감사 / Audit

7.1 Provisions relating to audit and accounting matters are contained in ss. 153 to 163, SFO, and were discussed in sections 7.17 to 7.27 of Topic 3.

Securities and Futures (Accounts and Audit) Rules
7.2 The SFC has made the Accounts and Audit Rules specifying the form and contents of financial statements and other documents that licensed corporations and associated entities of intermediaries (both licensed corporations and registered institutions) should prepare and the content of auditors’ reports.

Financial statements
7.3 The Accounts and Audit Rules require the preparation of accounts for each financial year consisting of a profit and loss account, a balance sheet and notes to the accounts for licensed corporations and associated entities of an intermediary, and cessation accounts for each of these if they cease to carry on regulated activities or cease to remain as associated entities.

7.4 In the case of active licensed corporations, supplementary information as at the end of the financial year, as specified in the Accounts and Audit Rules, will have to be prepared, including liquid capital calculations, a business and risk management questionnaire and various analyses of borrowings and client accounts.

Auditor’s report
7.5 The Accounts and Audit Rules specify the contents of the auditors’ report on the above financial statements, which are more extensive than the usual “true and fair” report normally found in company accounts. This is a reflection of the extension by the SFC of the normal duties of an auditor of a company, which are primarily to the shareholders, to provide better protection to investors and the market.

7.6 Broadly, the auditor is asked to confirm whether in his opinion:
(a) the profit and loss account and the balance sheet gave “a true and fair view”;

(b) each of the returns under the FRR was correctly compiled from the records, stating details of any discrepancies (for licensed corporations only);

(c) there would appear to have been any contravention of the FRR during the year (applicable to licensed corporations only).

(d) in so far as applicable, during the year:

(i) records had been kept in accordance with the relevant provisions of the Keeping of Records Rules and the financial statements reflected these records; and

(ii) specified provisions of the Client Money Rules and the Client Securities Rules had been complied with, and control systems had been in place to ensure compliance with these Rules; and

7.7 The auditors are allowed to submit their report in 2 parts, one containing the “normal”, “true and fair” report and another referring to all the other matters. The true and fair report is a short one and is enough to be used for wide circularization when it may not be convenient to issue the full report.

7.8 If the auditor is unable to confirm compliance with the provisions of the Client Securities Rules and the Client Money Rules or has noted contraventions of the FRR, he is required to report to the SFC. This is in addition to any special reports he may be required to make under s. 157, SFO (see sections 7.21 and 7.22 of Topic 3).

Revision question:
Question 11: An auditor does not want to make the full detailed report specified in the Accounts and Audit Rules for general circulation. Can he do anything about it?
Answer 11: He can issue two reports, one containing the normal true and fair report and the other containing all the other confirmations mentioned in section 7.6 above.

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