Class 2 - Rights, Duties And Liabilities Of Auditors In Hong Kong-bd

AF4228

Auditing and

Assurance

2021/22 S1

Class 2

Rights, Duties and Liabilities

of Auditors in Hong Kong

1

Prepared by RW for AF4228 2021/22 S1

Learning Objectives

2.1 Sources of rights, duties and

liabilities of auditors

2.2 Summary of statutory provisions

2.3 Quasi-legal duties under professional

requirements

2.4 Audit contract

2.5 Duty of care –Common law

2.6 Avoidance of litigation

Prepared by RW for AF4228 2021/22 S1

2.1 Sources of rights, duties and

liabilities of auditors

Statute

•Companies Ordinance (Cap. 622) (“CO”)

•Has commenced operation on 3 March 2014.

•Accounts and audit (Part 9)

•http://www.cr.gov.hk/en/companies_ordinance/docs/part9-

e.pdf

•CO Part 9 Division 5 –Audit

•Companies (Winding Up and Miscellaneous Provisions) Ordinance

(Cap. 32)

•Professional Accountants Ordinance (Chapter 50)

Common law

•Past Judicial Decisions

Rules and regulations (HKICPA)

•HKICPA Standards including Code of Ethics

Audit contract (Engagement letter)

•Implicit or explicit terms

Prepared by RW for AF4228 2021/22 S1

2.2 Summary of Statutory

Provisions

Appointment of Auditors

An auditor must be appointed for each financial year of a company

(s394)

•by a resolution passed at the annual general meeting (“AGM”) held in

respect of the previous financial year

•by a resolution passed at a general meeting if

•it is not required to hold an AGM (s396)

•no person is deemed to be reappointed as auditor of the company for the financial

year (s396)

•no auditor appointed at an AGM (s396)

•first auditor not appointed by directors (s397)

•by the directors

•for the first auditor of the company at any time before the first AGM / before the

appointment period (see s392) before the next financial year if no AGM is required

(s395); and

•to fill casual vacancy (s397)

•by the court

•where auditors are not appointed or reappointed as mentioned above, then any

member may make application for the appointment of auditors directly to the court

so as to fill the vacancy

2.2 Summary of Statutory

Provisions (Cont)

Renewable tenure to auditors

•Free from untoward managerial interference

Auditors resigned/removed/retired

•To give the company a statement of circumstances connected to the

resignation/removal/retirement or a statement of no such

circumstances (to enhance transparence and corporate governance)

•To request the statement to be sent to members