The Court of Appeal’s interesting judgment in Registrar of Hong Kong Institute of Certified Public Accountants v Wong & Anor  4 HKLRD 763*, demonstrates a general reluctance on the part of the courts in Hong Kong to interfere with a decision of a professional body’s disciplinary committee regarding the application of technical standards; in this case, the application of an accounting standard regarding how to treat a financial asset for the purposes of the audited accounts of a listed company.
The respondent accountants had issued an unqualified audit opinion on the company’s financial statements for 2009. Following an investigation into a possible auditing irregularity and a report to the HKICPA, a disciplinary committee was appointed. The disciplinary committee concluded that the respondents were at fault for failing to observe a professional standard, contrary to s. 34(1)(a)(vi) of the Public Accountants Ordinance (Cap. 50) – in this case, Hong Kong Accounting Standard 39 (“Financial Instruments: Recognition and Measurement” – in particular, “Impairment and uncollectibility of financial assets”, para. 58, and “Available-for-sale financial assets”, para. 67).
The relevant investigation report considered that the respondents should have expressed a modified opinion on the company’s financial statements. The relatively light sanction ordered by the disciplinary committee (a penalty of HK$10,000) reflects the scale of the alleged transgression. The disciplinary committee also exceptionally directed that there be no publicity of its sanction without the agreement of the respondents.
However, the respondents appear to have a different take on the application of HKAS 39 in the circumstances. Dissatisfied with the disciplinary committee’s decision, the respondents appealed to the Court of Appeal (pursuant to s. 41(1) of the Ordinance). That appeal failed and the Court of Appeal also refused permission to appeal. The respondents have applied to the Court of Final Appeal for permission to appeal. For a relatively modest legal spend, in the whole scheme of things, a successful appeal might result in favourable costs orders. The publicity associated with an appeal arising out of disciplinary proceedings does not appear to bother the respondents.
It will be interesting to see what the Appeal Committee of the CFA make of the application for permission to appeal. One can foresee a natural reluctance on the part of an appellate court to put itself in a position where it might (in effect) be required to second-guess a disciplinary committee’s decision regarding the application of a technical accounting standard that arguably is better left to a tribunal made-up of members with the relevant experience. The same could also be said of technical matters raised during the course of the disciplinary proceedings of other professional bodies in Hong Kong (in the absence of an obvious error on the part of a disciplinary body).
* The case is also a good example of some of the complexities often associated with disciplinary proceedings involving certified public accountants in Hong Kong.