HK accounting regulator fines BDO, staff over audit lapses

The Accounting and Financial Reporting Council has reprimanded Hong Kong accounting firm BDO, its 2018 audit engagement partner Alfred Lee, and its 2018 audit quality control reviewer Pak Tak Lun Amos for multiple violations of auditing standards, imposing a total fine of HK$455,000. 

Considering that the three regulated entities admitted their responsibilities at an early stage, the authority exercised discretion to reduce the fines by 30 percent, the maximum reduction possible. The AFRC also ordered Lee and Pak to complete additional continuing professional education hours.

The case primarily involves the 2018 audit of the now-liquidated former Hong Kong-listed Vestate Group and its subsidiaries. The AFRC stated that the auditors failed to obtain sufficient appropriate audit evidence to support the reasonableness of the impairment assessment. For example, the auditors did not challenge the valuer's erroneous assumption that Vestate’s point-of-sale and e-commerce payment processing business could generate revenue for over 20 years.

The AFRC emphasized that while auditors often require assistance from experts in specialized areas outside of accounting and auditing, they should not uncritically rely on the work of such experts.

STAFF REPORTER