Part C — Additional HK Ethical Requirements & Counter-Terrorist Financing Guidelines

Source: HKICPA Code of Ethics for Professional Accountants — Part C

File: 346ncoe0626.pdf | Latest revision: June 2026

~181,000 chars | 10 Sections (C-100 to C-1000) | ~270 paragraphs

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OVERVIEW

Part C contains Hong Kong-specific additional ethical requirements that amplify provisions in Part A (the IESBA International Code). These are locally developed pronouncements not found in the international code. Members must comply with Part C alongside Part A. Part C Sections 100–1000 cover: professional appointments, listed company auditor changes, unlawful acts by clients and employers, tax practice ethics, corporate finance advice, designation use, practice promotion, and client monies.

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SECTION 100 — Introduction (C-s100, ~1 page)

Section 100 serves as the introduction to Part C, establishing that these additional ethical requirements form an integral part of the Code. Members need to be aware of these requirements and comply with them. The sections that follow (200–1000) cover specific topics where the HKICPA Council has determined that local amplification or additional requirements beyond the IESBA International Code are necessary.

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SECTION 200 — Changes in a Professional Appointment (C-s200, ~9 pages, 43 paragraphs)

Key concept: "Professional Clearance" — the process by which an incoming auditor communicates with the outgoing auditor before accepting appointment.

The Statement — Preamble (200.1–200.2)

200.1 Where a change of auditor is contemplated, the nominated auditor should write to the existing auditor to obtain "professional clearance." This protects the nominated auditor by making them aware of any unusual circumstances surrounding the proposed change that may be relevant in determining acceptance.

200.2 The existing auditor should act promptly upon receipt of such written request. Where the client wishes to change auditor, the existing auditor should not cause undue hindrance and should cooperate with both the client and the nominated auditor to facilitate the flow of information and an effective changeover.

Audit Appointments (200.3–200.8)

200.3 A member asked to accept nomination as auditor should, save where the company has not previously had an auditor:

• (a) Find out whether the change of auditor has been properly dealt with in accordance with the Companies Ordinance or other legislation; and
• (b) Request the prospective client's permission to communicate with the auditor last appointed.

200.4 If the member is aware that the change has not been properly dealt with under the Companies Ordinance, they should advise the prospective client of any remedial action.

200.5 A member should decline nomination if the prospective client:

• (a) Fails to properly deal with the change of auditor in accordance with the Companies Ordinance; or
• (b) Refuses permission for communication with the auditor last appointed.

200.6 On receipt of permission, the member should request in writing of the existing auditor if there are any unusual circumstances surrounding the proposed change. An example letter is provided in the Appendix.

200.7 A member receiving such written request should act expeditiously and:

• (a) If no professional or other reason exists why the nominee should not accept nomination, reply accordingly without delay; or
• (b) If the member considers it appropriate to discuss the client's affairs with the proposed nominee, request permission of the client to do so freely. If this request is not granted, the member should report that fact to the proposed nominee who should not accept nomination.

200.8 On receipt of permission from the client, the member should advise the proposed nominee of concerns about the circumstances and disclose fully all information needed by the proposed nominee to decide whether to accept nomination.

Other Appointments (200.9–200.10)

200.9 The same principles apply in respect of changes of appointment for all other recurring professional work.

200.10 A member invited to undertake professional work additional to that already being carried out by the auditor and/or another accountant should notify the auditor/other accountant of the work being undertaken. This notification need not be given if the client advances a valid reason against it. The member undertaking additional work has the right to expect full cooperation from the continuing auditor/accountant.

Guidelines — General (200.11–200.28)

200.11 The guidance applies to replacement of auditors of companies, but the considerations generally also apply to changes in advisory work of a recurring nature (accountancy, taxation), and to clients of any type — company, corporate body, individual, partnership, or association. For audit clients, they apply to non-audit work as they do to audit work. The reasons for communication are equally applicable in all cases.

200.12 Where a member is invited to undertake additional work alongside another accountant who continues, the member should notify the other accountant unless the client gives a valid reason. This is not merely professional courtesy — it gives the existing accountant notice of the scope of the new appointment which may bear on how they discharge their continuing responsibilities.

Audit Appointments — Detailed Guidelines (200.13–200.28)

200.13 Definitions: "Existing auditor" = the individual or firm currently filling or who last filled the office. "Member" = the individual or firm invited to accept appointment. "Proposed new auditor" = used when referring to obligations of an existing auditor to any prospective successor.

200.14 The client has an indisputable right to choose its auditors and other professional advisors and to change to others if it so decides.

200.15 Auditors of a company are usually appointed to hold office until the conclusion of the next general meeting at which accounts are submitted. Shareholders are entitled in general meeting to appoint a different auditor, and the existing auditor is entitled under the Companies Ordinance to make written representations and to address the meeting.

200.16 A member invited to accept nomination in replacement of an existing auditor should endeavour to ascertain the reasons for the proposed change. This cannot effectively be done without direct communication with the existing auditor. The member therefore should not accept nomination without first communicating in writing with the existing auditor.

200.17 When first approached, the member should explain the duty to communicate with the existing auditor and request authority to do so. If authority is refused, the member must explain that they may not accept nomination and the matter can proceed no further. The member should ask the client to inform the existing auditor of the proposed change and give written authority to discuss the client's affairs. The member should decline to accept nomination if informed by the existing auditor that the client has refused to give authority to discuss affairs.

200.18 The initiative in communication rests with the member. The existing auditor should not volunteer information in the absence of communication and authority from the client.

200.19 The purpose of finding out the background to the proposed change is to enable the member to determine whether it would be proper to accept nomination. In particular, members will wish to ensure they do not unwittingly become the means by which unsatisfactory practices or impropriety may be enabled to continue or be concealed from shareholders.

200.20 The existing auditor should answer without delay the communication from a proposed new auditor. If no matters exist, the existing auditor should write to say so. If matters exist, they should inform the proposed new auditor of those factors of which the latter should be aware. The proposed auditor may wish to confer with the existing auditor, who may explain why in their opinion it is not advisable for the proposed auditor to accept nomination.

200.21 The existing auditor should give information as to professional considerations. This may indicate, for example, that the reasons for the change advanced by the client are not in accordance with the facts; or that the proposal to displace the existing auditor is put forward because the existing auditor has stood their ground and carried out duties in the face of opposition or evasion on occasions when important differences of principle or practice arose.

200.22 Should it be represented that the desire to replace the existing auditor is prompted by disagreement over the truth and fairness of accounts or the depth/methods of audit work, the member should discuss with the client the areas of disagreement and satisfy themselves either that the client's view is reasonable, or that the client will accept the member's right to a contrary opinion and, if appropriate, the duty to express it in the audit report.

200.23 If the existing auditor has withdrawn pursuant to paragraphs R360.20 and 360.21 A1 under Part A (NOCLAR), they should, on request by the proposed new auditor, provide all facts and other information concerning the identified or suspected non-compliance with laws and regulations to the proposed new auditor without the need to obtain client's consent, unless prohibited by law or regulation. See paragraph R360.22 under Part A for further guidance.

200.24 Where there has been failure or refusal by the client to supply the existing auditor with information properly required for performance of duties, the existing auditor should so inform the proposed new auditor.

200.25 It may be essential for the performance of professional obligations that the member should disclose information given by the predecessor. For example, disclosure to officers or employees of the client may be unavoidable if matters brought to attention by the predecessor are to be properly investigated. However, such disclosure should be no wider than is necessary.

200.26 If the member does not receive within a reasonable time a reply to their communication to the existing auditor and has no reason to believe there are any unusual circumstances, they should try to contact the existing auditor by other means. If unable to obtain a satisfactory outcome, they should send a further letter, preferably by recorded delivery, stating that unless a reply is received within a specified time, they will assume there are no matters of which they should be aware.

200.27 [Not used.]

200.28 The foregoing paragraphs indicate the general principles by which a member should be guided when invited to act as auditor of a company.

Special Situations (200.29–200.32)

200.29 — Appointment of a Joint Auditor: When a member receives an invitation to accept nomination as a joint auditor, they should be guided by similar principles to those for sole auditor.

200.30 — Retirement of a Joint Auditor: The appointment of joint auditors confers joint and several responsibility. The proposed withdrawal of a joint auditor substantially changes the appointment, so a surviving joint auditor should communicate formally with fellow joint auditors as though being asked to undertake a completely new appointment.

200.31 — Filling a Casual Vacancy: When invited by directors to fill a casual vacancy, the member should be guided by similar principles but may need to adapt procedure — obtaining information from the previous auditor's partners, administrators of their estate, or other appropriate sources.

200.32 — Business Acquired by a New Company: When asked to accept appointment as auditor of a new company formed to acquire an existing business with substantially the same ownership, the member should communicate with the auditor or accountant who acted for that business.

Unpaid Fees and Transfer of Papers (200.33–200.36)

200.33 — Unpaid Fees of Previous Auditor: The fact that fees may be owing to the existing auditor is not of itself a reason not to accept nomination. If the member does accept, it may be appropriate to assist in any way towards achieving settlement of outstanding fees — whether or not is entirely a matter for the member's judgment.

200.34 — Transfer of Books and Papers: The existing auditor should transfer promptly to their successor after appointment all books and papers of the company in their possession, unless exercising a lien for unpaid fees. See Statement 1.301 "Books and Papers."

200.35 — Providing Information to a Successor: The new auditor will often need to ask the predecessor for information as to the client's affairs, lack of which might prejudice the client's interests. Such information should be promptly given and, unless there is good reason such as an unusual amount of work involved, no charge should be made.

200.36 The existing auditor is under no legal obligation to make working papers available for review by the new auditor, but has an ethical obligation to respond to specific enquiries and, inter alia, should make available working papers relating to matters of continuing accounting significance, including information which may assist in determining consistent application of accounting principles.

Statutory Provisions (200.37–200.43)

200.37 By statute, an outgoing auditor is entitled and may be obliged to communicate to members or creditors matters connected with ceasing to hold office. Nothing in this section affects those statutory rights or duties.

200.38 Under section 425 of the Companies Ordinance, for an auditor whose appointment is terminated (either when the term expires or when removed by ordinary resolution), the auditor must give the company:

• (a) If there are circumstances connected with the termination that should be brought to the attention of members or creditors — a statement of those circumstances; or
• (b) If there are no such circumstances — a statement to that effect.

200.39 When special notice is given for a resolution to appoint an incoming auditor in place of the outgoing auditor (s.422(2) Companies Ordinance), the outgoing auditor:

• (a) May give the company a cessation statement setting out in reasonable length the circumstances surrounding the termination;
• (b) May request the company to state in every meeting notice that the statement has been made and to send a copy to every member;
• (c) May request the company to ensure the statement is read out at the meeting;
• (d) Is entitled to be given every notice/communication relating to the general meeting, to attend, and to be heard.

200.40 When special notice is given for removal from office (s.422(3)), similar rights apply — the outgoing auditor may give a cessation statement, request circulation to members, and request it be read at the meeting.

200.41 When a proposed written resolution is given for appointing a new auditor in place of the outgoing auditor (s.423(2)), the outgoing auditor may give a cessation statement and require the company to send a copy to every member when the written resolution is circulated.

200.42 For an auditor who resigns by giving notice in writing (s.417(1)), their term expires at the end of the day the notice is given or at a later date specified. Under s.424, such auditor must give the company either a statement of circumstances or a statement that there are no such circumstances. Under s.421, if the resignation notice is accompanied by a statement of circumstances, the auditor may require the directors to convene a general meeting.

200.43 If such a general meeting is convened, under s.422(1) the auditor may give a cessation statement, request circulation and reading, and is entitled to attend and be heard.

Qualified Privilege: Section 410 of the Companies Ordinance gives an auditor qualified privilege for statements made in the course of performing duties as auditor. In the absence of malice, an auditor is not liable for defamation in respect of any cessation statement or statement of circumstances connected with cessation of office.

Appendix — Example Clearance Letter

A template letter is provided:

"Dear Sirs, We have been nominated to act as auditors of .................... Limited. In order to assist us in determining whether to accept such nomination, we should be grateful if you would advise if there are any circumstances surrounding the proposed change of which we should be aware. Yours faithfully,"

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SECTION 300 — Change of Auditors of a Listed Issuer of The Stock Exchange of Hong Kong (C-s300, ~4 pages, 21 paragraphs)

Key concept: Listed company auditor changes require enhanced disclosure to protect the market.

Background (300.1–300.4)

300.1 The Stock Exchange of Hong Kong Limited (SEHK) and the Securities and Futures Commission (SFC) have raised concerns about announcements by listed issuers regarding reasons for auditor changes. In many cases, fee disputes are stated as the reason, but concern exists that auditors have been relying on purported fee disputes to disguise the real reasons. As a result, potentially significant matters about the listed issuer may not be disclosed to investors and creditors, and the market is not kept fully informed.

300.2 The purpose of this section, prepared in consultation with the SEHK and SFC, is to establish a framework to enhance communication by auditors with a listed issuer where there is a change of auditors. The framework requires outgoing auditors to prepare a letter to the audit committee and board of directors setting out the circumstances leading to their resignation or termination.

300.3 This section deals with changes of auditors of a listed issuer including auditors who: resign before expiration of term; decide not to seek re-election at the AGM; are notified by directors they will not be nominated for re-appointment; or are removed during their term.

300.4 This section should be read in conjunction with Section 320 "Professional Appointments" under Part A and Section 200 of Part C.

Listing Rule Requirements (300.5–300.6)

300.5 Under Main Board Listing Rule 13.88 and GEM Rule 17.100:

• A listed issuer must at each AGM appoint an auditor to hold office from the conclusion of that meeting until the next AGM
• The issuer must not remove its auditor before the end of the auditor's term without first obtaining shareholders' approval at a general meeting
• A circular proposing removal must be sent to shareholders with any written representations from the auditor, not less than 10 business days before the general meeting
• The issuer must allow the auditor to attend the general meeting and make written and/or verbal representations
• Under Code Provision F.2.2, management should ensure the external auditor attends the AGM to answer questions about the audit, the auditor's report, accounting policies, and auditor independence

300.6 Auditors of Hong Kong incorporated listed issuers are reminded that under sections 417 and 424 of the Companies Ordinance, an auditor who resigns must include a statement of circumstances or a statement that there are no such circumstances. Under s.425(1), these requirements extend to auditors who have been removed and retiring auditors not reappointed.

Definitions (300.7)

300.7 Key terms:

• (a) "Listed issuer" — a company listed on the Main Board or GEM of the SEHK
• (b) "Incoming auditors" — the auditors nominated for the current period who did not audit the preceding period's financial statements
• (c) "Outgoing auditors" — the auditors previously appointed who have been or are to be replaced

Duty to Shareholders (300.8–300.9)

300.8 Auditors are reminded that once appointed, they have a duty to the shareholders to report on the financial statements, and should make every reasonable effort to discharge this duty. Auditors should not attempt to avoid the responsibility of reporting on the financial statements by resigning.

300.9 The auditors' proper course of action, once appointed, is to report on the financial statements. If considering resigning during their term, they should discuss the contentious issues with the audit committee and seek the audit committee's assistance to resolve the issues with management and complete the audit. Having completed the audit, if they do not wish to be re-appointed, they should decline to stand for re-appointment when their term expires.

Communication with Audit Committee and Board (300.10–300.14)

300.10 This section requires outgoing auditors to prepare a letter to the audit committee and the board of directors whenever:

• (a) The outgoing auditors resign or decline to stand for re-appointment (Resignation); or
• (b) The listed issuer decides to propose removal during the auditors' term, or there is a proposal or intention not to re-appoint on expiry of term (Termination).

300.11 The outgoing auditors' letter (the "Letter of Resignation or Termination") should set out the circumstances leading to their Resignation or Termination. The circumstances to be disclosed are all occurrences that, in the opinion of the outgoing auditors, affect the relationship between the listed issuer and the outgoing auditors.

300.12 Occurrences that affect the relationship include, but are not limited to, "disagreements" and/or "unresolved issues." These will generally be those that occurred in connection with:

• (a) The audit of the most recently completed financial year
• (b) Any period subsequent to the most recently completed financial period for which an audit report has been issued, up to the date of Resignation or Termination

300.13 Disagreements refer to any matter of audit scope, accounting principles or policies, or financial statement disclosure that, if not resolved to the satisfaction of the outgoing auditors, would have resulted in a qualification in the audit report.

300.14 Disagreements include both those resolved to the outgoing auditors' satisfaction (which nevertheless affect the relationship) and those not resolved. Disagreements should have occurred at the decision-making level — between personnel of the listed issuer responsible for finalizing financial statements and personnel of the auditors responsible for authorizing issuance of audit reports. The term "disagreement" is to be interpreted broadly — it is not necessary for there to have been an argument, merely a difference of opinion.

Unresolved Issues and Announcements (300.15–300.20)

The section continues with detailed requirements regarding unresolved issues, the content of announcements made by listed issuers, and the incoming auditor's obligations to review announcements before publication. All changes of auditors must be disclosed fully to avoid the possibility of the market being misled.

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SECTION 400 — Unlawful Acts or Defaults by Clients of Members (C-s400, ~20 pages, 87 paragraphs)

Key concept: The largest and most detailed section — covering a member's duties when discovering fraud, tax evasion, or other illegal acts by clients.

Scope and General Principles (400.1–400.10)

400.1–400.3 This section covers situations where a practising member discovers unlawful acts or defaults by clients. Members should exercise careful judgment and would be well advised to seek legal or other professional advice if in doubt. The guidance applies to members in public practice acting in any professional capacity.

400.4 Members have a duty of confidentiality to clients BUT this is overridden in certain circumstances where there is a higher public interest duty.

400.5 When unlawful acts are discovered, the member should:

• Advise the client on the proper course of action
• Consider the implications for the professional relationship
• If the client refuses to take appropriate action, consider duties to third parties and the public interest

Taxation Frauds and Irregularities (400.23–400.48) — Major Sub-section

400.23 If a member discovers that past tax computations or returns were incorrect due to client deception or fraud:

• The member should advise the client to make full disclosure to the Inland Revenue Department (IRD)
• If the client refuses, the member must cease to act for the client in tax matters
• The member should consider whether they can continue as auditor in light of the client's refusal

400.29–400.31 When ceasing to act, the member should:

• Inform the IRD that they have ceased acting (but NOT disclose the reason without client consent or legal compulsion)
• Not volunteer information about the irregularities unless legally required
• For listed companies, additional Stock Exchange notification requirements apply under Part A section 360

400.32–400.48 The member should not continue to act if the client persists in tax evasion. Detailed procedures cover:

• Responding to IRD enquiries after ceasing to act
• Handling requests for information from the IRD
• The distinction between client deception and client disagreement
• Cases where the member discovers errors in their own past work

Removal of the Auditor (400.55)

400.55 If directors (who hold a controlling interest or are all shareholders) fail to comply with the auditor's advice and wish to prevent the auditor from completing the audit and making a qualified report, they could call a general meeting solely to remove the auditor. In this case, the auditor may:

• Exercise the right under s.411 Companies Ordinance to attend the meeting and be heard
• Consider exercising rights under s.422(3) by giving the company a statement of circumstances surrounding the proposed removal
• Request the company to comply with the requirements of s.422(5)
• If acting for the company in taxation matters and receiving IRD enquiries, follow the guidance in paragraphs 400.23–400.48

Companies in Liquidation (400.56–400.58)

400.56 Although the auditor is appointed by shareholders, the appointment is by the company as a legal entity and the duty of confidence is to the company as distinct from individual shareholders. If the company goes into liquidation, the company's rights remain vested in the company as an entity. The liquidator is the person through whom the company's rights are exercised, so there can be no breach of confidence in giving the liquidator information to which the company itself is entitled.

400.57 If the auditor of a company in liquidation is approached by the police for assistance in enquiries that may lead to prosecution of a director, the auditor's appropriate course is to make available to the liquidator all relevant information, leaving with the liquidator the responsibility of deciding whether under s.277 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance the liquidator has a duty to report to the Secretary for Justice. If such a report is made, the auditor has a statutory duty to give assistance to the Secretary for Justice (s.277(4)), overriding the duty of confidence. However, if the auditor has encountered suspected NOCLAR, they should follow the Part A section 360 framework.

400.58 The appointment of a member to the office of liquidator or receiver does not give rise to a professional client relationship vis-à-vis the company. However, if the member is already the auditor at the time of appointment as liquidator in a members' voluntary winding up, they are under a duty of confidence for matters learned as auditor. A receiver, whether appointed by the Court or under hand, is not a representative of the company in the way a liquidator is — the auditor should continue to regard the company or its liquidator as the client.

Companies under Investigation (400.59–400.59B)

400.59 Under section 846 of the Companies Ordinance, an inspector appointed to investigate a company's affairs has powers to require the auditor to:

• (a) Produce any record or document relevant to the investigation
• (b) Take all reasonable steps to preserve records before production
• (c) Attend before the inspector and answer questions relating to any matter under investigation
• (d) Answer any question relating to any matter under investigation
• (e) Give the inspector all other assistance reasonably possible

Where these provisions apply, the auditor's duty of confidence is overridden by their statutory duty.

400.59A Under s.848, the inspector may make copies, require information or explanation, and require verification by statutory declaration.

400.59B Under s.849, the inspector may exercise these powers in relation to an associated body corporate of the company.

Sole Traders and Partnerships (400.60–400.62)

400.60 For sole traders and partnerships, a practising member may have to work from incomplete records and within limits laid down by the client. Such clients are not subject to statutory requirements similar to those for companies — companies have statutory obligations regarding accounting records and the auditor has a statutory duty to report non-compliance. As such statutory requirements are not present for sole traders and partnerships, it is important that anyone who sees the accounts should be made aware, by the member's report, of the significance of the association of the member's name with the accounts.

400.61 Where a member is acting for a client in taxation matters and receives IRD questions designed to ascertain whether all receipts have been properly accounted for, the member should not undertake responsibility for replies unless satisfied from examination of the books and records that all relevant information is available. Where not so satisfied, the proper course is to obtain answers from the client and pass them on as such to the IRD.

400.62 If a member discovers that past accounts which they prepared or audited were false or misleading through having been deceived by the client, the procedure in relation to the IRD follows paragraphs 400.29–400.31. With regard to third parties other than the IRD, the member should act on the basis of the advice in paragraph 400.54(c).

Independent Commission Against Corruption (ICAC) Investigations (400.63–400.89)

400.63 Members may find they are requested by the ICAC to "assist" in investigation of corruption allegations, mainly against their own clients. Such assistance is usually in the form of furnishing information orally or in writing. Since the relevant ordinances do not cover all procedural aspects, the following procedures have been agreed with the Commission.

400.64–400.89 — Principles Underlying an Approach Made by ICAC:

• ICAC officers may request information from members about their clients
• Members should cooperate within the bounds of their professional duties
• Where possible, members should seek client consent before disclosing information
• If consent is refused but the member believes disclosure is required by law, they should seek legal advice
• The ICAC may serve a notice under s.14 of the Prevention of Bribery Ordinance requiring production of documents or information
• Members have obligations under the Prevention of Bribery Ordinance (Cap. 201) and the ICAC Ordinance (Cap. 204)
• Detailed procedures cover: voluntary assistance, compelled production, legal professional privilege, and the handling of original documents

Professional Negligence (400.90–400.100)

Members discovering errors in their own past work should promptly inform the client. If the error affects third parties (e.g., lenders relying on audited accounts), the member must consider their duty to those parties. Professional indemnity insurance considerations apply.

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SECTION 500 — Unlawful Acts or Defaults by or on Behalf of a Member's Employer (C-s500, ~5 pages, 26 paragraphs)

Key concept: Members employed in business who discover unlawful acts — escalation and whistleblowing framework.

Scope (500.1–500.4)

500.1–500.2 This section applies to members employed in commerce, industry, or the public sector who discover unlawful acts or defaults within their employing organization. It should be read in conjunction with Part 2 of Part A (Professional Accountants in Business) and Section 360 "Responding to Non-Compliance with Laws and Regulations (NOCLAR)" under Part A.

Disclosure by Employer to Member (500.3)

500.3 Where a member is employed to prepare accounts or financial information and the employer does not provide all relevant information, the member must consider their obligations. If the member suspects that the incomplete information is intended to mislead, they should follow the escalation procedures.

Escalation Procedures (500.5–500.20)

500.5 When a member discovers unlawful acts, the first step is to raise the matter with their immediate superior.

500.6 If the immediate superior is implicated in the unlawful act, the member should go to the next level of management.

500.7 If the matter remains unresolved after internal escalation, the member should consider:

• Reporting to the audit committee or board of directors
• Seeking legal advice
• Resignation — if the member believes the unlawful conduct is continuing and internal resolution is impossible
• Whistleblowing (reporting to external authorities) — as a last resort, where the member believes the matter is of sufficient seriousness and public interest

500.8 Throughout the process, the member should:

• Document all steps taken, including dates, persons consulted, and decisions made
• Maintain confidentiality where possible
• Balance the duty of confidentiality to the employer against the public interest

500.9–500.20 Detailed guidance covers:

• The member's protection under employment law
• The framework for determining when external reporting is justified
• Following Part A section 360 NOCLAR framework
• Considerations when the employer is a listed company
• The member's own potential liability if they fail to act

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SECTION 600 — Ethics in Tax Practice (C-s600, ~2 pages, 12 paragraphs)

Key concept: Boundaries between legitimate tax advice and assisting tax evasion.

Core Principles (600.1–600.12)

600.1 A member may assist a client in arranging their tax affairs efficiently within the law.

600.2 A member must never knowingly assist in tax evasion.

600.3 The distinction between tax avoidance (legal) and tax evasion (illegal) is critical. Members must be clear on this boundary.

600.4 If a client proposes a tax arrangement the member considers improper:

• Advise the client of the risks and why the arrangement is improper
• If the client persists, cease to act for the client in that matter
• Consider whether the matter should be reported under Section 400

600.5 Members should not hold themselves out as specialists in areas of tax where they lack competence.

600.6 When providing tax advice, members should ensure the client understands:

• The degree of risk associated with the advice
• That the advice is based on current law and practice, which may change
• That the member does not guarantee the outcome

600.7–600.12 Additional guidance covers:

• Responding to IRD enquiries
• Errors in past tax returns
• Tax planning vs. tax avoidance vs. tax evasion
• Cross-border tax matters
• The Tax Reserve Certificate scheme

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SECTION 700 — Corporate Finance Advice (C-s700, ~9 pages, 44 paragraphs)

Key concept: Managing conflicts of interest in takeover, merger, and corporate finance advisory work.

Scope (700.1–700.5)

700.1–700.5 Covers members providing corporate finance services including: takeovers, mergers, share buy-backs, flotations, fundraisings, and related advisory work. The guidance is designed to assist members who advise in these circumstances. A definition of corporate finance activities is set out in Annex I of this section.

Objectivity and Integrity (700.6–700.7)

700.6 Subsection 111 "Integrity" and Subsection 112 "Objectivity" under Part A, together with Part 4A "Independence for Audit and Review Engagements," include guidance on integrity, objectivity, and independence applicable to corporate finance activities.

700.7 Subject to paragraph 700.6, and provided a member maintains objectivity and integrity throughout — both in regard to the client and to other interested third parties — there can be no objection to a firm accepting an engagement designed primarily to advance the client's case.

Conflicts of Interest (700.8–700.23)

700.8 It may be in the best interests of a client company for corporate finance advice to be provided by its auditor and there is nothing improper in the auditor supporting a client in this way. There are, however, a variety of situations in which conflict can arise.

700.9 It would not on the face of it be improper for the firm to continue to act as auditor to both parties in a takeover situation, even if the takeover were contested.

700.10 All reasonable steps should be taken to ascertain whether a conflict of interest exists or is likely to arise in the future between a firm and its clients, both in regard to new engagements and changing circumstances of existing clients, including any implications from possession of confidential information.

700.11 A firm should not accept or continue an engagement in which there is or is likely to be a significant conflict of interest between the firm and its clients.

700.12 Whether a significant conflict exists will depend on all the circumstances. The test is whether a reasonable observer, seized with all the facts, would consider the interest as likely to affect the objectivity of the firm. However, any material financial gain which accrues or is likely to accrue to the firm as a result of the engagement, otherwise than in the form of fees or other reward from the client for its services, or commission properly earned and declared, will always amount to a significant conflict of interests.

700.13 Relationships with clients and former clients need to be reviewed before accepting a new appointment and annually thereafter. A relationship which ended over two years before is unlikely to constitute a conflict. Where it is clear that a material conflict of interest exists, a firm should decline to act as corporate finance adviser.

Conflict between Interests of Different Clients (700.14–700.21)

700.14 There is nothing improper in a firm having two or more clients whose interests may be in conflict. In such a case, the work should be managed to avoid one client's interests adversely affecting another. Where acceptance or continuance would, even with safeguards, materially prejudice the interests of any client, the appointment should not be accepted or continued, or one appointment discontinued.

700.15 It would be neither reasonable nor necessary to discontinue acting in anticipation of every potential conflict. It could in some instances give rise to harmful rumour or speculation for a firm to disengage before a transaction becomes public knowledge.

700.16 Where there appears to be a conflict between clients but after careful consideration the firm considers the conflict is not material and unlikely to seriously prejudice any client's interests, the firm may accept or continue the engagement but not without first informing the clients concerned and obtaining the consent of both in writing.

700.17 A firm should not act or continue as lead adviser for two or more clients if the disclosure called for in paragraph 700.16 would materially prejudice the interests of a client.

700.18 "Lead adviser" is the firm or person primarily responsible for advising on, organizing, and presenting an offer or the response to an offer, acting in its capacity as a sponsor or independent financial adviser. This definition would include the "independent financial adviser" required by a defending company under Rule 2.1 of The Codes on Takeovers and Mergers and Share Buy-backs.

700.19 Where a conflict is likely to materially prejudice the interests of a client, an engagement should not be accepted or continued even at the informed request of the clients concerned.

700.20 Where a firm is required to disengage from an existing client, it should do so as speedily as practicable having regard to the interests of the client.

700.21 Wherever a significant conflict between the interests of different clients or potential clients is identified, sufficient disclosure in writing should be made to the clients concerned together with details of the proposed safeguards, so they may make an informed decision.

Safeguards (700.22–700.23)

700.22 Where a firm acts for two or more clients following disclosure in accordance with paragraph 700.16, all reasonable steps should be taken to manage the conflict. These steps should include:

• (a) The use of different partners and teams for different engagements
• (b) Standing instructions and all other necessary steps to prevent the leakage of confidential information between different teams and sections within the firm (i.e., Chinese walls)
• (c) Regular review of the situation by a senior partner or compliance officer not personally involved with either client
• (d) Advising at least one or all the clients to seek additional independent advice

700.23 Any decision on the part of a sole practitioner should take account of the fact that safeguards (a) to (c) above will not be available to them. Similar considerations apply to a small practice.

Documents for Client and Public Use / Confidentiality (700.24–700.31)

700.24 Information acquired in the course of professional work should not be disclosed except where consent has been obtained from the client/employer, or where there is a public duty to disclose, or where there is a legal or professional right or duty to disclose (see Subsection 114 "Confidentiality" and Section 360 "NOCLAR" under Part A).

700.25 Where in the course of corporate finance advice a firm prepares information for a client, it may be called upon to do so:

• (a) In a document for the client's consumption only
• (b) To assist the client to produce a document going out solely under the client's name and authority
• (c) As part of a document published over the name of the firm

700.26 Any statements or observations in a document prepared for a client must be such as, taken individually and as a whole, are justifiable on an objective examination of the available facts.

700.27 For documents prepared solely for the client and its professional advisers, it should be a condition of the engagement that the document should not be disclosed to any third party without the firm's express permission.

700.28 Any document, whether for private or public use, should be prepared in accordance with normal professional standards of integrity and objectivity and with a proper degree of care.

700.29 A firm is entitled to assume that published accounts on which it is commenting have been prepared properly and in accordance with all relevant Accounting Standards. Where scope for alternative accounting treatment exists, and the accuracy of the comment depends on an assumption as to the actual treatment chosen, that assumption must be stated, together with any other material assumptions. Where the firm is not in possession of sufficient information to warrant a clear opinion, this should be declared in the document.

700.30 A firm must take responsibility for anything published under its name, and the published document should make clear the identity of the client for whom the firm is acting. To prevent misleading or out-of-context quotations, it should be a condition for the engagement that, if anything less than the full document is to be published, the text and its context should be expressly agreed with the firm.

700.31 A firm should ensure that public documents and circulars include prominently the name of the brokers, investment bank, or other advisers responsible for promoting or underwriting the shares or securities, where different from the firm that has accepted the role of sponsor, in order to make abundantly clear the roles undertaken by the various advisers.

The Codes on Takeovers and Mergers and Share Buy-backs (700.32–700.42)

700.32 A member who provides takeover services for clients is required to comply with The Codes on Takeovers and Mergers and Share Buy-backs (the "Codes") which are expressly applied to professional advisers as well as to those engaged in the securities market.

700.33–700.34 The Codes apply to "public companies in Hong Kong" and the persons to whom the Codes apply include:

• (a) Directors of public companies
• (b) Persons seeking to gain or consolidate control of public companies
• (c) Their professional advisers
• (d) Those actively engaged in the securities market in all its aspects

700.35 A "private company" under s.11 of the Companies Ordinance has three restrictions: restricted share transfer rights, maximum 50 members (excluding employees), and prohibition on inviting public subscription. A "public company" under s.12 is a company that is not a private company and not a company limited by guarantee.

700.36–700.42 Additional guidance covers: independence requirements under the Codes, the role of the independent financial adviser (IFA), disclosure of dealings, and the Takeovers Executive and Takeovers Panel procedures.

Annex I — Definition of Corporate Finance Activities

Includes: advising on takeovers and mergers; sponsor work for flotations; independent financial adviser engagements; share buy-backs; capital restructuring; and other advisory work of a similar nature.

Annex II — Guidance Note: Compliance with The Codes on Takeovers and Mergers and Share Buy-backs

Provides specific guidance for members on complying with the Codes when acting in takeover transactions.

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SECTION 800 — Use of Designations and Institute's Logo (C-s800, ~2 pages, 11 paragraphs)

Key concept: Proper use of CPA titles and HKICPA branding.

Core Rules (800.1–800.11)

800.1 Only members holding a valid practising certificate may use the designation "Certified Public Accountant (Practising)" or "CPA (Practising)."

800.2 Members not holding a practising certificate may use "Certified Public Accountant" or "CPA" but must not imply they are in public practice.

800.3 Firm names must not be misleading. They should not imply capabilities or connections that do not exist.

800.4 The HKICPA logo may only be used in accordance with Institute guidelines and with prior permission.

800.5 Members must not use designations implying specialist expertise unless genuinely qualified in that area.

800.6 Under the Accounting and Financial Reporting Council Ordinance (AFRCO), the AFRC is responsible for issuing practising certificates and maintaining the register of certified public accountants.

800.7–800.11 Additional provisions cover: use of designations in electronic communications, letterhead requirements, name changes after merger, display of certificates, and the consequences of misuse (disciplinary action).

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SECTION 900 — Practice Promotion (C-s900, ~4 pages, 20 paragraphs)

Key concept: Rules on advertising, solicitation, and promotion of accounting services.

General Principles (900.1–900.9)

900.1 Practices may promote their services provided the promotion is:

• Truthful and not misleading
• In good taste
• Not disparaging of other members or firms
• Not making unrealistic claims

900.2 The guiding principle is that any promotional activity should enhance the public's perception of the profession.

900.3 Promotion must not bring the profession into disrepute.

900.4 Members should be mindful that what is considered acceptable in one jurisdiction may not be acceptable in another.

900.5 Where members receive the benefits of promotional activities by third parties, they are reminded that they are not permitted to do through others what they cannot do themselves.

Permitted Activities (900.6–900.12)

• Advertising in newspapers, magazines, trade journals, and other media
• Directory entries (including online directories)
• Informational brochures and newsletters (print and electronic)
• Seminars, presentations, and speaking engagements
• Websites and social media presence
• Sponsorship of events
• Press releases and media relations

Prohibited Activities (900.13–900.18)

• Cold-calling or unsolicited personal visits to prospective clients
• Comparative advertising that names or identifies competitors
• Claims of superiority over other practices or practitioners
• Fee quotes that are misleading or do not disclose the basis of calculation
• Using the Institute's logo in advertising without permission
• Promoting services in a way that could reasonably be expected to bring the profession into disrepute

Cross-Border Promotion (900.19–900.20)

• Special rules apply when promoting services across jurisdictions
• Members must comply with the local regulations and ethical requirements in the target jurisdiction
• Where different rules apply, the more restrictive should generally be followed

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SECTION 1000 — Client's Monies (C-s1000, ~2 pages)

Key concept: Safeguarding client funds held by practices.

Core Principles (1000.1–1000.10)

1000.1 Practices that hold client monies must establish proper procedures for safeguarding those funds.

1000.2 Client monies must be kept in separate client bank accounts — clearly segregated from the practice's own funds.

1000.3 Proper accounting records must be maintained for all client monies, showing:

• The amount held for each client
• All receipts and payments
• The balance held at any time

1000.4 Client accounts should be reconciled regularly — at least monthly.

1000.5 Client monies should only be used for the purpose for which they were given. They must not be used for the practice's own purposes.

1000.6 Client monies must be returned promptly when no longer needed for the purpose for which they were given.

1000.7 Interest earned on client accounts should be dealt with as agreed with the client. If no agreement exists, the interest belongs to the client.

1000.8 A practice must be careful to differentiate, both in its records and where appropriate in its use of client accounts, between monies held on behalf of clients and monies belonging to the practice.

1000.9 For liquidation and insolvency work, additional requirements under Part E (Section 500 — Professional Ethics in Liquidation and Insolvency) apply to client monies held in trust accounts.

1000.10 Proper safeguards should be in place to prevent unauthorized access to or misuse of client monies.

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KEY TAKEAWAYS — Part C at a Glance

Section	Core Obligation	Paragraphs
C-100	Introduction; Part C is integral to the Code	~6
C-200	Professional clearance before accepting auditor appointment; statutory statements on cessation	~43
C-300	Listed company auditor changes require SEHK notification, Letter of Resignation/Termination to audit committee	~21
C-400	Report client fraud/tax evasion; cooperate with ICAC, liquidators, and inspectors under statutory duty	~87
C-500	Members in business must escalate unlawful acts internally; whistleblowing as last resort; document all steps	~26
C-600	Tax advice within the law OK; never assist tax evasion; distinguish avoidance from evasion	~12
C-700	Conflict management in corporate finance; reasonable observer test; Chinese walls and safeguards; comply with Takeovers Code	~44
C-800	Proper use of CPA designations; practising certificate required for "CPA (Practising)"; logo use restricted	~11
C-900	Promotion must be truthful, not comparative, no cold-calling; cross-border compliance	~20
C-1000	Client monies in separate bank accounts; regular reconciliation; prompt return when not needed	~10

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