YES, please specify:


(iii) Developed internally by the Practice?

(iv) Is the Audit Manual updated on a regular basis to take into account

changes in professional standards, regulatory and legal requirements?

(v) Do the procedures set out in the Audit Manual prescribe the direction,

supervision and review of audit work?

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

(ii) Produced by an international firm / practice of which the Practice is a

member?

If YES, please specify:

NoYes N/A

Title

Author

Publisher

Edition

Title

Author

Publisher

Edition

DRAFT



3.6.2 Does the Practice use a sample Audit Programme (generated as part of the

audit assessment and evaluation process) appropriately tailored to suit the

clients’ circumstances and the audit process?

If the answer is “YES”, please complete questions 3.6.2(a)(i) to (iv).

If the answer is “NO”, please select “N/A” for questions 3.6.2(a)(i) to (iv).

(a) Is the sample Audit Programme:

(i) Commercially available?

If “YES”, please specify:

Title

Author

Publisher

Edition

(ii) Produced by an international firm / practice of which the Practice is

a member?

If “YES”, please specify:

Title

Author

Publisher

Edition

(iii) Developed internally by the Practice?

(iv) Is the sample Audit Programme updated on a regular basis to take

into account changes in professional standards, regulatory and legal

requirements?

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

DRAFT


3.6.3 Does the Practice use a comprehensive Accounts Disclosure Checklist?

If the answer is “YES”, please complete questions 3.6.3(a) to (c).

If the answer is “NO”, please select “N/A” for questions 3.6.3(b) and (c).

(a) Please specify

Title / Edition

(b) Is the Accounts Disclosure Checklist developed internally by the Practice ?

(c) Is the Accounts Disclosure Checklist updated on a regular basis to take into

account changes in professional standards, regulatory and legal requirements

by a specifically dedicated person who is a member of the HKICPA?

3.6.4 Does the Practice use a set of comprehensive Specimen Accounts?

If the answer is “YES”, please complete questions 3.6.4(a) to (c).

If the answer is “NO”, please select “N/A” for questions 3.6.4(b) and (c).

(a) Please specify

Title / Edition

(b) Is the set of Specimen Accounts developed internally by the Practice?

(c) Is the set of Specimen Accounts updated on a regular basis to take into

account changes in professional standards, regulatory and legal requirements

by a specifically dedicated person who is a member of the HKICPA?

Specialised audit / assurance and control procedures

3.6.5 Does the Practice have any audit / assurance engagements on listed or regulated

entities?



3.6.6 Is specific documentation used to augment normal audit/assurance procedures?

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

DRAFT



Use of computer audit and interrogation software

3.6.7 Does the Practice have procedures for assessing whether specialist expertise in

computer audit procedures is required?



3.6.8 Does the Practice have clients which require specialist expertise in computer

audit procedures?

3.6.9 Does the Practice have any specialist expertise in computer audit procedures?

3.6.10 Are any Principal(s) and / or Staff designated as computer audit specialists?

3.6.11 Does the Principal(s) and / or Staff designated as computer audit specialists

receive appropriate training?

3.6.12 Does the Practice use any audit interrogation software?

Consultation / Differences of opinion

3.6.13 Has the Practice established guidelines to assist Principal(s) and Staff to identify

difficult and contentious matters that require consultation?

3.6.14 Are sufficient resources available to enable appropriate consultation to take

place?

3.6.15 Are the nature, scope and conclusions resulting from consultation documented?

3.6.16 Has the Practice established policies and procedures for dealing with and

resolving differences of opinion within the engagement team and with other

individuals (e.g. the engagement quality control reviewer) involved in the audit

process?



NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

DRAFT

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A


3.6.17 (a) Have the conclusions reached under question 3.6.16 been documented

and implemented?

(b) Has the report for the engagement not been issued until after the matter

regarding differences of opinion mentioned under question 3.6.16 has

been resolved?

Engagement Quality Control Review

3.6.18 Has the Practice established policies and procedures that require an Engagement

Quality Control Review for all audits of financial statements of listed entities?



3.6.19 Whether the Engagement Quality Control Review under question 3.6.18 was

completed before the report for the engagement was issued?

3.6.20 Has the Practice established policies and procedures setting out the criteria by

which audits, other than those of listed entities, are required to be subject to

an Engagement Quality Control Review?

3.6.21 Has the Practice established policies and procedures setting out:

(a) The nature, timing and extent of an Engagement Quality Control Review?

(b) The criteria for eligibility of engagement quality control reviewers through

the technical qualifications and the degree the reviewer can be consulted

on the engagement without compromising the reviewer’s objectivity?

(c) Documentation of an Engagement Quality Control Review showing that:

(i) The procedures required for the review have been performed;

(ii) The review has been completed before the engagement report is issued;

(iii) The reviewer is not aware of unresolved matters in relation to the

engagement team’s significant judgments and conclusions?

NoYes N/A

NoYes N/A

NoYes N/A

DRAFT



3.7 Monitoring

If the answer is “YES“ for question 3.1.2(f), please complete questions 3.7.1

to 3.7.17.

If the answer is “NO” for question 3.1.2(f), please select “N/A” for questions

3.7.1 to 3.7.17.

3.7.1 Has the Practice established policies and procedures designed to provide it

with reasonable assurance that policies and procedures relating to the system

of quality control are relevant, adequate, operating effectively and complied

with in the Practice?



3.7.2 Has the Practice completed a Quality Assurance Review (QAR) during the period

covered by this Questionnaire?

Date of the most recent QAR completed:

Day Month Year

NoYes N/A

3.7.3 Does the Practice keep a record of the most recent QAR carried out including

work done and the results?

3.7.4 Was the QAR carried out by an individual or organisation independent of the

Practice other than the Institute (e.g. an overseas office of an International

Practice)?

If the answer is “YES”, please give the name(s) and address(es) of the reviewing

individual and / or organisation in (a) and /or (b) and select “N/A” for questions

3.7.5 to 3.7.9.

(a) Individual:

(b) Organisation:

NoYes N/A

NoYes N/A

NoYes N/A

Family Name: Other Name(s):

Address:

Name:

Address:

DRAFT


3.7.5 Was a standard checklist used for the QAR?

(a) If a standard checklist was used for the QAR, please provide the name of

the checklist:

3.7.6 Did the QAR review team develop a review programme for use on all file

reviews?

3.7.7 Was a briefing / training session held for all members of the QAR review team?

3.7.8 Were all QAR reviews supervised and controlled by a suitably experienced and

senior Principal of the Practice?

3.7.9 Does the QAR review team check the effectiveness of follow-up action required

from the previous review?

(Select “NONE” if no follow-up action required or this is a new mode of practice)

3.7.10 Did the documented QAR(s) show that:

(a) Audit / assurance assignments were carried out in accordance with relevant

standards and the Practice’s own procedures?

(b) Financial statements reported on were prepared in accordance with HKASand relevant regulation and legislation?

(c) An appropriate audit / assurance opinion was issued?

3.7.11 Were all matters raised by QAR review team cleared with the Engagement

Principal before conclusion of the review report?

3.7.12 Has appropriate action been taken, or is planned to be taken on a timely basis,

in respect of all QAR findings?

(If no findings require further action, please select “NONE”.)

3.7.13 Does the Practice, at least annually, communicate the results of the monitoring

of its quality control system to:

(a) The Practice’s chief executive officer or managing board?

(b) Engagement Principal?

(c ) Audit Staff?

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes NoneN/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes NoneN/A

NoYes N/A

NoYes N/A

DRAFT



Complaints handling

3.7.14 Since the completion of the last Questionnaire, or since registration if this is

the first Questionnaire, has the Practice:-

(a) received any written complaint(s)?

(b) lodged with the professional indemnity insurance insurers any report of a

reportable event relating to its audit / assurance engagements?

3.7.15 Has the Practice established policies and procedures to deal with formal

complaints and allegations about the quality of work performed by the Practice

in audit / assurance engagements?

3.7.16 Since the completion of the last Questionnaire, or since registration if this is the

first Questionnaire, has the Practice, any Practising Principal(s) or Authorised

Signatory(ies) of the Practice been disciplined by or engaged in correspondence

with the following regulator(s) and enforcement authority(ies) other than the

Institute where the regulator(s)/enforcement authority(ies) has questioned the quality

of work of the Practice, any Practising Principal(s) and/or Authorised Signatory(ies)?

(a) The Stock Exchange of Hong Kong Limited?

(b) The Hong Kong Monetary Authority?

(c) The Insurance Authority?

(d) The Securities and Futures Commission?

(e) The Law Society of Hong Kong?

(f) The Mandatory Provident Fund Schemes Authority?

(g) The Independent Commission Against Corruption?

(h) The Police (e.g. the Commercial Crime Bureau)

(i) Overseas regulatory body?Please specify:

(j) Other?Please specify:

3.7.17 Does the Practice have procedures in place to prevent employing a personwho has been removed as a member of the HKICPA?

(By-Law 28(b) of the Professional Accountants Ordinance)

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

NoYes N/A

DRAFT

3.8 Documentation

3.8.1 Has the Practice established policies and procedures, appropriate to its size

and structure, which provide documentary evidence of the operation of the

six elements of a system of quality control in 3.1.2 above?


NoYes N/A

DRAFT



EXAM

PLE

Number of audit clients

4.1 Regulated clients

4.1.1 Number of companies audited by the Practicewhere the company is:

(a) An “Authorised Institution” as defined underthe Banking Ordinance

(b) An “Insurer” as defined under the InsuranceCompanies Ordinance and NOT alreadyreported in (a) above

(c) A “Licensed Corporation” or an “AssociatedEntity” of an “Intermediary” as defined underthe Securities and Futures Ordinance and NOTalready reported in (a) or (b) above

4.1.2 Total number of regulated companies auditedby the Practice (sum of (a) to (c) above)

4.2 Other audit clients

Number of companies audited by thePractice which are NOT already reported in 4.1

4.3 Total audit clients

Total number of companies audited by thePractice (sum of 4.1.2 and 4.2)

4.4 Listed clients and other clients ofsignificant public interest

4.4.1 How many listed companies audited by thePractice are included in the number reported in 4.3?

4.4.2 How many non-listed companies of significantpublic interest audited by the Practice are

included in the number reported in 4.3?

4. CLIENT PROFILE INFORMATION

(please provide practising certificate number of each Practising Principal of the Practice in the space

above, and the entries in 4.1 to 4.4 below are inrespect of the number of audit clients where thePractising Principal is the Engagement Principal)

Total forthe

Practice P01700Individual Practising Principal

P02605 P02982

0 3 03

2 0 02

0 6 06

2 9 011

174 155 188517

176 164 188528

3 4 07

2 2 04

DRAFT

Number of audit clients

4.1 Regulated clients

4.1.1 Number of companies audited by the Practicewhere the company is:

(a) An “Authorised Institution” as defined underthe Banking Ordinance

(b) An “Insurer” as defined under the InsuranceCompanies Ordinance and NOT alreadyreported in (a) above

(c) A “Licensed Corporation” or an “AssociatedEntity” of an “Intermediary” as defined underthe Securities and Futures Ordinance and NOTalready reported in (a) or (b) above

4.1.2 Total number of regulated companies auditedby the Practice (sum of (a) to (c) above)

4.2 Other audit clients

Number of companies audited by thePractice which are NOT already reported in 4.1

4.3 Total audit clients

Total number of companies audited by thePractice (sum of 4.1.2 and 4.2)

4.4 Listed clients and other clients ofsignificant public interest

4.4.1 How many listed companies audited by thePractice are included in the number reported in 4.3?

4.4.2 How many non-listed companies of significantpublic interest audited by the Practice are

included in the number reported in 4.3?

(please provide practising certificate number of each Practising Principal of the Practice in the space

above, and the entries in 4.1 to 4.4 below are inrespect of the number of audit clients where thePractising Principal is the Engagement Principal)

Total forthe

Practice

Individual Practising Principal


Please take copy of this page if more space is required for practices with more than threePractising Principals.

DRAFT



4.5 Other engagements

4.5.1 Does the Practice conduct any of the following types of engagements?

(a) Engagements governed by HKSAE and/or HKSRE

(b) Engagements relating to accountants’ report for prospectus or preparation of

profit forecast

(c) Engagements relating to interim report

(d) Engagements relating to WebTrust services

(e) Engagements governed by Practice Note 840 relating to accountant’s report

on solicitors’ accounts under the Solicitors’ Accounts Rules and the

Accountant’s Report Rules

(f) Engagements governed by Practice Note 810.1 relating to auditors’ report

on insurance brokers’ compliance with the minimum requirements specified

under sections 69(2) and 70(2) of the Insurance Companies Ordinance

4.5.2 Does the Practice audit a company which is a subsidiary of, or a special purpose

entity controlled by, a listed company NOT audited by the Practice?

4.5.3 Does the Practice audit a listed company where a subsidiary or a special purpose

entity controlled by it is NOT audited by the Practice?

4.6 Other audit and assurance related activities

4.6.1 Does the Practice sign audit reports for clients where the audit work is performed

by persons who are not Audit Staff of the Practice?

NoYes

NoYes

NoYes

NoYes

NoYes

NoYes

NoYes

NoYes

NoYes

DRAFT

GLOSSARY OF TERMSPRACTICE REVIEW SELF-ASSESSMENT QUESTIONNAIRE

Abbreviations used

CPA Certified Public Accountant

HKAS Hong Kong Accounting Standards

HKICPA / the Institute Hong Kong Institute of Certified Public Accountants

HKSA Hong Kong Standards on Auditing

HKSAE Hong Kong Standards on Assurance Engagements

HKSRE Hong Kong Standards on Review Engagements

N/A Not Applicable

QAR Quality Assurance Review

Glossary of TermsPractice ReviewSelf-Assessment Questionnaire

A1

DRAFT

A2Glossary of Terms


Definitions of terms used

Accounting Reference Period

The Practice’s most recently completed financial accounting year.

Accounts Disclosure Checklist

A checklist, either manual or computerised, which is used to ensure that final accounts comply with

HKAS and relevant regulation and legislation.

Appraisals

Appraisals are procedures carried out by the Practice to assess the technical competence and capabilities

of its Audit Staff, Principals, Authorised Signatories, Consultants and/or Sub-contractors and to ensure

that deficiencies are identified and improvements made.

Arrangements (Professional Ethics)

Full guidance on integrity, objectivity and independence is given in the HKICPA Statements of Professional

Ethics / Code of Ethics for Professional Accountants.

In respect of confidentiality, the most effective arrangement would be for all Principals, Authorised

Signatories and Staff (and also sub-contractors and consultants) to sign an agreement with the Practice

not to disclose any information concerning the Practice or any of its clients to any third party without

the written permission of the Practice. It is considered best practice to renew all such confidentiality

agreements annually.

In respect of independence, the most effective arrangement would involve all Principals, Authorised

Signatories and Staff completing an annual independence declaration. The declarations should be evaluated

by, or under the supervision of a Principal and potential threats should be identified so that steps can be

taken to mitigate them.

Threats which affect the Practice as a whole should also be considered, such as undue dependence on

the fees of any one or group of audit client(s).

DRAFT


A3

Assurance

Work undertaken to express a conclusion designed to enhance the degree of confidence of the intended

users other than the responsible party about the outcome of the evaluation or measurement of a subject

matter against criteria. [Hong Kong Framework for Assurance Engagements]

For the purpose of this Questionnaire, assurance includes work governed by HKSAE and HKSRE.

Audit

Work undertaken to enable auditors to express an opinion on whether the financial statements are

prepared, in all material respects, in accordance with an identified financial reporting framework.

[HKSA 200]

Audit Manual

A book / guideline setting out the audit methodologies and principles adopted by the Practice.

Audit risk

”Audit risk” means the risk that auditors give an inappropriate audit opinion when the financial statements

are materially misstated.

Audit risk has three components: inherent risk, control risk and detection risk. [HKSA 200]

DRAFT

Glossary of TermsPractice Review

Self-Assessment QuestionnaireA4

Audit Staff

Staff of the Practice, or persons who are required to follow the policies and procedures of the Practice

and whose work is under the control of a Practising Principal of the Practice, who are engaged in audit /

assurance work using the Practice’s audit / assurance procedures and documentation including audit /

assurance programmes.

Audit Staff are persons to whom audit / assurance work is delegated and whose work is directed and

reviewed in a manner which provides reasonable assurance that such work is performed competently

and with due care.

Audit Staff - Qualified

These are Audit Staff who are qualified CPAs under sections 22 and 24 of the Professional Accountants

Ordinance and are engaged on audit / assurance work.

Audit Staff - Not Qualified

These are Audit Staff who are NOT qualified CPAs under sections 22 and 24 of the Professional Accountants

Ordinance and are engaged on audit / assurance work.

Authorised Signatory

A CPA holding a practising certificate (other than a Principal) who has been authorised to sign audit /

assurance reports in the name of the Practice.

Commercially available

An Audit Manual or Sample Audit Programme which is available for purchase from a publisher.

If a Practice purchases an Audit Manual or Sample Audit Programme from another practice, it should

report that it has a commercially available Audit Manual or Sample Audit Programme as well as providing

the name of the practice which provides it.

DRAFT


A5

Company(ies)

For the purposes of section 4 of this Questionnaire, a company includes a partnership, a branch and

a fund.

Complaint

A written communication that alleges, suggests or implies that the Practice, a Principal or a Staff has

failed to comply with professional standards, regulatory or legal requirements in relation to audit / assurance

engagements.

Consultants

Individuals, firms or agencies which provide ad hoc or technical advice to the Practice.

Consultation

Involvement of individuals, firms or agencies to provide ad hoc or technical advice to the Practice.

Correspondence with regulators

It refers to scenarios where the Practice may be in correspondence on non-routine regulatory matters

relating to audit / assurance engagements that have been raised with the Practice by regulatory authorities

(e.g. The Stock Exchange of Hong Kong Limited) in relation to complaints and allegations that the work

performed by the Practice fails to comply with professional standards, regulatory or legal requirements or

allegations of non-compliance with the Practice’s system of quality control.

Practices should NOT report routine correspondence such as those that are related to the submission or

clarification of regulatory returns.

Engagement Principal

Principal primarily responsible for the completion of the engagement.

DRAFT



Engagement Quality Control Review

A review which provides an objective evaluation of the significant judgments made by the engagement

team and the conclusions reached in formulating the audit / assurance report.

The engagement quality control review (such as a second / concurring partner review) should be completed

before the issuance of the audit / assurance report.

Engagement team

The individuals involved in performing an engagement, including any experts employed or engaged by

the Practice in connection with that engagement.

Full Time

Practising Principal / Authorised Signatory who normally works for a total of 3 or more days per week on

average for the Practice.

Hours charged to clients on audit / assurance work

Estimated total hours charged on audit / assurance work during the Accounting Reference Period.

If no audit / assurance work is performed during the Accounting Reference Period, please answer ”0”.

The estimated total number of hours reported in the Questionnaire should be based on information kept

by the Practice.

The estimated time information should be made available for the Practice Reviewer’s review.

Interim report

A report issued by an entity for an interim period containing financial and non-financial information.

An Interim period is a financial reporting period shorter than a full financial year.

DRAFT


A7

Listed

An entity is listed if its shares are listed on a recognised stock exchange in Hong Kong or overseas.

Non-practising Principal

A Principal who is NOT a Practising Certificate Holder.

Office

An office of the Practice is any place in or outside Hong Kong occupied by the Practice for conducting

business in the name of the Practice which is regulated by the HKICPA. It includes the Practice’s principal

registered office and other branch offices.

Different locations within the same building are considered to be one office.

Practising Certificate Holder

An individual who holds a practising certificate issued by the Institute.

Practising Principal

A Principal who is a Practising Certificate Holder.

Principal

A Principal means:-

(a) a sole practitioner practising in his / her own name; or

(b) a partner of a partnership practice; or

(c) a director of a corporate practice,

who can sign documents in the name of the Practice.

A Principal does not include an Authorised Signatory.

DRAFT



Professional standards

Statements of professional ethics; or standards of accounting, auditing and assurance practices issued by

the Council of the Institute. [Section 18A of the Professional Accountants Ordinance]

Profit forecast

Profit forecast is an estimate of financial results made in advance of completion of financial statements up

to publication standard:

(a) for any expired accounting period;

(b) for a current (or unexpired) accounting period; or

(c) the current and the immediately succeeding accounting period, provided that a sufficiently significant

part of the current period has already elapsed. [Auditing Guideline 3.341]

Prospectus

Prospectus means any prospectus, notice, circular, brochure, advertisement or other document -

(a) offering any shares or debentures of a company to the public for subscription or purchase for cash or

other consideration; or

(b) calculated to invite offers by the public to subscribe for or purchase for cash or other consideration

any shares or debentures of a company. [Auditing Guideline 3.340 and Section 2 of the Companies

Ordinance]

DRAFT


A9

Quality Assurance Review (QAR)

A periodic inspection of a selection of completed engagements in order to judge compliance with

Statements of Auditing and Assurance Standards and other professional requirements.

The inspection of a selection of completed engagements should be ordinarily performed on a cyclical

basis. Engagements selected for inspection include at least one engagement for each Engagement

Principal over an inspection cycle, which ordinarily spans no more than three years.

Small practices and sole practitioners may wish to use a suitably qualified external person or another

practice to carry out engagement inspections and other monitoring procedures. Alternatively, they may

wish to establish arrangements to share resources with other appropriate organisations to facilitate

monitoring activities.

Regulated

An entity is regulated if it is subject to the regulations of the Hong Kong Monetary Authority, the Insurance

Authority, the Securities and Futures Commission, the Law Society of Hong Kong or the Mandatory

Provident Fund Schemes Authority.

Reportable event

An event relating to potential claims which the Practice is required to report or has reported to a professional

indemnity insurance insurer under the terms of the insurance scheme.

Resident Office

A Principal’s Resident Office is the main place of work of the Principal and includes the registered office.

The Resident Office’s address would be the Principal’s main point of contact with clients.

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Sample Audit Programme

A reference document from which a tailored audit programme is derived for a specific engagement.

An audit programme sets out the nature, timing and extent of planned audit procedures required to be

implemented.

An audit programme serves as a set of instructions to staff involved in the audit and as a means to control

the proper execution of the work.

Significant public interest

An entity is of significant public interest, as decided by the Council of the Institute from time to time,

where it attracts significant public attention because of its business, its size, its corporate status and the

number and range of its stakeholders.

Specific documentation

Audit Manuals, Audit Programmes, Accounts Disclosure Checklists or Specimen Accounts or other audit /

assurance documentation on specific industries such as banking or insurance business.

Special Purpose Entity (SPE)

A special purpose entity may take the form of a corporation, trust, partnership or an unincorporated

entity. For further guidance, please refer to Interpretation HKAS-INT-12 “Consolidation - Special Purpose

Entities”.

Specimen Accounts

Sample accounts which set out accounts disclosure requirements to ensure compliance with HKAS and

relevant regulation and legislation.

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A11

Staff

Individuals whose work is under the control of a Practising Principal of the Practice and who are required

to follow the policies and procedures of the Practice.

Staff also includes individuals who provide services to the Practice under an employment contract under

the provisions of the Employment Ordinance and where an employee return (form IR56B) is required to

be submitted to the Inland Revenue Department.

Sub-contractors

Individuals, firms or agencies which are NOT Staff of the Practice but are involved in performing audit /

assurance work for the Practice.

Subsidiary

A subsidiary is an entity, including an unincorporated entity such as a partnership, that is controlled by

another entity (known as the parent). [HKAS 27]

WebTrust services

WebTrust is a comprehensive e-commerce assurance service that provides a worldwide professional

assurance standard for e-commerce “best practice” designed to build trust and confidence in this new

electronic marketplace.

It covers the following seven key areas:

(a) On-line Privacy

(b) Security

(c) Confidentiality

(d) Availability

(e) Business Practices / Transaction Integrity

(f) Non-repudiation

(g) Certification Authorities

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Hong Kong Institute of Certified Public Accountants4th Floor, Tower Two, Lippo Centre,89 Queenway, Hong Kong.Tel: (852) 2287 7228Fax: (852) 2865 6603Email: [email protected]: www.hkicpa.org.hk

89(852) 2287 7228(852) 2865 [email protected]

Documents

Communication paper on the Revision of Practice Review ...app1.hkicpa.org.hk/qa/practice_reviews/comm_doc/PRC_CommPaper.pdfCommunication paper on the Revision of Practice Review Programme