HKSA

1
HKSA
Prospective Students Society Qualification
Programme Case Analysis Competition 2002
Presented by The Chinese University
of Hong Kong Chris Lo Colin Lau
Raymond Chan Nicole Ng
HKSA QP Case Competition Team 28
2
AGENDA

• Background
• Ethical Issue
• Action Consequence
• Recommendation
• Conclusion

HKSA QP Case Competition Team 28
3
Background
Background
Ethical Issue
Action Consequence
Recommendation
Conclusion
4
Ethical Issue
Ethical Issue
Background
Action Consequence
Recommendation
Conclusion

• Auditors Responsibility to Fraud
• SAS 110

• Integrity, Objectivity and Independence
• Statement 1.203

• Going Concern
• SAS 130

Personal Loyalty
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Action Consequence
Action Consequence
Rejects Alfreds request
Accepts Alfreds request
6
Accepts Alfreds request

• AP
• Keep good relationship
• with Beta
• Likely be sued by
• investors

• Beta
• Get listed on GEM
• Face risk of bubbles
• burst

• Betas potential
• investors
• Likely discover hidden
• information

7
Action Consequence
Action Consequence
Rejects Alfreds request
Accepts Alfreds request
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Rejects Alfreds request

• AP
• Lose client
• Reduce risk of being
• sued by stockholders

• Beta
• Approach other auditors
• (opinion shopping)

• Betas potential
• investors
• The general confidences
• of investors are kept

• James
• Cant keep friendship
• Not being found
• criminal guilty

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Recommendation

• Emphasize on
• Conducting communication
• Insisting on our professional conduct
• Three Phases
• Phase I Communication
• Phase II Insistence on profession
• Phase III Withdrawal from the engagement

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Phase II
Risk of snowball effects Masking the truth is not
equal to solving the problem Disguise the fact
now gtgt problem accumulate Accumulated problem
will explode sooner or later and lead to an
uncontrollable financial disaster.
Reputation of the firm If public discover that
the statements are not presented in a true and
fair way, they will lose their confidence on the
company Reputation is important for long term
Suitability of IPO Think about the current
economic situation of HK Think about the cost of
IPO Advise Alfred to think about other ways to
collect fund
Phase I
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Seek advice from seniors and professional bodies
throughout the whole process,
Withdrawal from the engagement
Phase III
Phase II
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Conclusion
Conclusion

• Whistle blower

• Recovery of Investors Confidence

13
QA
HKSA QP Case Competition Team 28
HKSA QP Case Competition Team 28
14
Thank You
HKSA QP Case Competition Team 28