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Revision ofPractice ReviewProgramme &Practice ReviewQuestionnaire
Communication paper on the
DRAFT
DRAFT
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
DRAFT
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
DRAFT
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
DRAFT
(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
DRAFT
(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
DRAFT
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.
5Hong Kong Institute of CPAsCommunication paper on the Revision ofPractice Review Programme & Practice Review Questionnaire
DRAFT
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.
6Hong Kong Institute of CPAs
Communication paper on the Revision ofPractice Review Programme & Practice Review Questionnaire
DRAFT
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
7Hong Kong Institute of CPAsCommunication paper on the Revision ofPractice Review Programme & Practice Review Questionnaire
DRAFT
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
8Hong Kong Institute of CPAs
Communication paper on the Revision ofPractice Review Programme & Practice Review Questionnaire
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]
DRAFT
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
DRAFT
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.
1Hong Kong Institute of CPAs
Practice ReviewSelf-Assessment Questionnaire
DRAFT
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
DRAFT
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:
Is there a full time resident Practising Principal in the office?
YES NO
Office 004
Address:
Telephone: Facsimile:
Email:
Is there a full time resident Practising Principal in the office?
YES NO
Office 006
Address:
Telephone: Facsimile:
Email:
Is there a full time resident Practising Principal in the office?
YES NO
Office 008
Address:
Telephone: Facsimile:
Email:
Is there a full time resident Practising Principal in the office?
YES NO
Office 010
Address:
Telephone: Facsimile:
Email:
Is there a full time resident Practising Principal in the office?
YES NO
Office 001 (Registered Office)
Address:
Telephone: Facsimile:
Email:
Is there a full time resident Practising Principal in the office?
YES NO
Office 003
Address:
Telephone: Facsimile:
Email:
Is there a full time resident Practising Principal in the office?
YES NO
Office 005
Address:
Telephone: Facsimile:
Email:
Is there a full time resident Practising Principal in the office?
YES NO
Office 007
Address:
Telephone: Facsimile:
Email:
Is there a full time resident Practising Principal in the office?
YES NO
Office 009
Address:
Telephone: Facsimile:
Email:
Is there a full time resident Practising Principal in the office?
YES NO
3Hong Kong Institute of CPAs
Practice ReviewSelf-Assessment Questionnaire
✓
DRAFT
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
4Hong Kong Institute of CPAsPractice ReviewSelf-Assessment Questionnaire
2.2.2 Non - practising Principal(s)
Example Doe Mary A77777 005 100
Total
DRAFT
Family Name Hours Charged toClients on Audit /Assurance Work
Resident Office(Office Number
in Part 2.1)
PractisingCertificateNumber
HKICPAMembership
Number
Other Name (s)
2.2.3 Authorised Signatory(ies)
Example Doe Peter A66666 P66666 005 200
Total
5Hong Kong Institute of CPAs
Practice ReviewSelf-Assessment Questionnaire
DRAFT
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
PractisingCertificateNumber
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)
6Hong Kong Institute of CPAsPractice ReviewSelf-Assessment Questionnaire
DRAFT
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
7Hong Kong Institute of CPAs
Practice ReviewSelf-Assessment Questionnaire
DRAFT
8Hong Kong Institute of CPAsPractice ReviewSelf-Assessment Questionnaire
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
DRAFT
NoYes N/A
NoYes N/A
NoYes N/A
9Hong Kong Institute of CPAs
Practice ReviewSelf-Assessment Questionnaire
2.6 Use of Sub-contractors
2.6.1 Does the Practice use sub-contractors to perform any audit / assurance work?
If the answer is “YES”, please complete questions 2.6.2 to 2.6.7.
If the answer is “NO”, please select “N/A” for questions 2.6.2 to 2.6.7.
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
DRAFT
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.)
If the answer is “YES”, please complete questions 3.1.2 to 3.8.1.
If the answer is “NO”, please select “N/A” for questions 3.1.2 to 3.8.1.
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
10Hong Kong Institute of CPAsPractice ReviewSelf-Assessment Questionnaire
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
11Hong Kong Institute of CPAs
Practice ReviewSelf-Assessment Questionnaire
DRAFT
12Hong Kong Institute of CPAsPractice ReviewSelf-Assessment Questionnaire
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?
If the answer is “YES”, please complete question 3.3.3.
If the answer is “NO”, please select “N/A” for question 3.3.3.
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?
If the answer is “YES”, please complete question 3.3.5.
If the answer is “NO”, please select “N/A” for question 3.3.5.
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
13Hong Kong Institute of CPAs
Practice ReviewSelf-Assessment Questionnaire
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
14Hong Kong Institute of CPAsPractice ReviewSelf-Assessment Questionnaire
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?
If the answer is “YES”, please complete questions 3.3.14 to 3.3.18.
If the answer is “NO”, please select “N/A” for questions 3.3.14 to 3.3.18.
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
15Hong Kong Institute of CPAs
Practice ReviewSelf-Assessment Questionnaire
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
16Hong Kong Institute of CPAsPractice ReviewSelf-Assessment Questionnaire
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
17Hong Kong Institute of CPAs
Practice ReviewSelf-Assessment Questionnaire
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:
18Hong Kong Institute of CPAsPractice ReviewSelf-Assessment Questionnaire
(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
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Practice ReviewSelf-Assessment Questionnaire
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
20Hong Kong Institute of CPAsPractice ReviewSelf-Assessment Questionnaire
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?
If the answer is “YES”, please complete question 3.6.6.
If the answer is “NO”, please select “N/A” for question 3.6.6.
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
21Hong Kong Institute of CPAs
Practice ReviewSelf-Assessment Questionnaire
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?
If the answer is “YES”, please complete questions 3.6.8 to 3.6.12.
If the answer is “NO”, please select “N/A” for questions 3.6.8 to 3.6.12.
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?
If the answer is “YES”, please complete question 3.6.17.
If the answer is “NO”, please select “N/A” for question 3.6.17.
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
22Hong Kong Institute of CPAsPractice ReviewSelf-Assessment Questionnaire
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?
If the answer is “YES”, please complete question 3.6.19.
If the answer is “NO”, please select “N/A” for question 3.6.19.
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
23Hong Kong Institute of CPAs
Practice ReviewSelf-Assessment Questionnaire
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?
If the answer is “YES”, please complete questions 3.7.2 to 3.7.17.
If the answer is “NO”, please select “N/A” for questions 3.7.2 to 3.7.17.
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
24Hong Kong Institute of CPAsPractice ReviewSelf-Assessment Questionnaire
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
25Hong Kong Institute of CPAs
Practice ReviewSelf-Assessment Questionnaire
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?
26Hong Kong Institute of CPAsPractice ReviewSelf-Assessment Questionnaire
NoYes N/A
DRAFT
27Hong Kong Institute of CPAs
Practice ReviewSelf-Assessment Questionnaire
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
28Hong Kong Institute of CPAsPractice ReviewSelf-Assessment Questionnaire
Please take copy of this page if more space is required for practices with more than threePractising Principals.
DRAFT
29Hong Kong Institute of CPAs
Practice ReviewSelf-Assessment Questionnaire
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
Practice ReviewSelf-Assessment Questionnaire
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
Glossary of TermsPractice ReviewSelf-Assessment Questionnaire
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
Glossary of TermsPractice ReviewSelf-Assessment Questionnaire
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.
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Self-Assessment QuestionnaireA6
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.
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Glossary of TermsPractice ReviewSelf-Assessment Questionnaire
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.
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Glossary of TermsPractice Review
Self-Assessment QuestionnaireA8
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]
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Glossary of TermsPractice ReviewSelf-Assessment Questionnaire
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.
DRAFT
Glossary of TermsPractice Review
Self-Assessment QuestionnaireA10
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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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
DRAFT
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]