1. March 2011 Lindy Yau Practising Director C K Yau & Partners CPA Ltd

2. AGENDA 2

3. 3

4. 1.1 ETHICS 4 What is ethics? Behaviour

5. What is accounting ethics? 5 1.2 ACCOUNTING ETHICS Behaviour

6. 6 Role of professional accountants 專業會計師的角色 Accounting and reporting 會計及報告原則 Auditing 審核 Financial projection 財務預測 Taxation 稅務 Other advisory services 其他顧問服務

7. 7 1.2 ACCOUNTING ETHICS Source: ICAEW, Accountancy, January 2011

8. 8 1.2 ACCOUNTING ETHICS Source: HKICPA, APLUS, February 2011

9. Importance of high ethical standard of professional accountant and its impacts Public confidence on professional accounting services The reputation of the professional accountants Affect the decision made by accounting information users e.g. management and investors 9 1.2 ACCOUNTING ETHICS

10. Ethical issues in accounting (Practising and non-practising) Offering audit and non-audit services to clients Clients prefer accounting firms which give favourable financial reports Pressure from clients or senior on financial manipulation and tax evasion Conflict of interest Use of confidential information for personal financial gains or insider dealing Temptation from clients 10 1.2 ACCOUNTING ETHICS

11. Fundamental Principles 11 1.2 ACCOUNTING ETHICS Fundamental Principles 基本原則 Integrity 誠信 Objectivity 客觀 Professional competence and due care 專業才能 Confidentiality 保密原則 Professional behaviour 專業操守

12. International Federation of Accountants (IFAC) as an organization that promotes accounting ethics International Ethics Standards Board for Accountant (IESBA) Code of Ethics for Professional Accountants Develops ethical standards and guidance for use by professional accountants. Encourages member bodies to adopt high standards of ethics for their members and promotes good ethical practices globally 12 1.2 ACCOUNTING ETHICS

13. HKICPA as an organization that promotes accounting ethics Code of Ethics for Professional Accountants Adopting IFAC Code of Ethics for Professional Accountants Additional ethical requirements developed by HKICPA Disciplinary actions may be taken to members of the institute for non-compliance 13 1.2 ACCOUNTING ETHICS

14. HKICPA as an organization that promotes accounting ethics Latest development HKICPA - Code of Ethics for Professional Accountants Committees and working groups Statutory boards and committees Non-statutory boards and committees Advisory working groups 14 1.2 ACCOUNTING ETHICS

15. Revised Code of Ethics Announced on June 2010 Effective from 1 January 2011 Main principles-based approach Covers guidance on accepting payment in an agent-principal relationship under the Prevention of Bribery Ordinance ICAC approach Best Defence Against Corruption 15 1.2 ACCOUNTING ETHICS

16. Case Sharing 16

17. 17 CASE SHARING 明報 : 2011 年 3 月 10 日

18. 18 CASE SHARING 中信泰富事件 頭條日報 2011 年 3 月 10 日中信泰富遲報虧損 警指「撲水」涉欺詐 明報 2011 年 3 月 10 日警指涉欺詐 拒還中信泰富文件 外匯累計期權蝕 155 億遲公布 星島日報 2011 年 3 月 10 日炒外匯損手 155 億 警促交出文件 中信泰富「撲水」 17 億應急 東方日報 2011 年 3 月 11 日中信泰富文件法官查閱 星島日報 2011 年 3 月 11 日貸款合約有榮智健簽名

19. 19 CASE SHARING 明報 : 2010 年 12 月 23 日

20. 20

21. Definition Involves a set of relationships between an organisation’s management, its board, its shareholders and other stakeholders. Provides the structure through which the objectives of the organisation are set, and the means of attaining those objectives and monitoring performance are determined. The Organisation for Economic Co-operation and Development (OECD) – Principles of Corporate Governance 21 2. CORPORATE GOVERNANCE

22. Principles Ensuring the basis for an effective corporate governance framework Protecting and facilitating the exercise of shareholders’ rights Ensuring the equitable treatment of all shareholders Recognising the rights of different shareholders Ensuring timely and accurate disclosure of all material matters of the corporation 22 2. CORPORATE GOVERNANCE

23. 23 Conflict of interest Company’s interest Information Asymmetry 2. CORPORATE GOVERNANCE Objective Principal and agent have different interests and goals Corporate governance can help in converging their goals

24. 24 2. CORPORATE GOVERNANCE Stakeholders

25. Example: School Management Committee (SMC) 學校管理委員會 ( 官立學校 ) 25 SMC Chairman (EDB officer) Principal/ School Head 2 Teachers2 Parents Alumni Independent members 2. CORPORATE GOVERNANCE

26. Corporate Governance in Hong Kong 26 2. CORPORATE GOVERNANCE Companies Ordinance 公司條例 Cap 32 Banking Ordinance 銀行業條例 Cap 155 Securities (Insider Dealing) Ordinance 證券 ( 內幕交易 ) 條例 Cap 395 Securities (Disclosure of interests) Ordinance 證券 ( 披露權益 ) 條例 Cap 396 Securities and Futures Ordinance 證券及期貨條例 Cap 571 Main Board Listing Rules 主板上市規則 - GEM Listing Rules 創業板上市規則 -

27. Corporate Governance in Hong Kong Hong Kong Exchanges and Clearing Ltd 香港交易及結算所有限公司 ( 香港交易所 ) Mission: “HKEx works closely with the Securities and Futures Commission (SFC) to regulate listed issuers; administers listing, trading and clearing rules” 「香港交易所須與證券及期貨事務監察委員會（證監會）緊密配合，以 監管上市發行人；執行上市、交易及結算的規則」 27 2. CORPORATE GOVERNANCE

28. Corporate Governance in Hong Kong Hong Kong Exchanges and Clearing Ltd Listing Rules 28 2. CORPORATE GOVERNANCE Main board listing rule ( 主板上市規則 ) GEM listing rule ( 創業 板上市規則 ) Code on Corporate Governance Practices 《企業管治常規守則》 Appendix 14Appendix 15 Corporate Governance Report 《企業管治報告》 Appendix 23Appendix 16

29. Corporate Governance in Hong Kong Hong Kong Exchanges and Clearing Ltd Analysis of Corporate Governance Practices Disclosure in Annual Reports Consultation paper – Review of the Code on Corporate Governance Practices and Associated Listing Rules (Dec 2010) The most significant proposals: The selection, appointment or dismissal of the company secretary is a matter for the board as a whole to decide, and that a physical board meeting should be held to discuss the dismissal of the company secretary The company secretary should report to the board chairman and / or the chief executive officer Issuers are required to set up a remuneration committee chaired by an independent director and comprised of a majority of independent directors. 29 2. CORPORATE GOVERNANCE

30. Corporate Governance in Hong Kong Hong Kong Exchanges and Clearing Ltd Consultation paper – Review of the Code on Corporate Governance Practices and Associated Listing Rules (Dec 2010) INEDs to form one-third of the board Directors to undertake 8 hours of training per year Companies to review directors’ time commitments Companies to report on any non-compliance with chairman’s duties Boards to be subject to evaluation Companies to set up a corporate governance committee “Attendance” at board meetings to be more strictly defined Companies to provide adequate and general director’ insurance 30 2. CORPORATE GOVERNANCE Source: Chartered Secretaries, CSJ, February 2011

31. Corporate Governance in Hong Kong Hong Kong Exchanges and Clearing Ltd Consultation paper – Review of the Code on Corporate Governance Practices and Associated Listing Rules (Dec 2010) 31 2. CORPORATE GOVERNANCE

32. Securities and Futures Commission 證 券 及 期 貨 事 務 監 察 委 員 會 ( 證 監 會 ) Non-governmental statutory body Regulates the securities and futures markets in Hong Kong 32 2. CORPORATE GOVERNANCE

33. Corporate Governance in Hong Kong HKICPA 香港會計師公會 Corporate Governance for Public Bodies – A Basic Framework Best Corporate Governance Disclosure Awards 2010 最佳企業管治資料披露大奬 2010 Judging criteria and considerations Overall presentation Promptness of reporting Quality of disclosure in relation to, for example: Corporate governance statement and practice Internal control and risk management Other voluntary disclosures 33 2. CORPORATE GOVERNANCE

34. 2010 BEST CORPORATE GOVERNANCE DISCLOSURES AWARDS 34

35. 35 2010 BEST CORPORATE GOVERNANCE DISCLOSURES AWARDS

36. Corporate Governance in Hong Kong HKICPA Strategic aims: Specialist qualification (SQ) and specialist designation (SD). Audit Insolvency (* SQ in insolvency, SD in insolvency) Corporate finance Taxation Information technology Business valuation 36 2. CORPORATE GOVERNANCE

37. Others 37 ORGANISATIONS THAT PROMOTE CORPORATE GOVERNANCE IN HONG KONG

38. Case Sharing 38

39. 39 星島日報 : 2011 年 2 月 22 日 CASE SHARING

40. 40 CASE SHARING 阿里巴巴事件 星島日報 2011 年 2 月 22 日阿里巴巴高層大換血 供應商涉詐騙買家 衛哲 李旭暉請辭 蘋果日報 2011 年 2 月 22 日阿里巴巴爆詐騙醜聞 求揾快錢縱容騙徒 CEO 及 COO 下台

41. REFERENCE Companies Ordinance (Cap 32) 公司條例 Banking Ordinance (Cap 155) 銀行業條例 Securities (Insider Dealing) Ordinance (Cap 395) 證券 ( 內幕交易 ) 條例 Securities (Disclosure of interests) Ordinance (Cap 396) 證券 ( 披露權益 ) 條例 Securities and Futures Ordinance (Cap 571) 證券及期貨條例 http://www.legislation.gov.hk Main Board Listing Rules GEM Listing Rules http://www.hkex.com.hk/eng/rulesreg/regulatory.htm Analysis of Corporate Governance Practices Disclosure in Annual Reports (September 2010) http://www.hkexnews.hk/reports/corpgovpract/CG_Practices_2009_E.pdf Review of the Code on Coporate Governance Practices and Associated Listing Rule http://www.hkgem.com/eng/newsconsul/mktconsul/documents/cp2010124.pdf 41

42. REFERENCE HKICPA Ethics in Management – A Practical Guide for Professional Accountants http://www.hkicpa.org.hk/en/standards-and-regulations/standards/code-of-ethics/references/ Corporate Governance for Public Bodies – A Basic Framework http://app1.hkicpa.org.hk/publications/corporategovernanceguides/eframework_guide.pdf Best Corporate Governance Disclosure Awards 10 th Anniversary, Judges’ report http://www.hkicpa.org.hk/file/media/section5_membership/Professional%20Representation/ pdf-file/judgesreport2010.pdf Fifth Long Range Plan (2007-2012) http://www.hkicpa.org.hk/file/media/section1_about_us/status/Fifth_Long_Range_Plan.pdf New Specialist Accreditations for Insolvency Professionals http://www.hkicpa.org.hk/file/media/section4_cpd/Specialist%20Qualifications/insolvency- specialist/specialist-designation/forms/sqsd-brochure.pdf A plus magazine http://app1.hkicpa.org.hk/APLUS/past_issues.php 42

43. REFERENCE IFAC Code of Ethics for Professional Accountants http://web.ifac.org/media/publications/5/2010-handbook-of-the-code-o/2010-handbook-of- the-code-o.pdf OECD The Organisation for Economic Co-operation and Development– Principles of Corporate Governance http://www.oecd.org/document/49/0,3746,en_2649_34813_31530865_1_1_1_1,00.html 匯治出版有限公司 企業管治：上市公司問題分析 ( 何順文、高衍璋 ) 中國公司管治與制度 ( 何順文、李元莎 ) 營商有道：企業管治新思維 ( 鄭治洪、司徒永富 ) 企業管治：原則與商德（鄭治洪、司徒永富） CLP CLP Code on Corporate Governance 2009 https://www.clpgroup.com/ourcompany/corporategovernance/framework/codespoliciesandg uidelines/Pages/codespoliciesandguidelines.aspx 43

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