DISCIPLINARY COMMITTEE OF THE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS

Transcription

1 DISCIPLINARY COMMITTEE OF THE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS REASONS FOR DECISION In the matter of: Mr Garret Zeng Xianggao Heard on: 29 April 2016 Location: ACCA, The Adelphi, 1-11 John Adam Street, London WC2N 6AU Committee: Mrs Lubna Shuja (Chairman), Mr Patrick Bragg (Accountant), Mr Gerard McClay (Lay) Legal Adviser: Mr Andrew Granville Stafford Persons present and capacity: Mr Garret Zeng Xianggao (by telephone) Ms Alina Mu Liu (translator) Mr Mohammed Ismail (ACCA Case Presenter) Ms Sophie Cubillo-Barsi (Hearings Officer) Observers: None PRELIMINARY APPLICATIONS 1. The Committee convened to consider a report concerning Mr Garret Zeng Xianggao FCCA ( Mr Zeng ). The Committee had before it a bundle of papers (pages A-H and 1-61), a transcript of the previous hearing on 23 October 2015 (pages 62 to 85), and three bundles of service papers (pages 1 to 15; 16 to 34 and 35 to 53). 2. Mr Zeng attended the hearing by telephone and the proceedings were translated for him by a Chinese (Putonghuo) translator. 3. At the start of the hearing Mr Ismail made an application pursuant to Regulation 10(5) of the Chartered Certified Accountants Complaints and Disciplinary Regulations ( CDR ) to amend the allegations as follows: 1

2 To include at the end of Allegation 1(b)(ii) the words contrary to Regulation 3(1) of the Complaints and Disciplinary Regulations 2014 ; To include in Allegation 1(c) the words b(i) and after the words the facts set out at. 4. Mr Ismail said the amendments do not introduce any new matters; their purpose was to clarify the regulations ACCA relies on in support of its case and to correct an omission from Allegation 1(c). Mr Zeng did not initially oppose the application but subsequently made some submissions about whether it was necessary. The Committee was satisfied that the amendments would not cause any prejudice to Mr Zeng in the conduct of his defence. They do not change the nature of the case against him; they simply clarify the relevant regulation and correct an omission. The Committee therefore determined that it was in the interests of justice to allow the amendments. ALLEGATIONS AND BRIEF BACKGROUND 5. The allegations against Mr Zeng, as amended, are as follows: Allegation 1 (a) Pursuant to bye-law 8(a)(vi), Garret Zeng Xianggao is liable to disciplinary action by virtue of the disciplinary finding against him on 12 December 2014 by HKICPA. (b) In respect of (a) above Garret Zeng Xianggao; (i) Failed to notify ACCA contrary to bye-law 10(b) (ii) Failed to cooperate with the ACCA investigation in that he did not respond to ACCA correspondence as set out in Schedule 1 contrary to Regulation 3(1) of the Complaints and Disciplinary Regulations 2014 Schedule 1 Letter/ dated 3 February 2015 Letter/ dated 21 February 2015 Letter/ dated 12 March 2015 (c) In light of the facts set out at (b)(i) and (b)(ii) Garret Zeng Xianggao is; (i) Guilty of misconduct pursuant to bye-law 8(a)(i) 2

3 or (ii) Liable to disciplinary action pursuant to bye-law 8(a)(iii). 6. Mr Zeng is resident in Hong Kong. He became a member of ACCA in 1994 and has been a fellow since He is sole proprietor of accountancy practice Kangyuan Zeng & Co ( the firm ). 7. This case arises out of disciplinary findings made against Mr Zeng by the Hong Kong Institute of Certified Public Accountants ( HKICPA ). 8. On 12 December 2014 the Disciplinary Committee of HKICPA heard the following complaints against Mr Zeng. It was alleged that (a) he had failed to maintain his knowledge and skill in breach of the Code of Ethics of Professional Accountants, and (b) that he had been guilty of professional misconduct. 9. The complaints arose as a result of a practice review follow-up visit in August 2012 which identified deficiencies in the firm s audit work. In particular it was found that after Mr Zeng issued an unmodified auditor s report on the financial statements of Client G, a securities broker, omissions and errors were found in the financial statements which were then rectified. 10. Mr Zeng admitted the complaints and it was ordered that his practising certificate be cancelled and not re-issued for 10 months. In addition he was ordered to pay costs of HK$25, At a hearing also on 12 December 2014 the same Disciplinary Committee found two further complaints proved against Mr Zeng, namely (a) that he breached the professional standards of integrity and objectivity by acceding to a client s request to issue an unmodified audit opinion on financial statements that were known to contain a material error; and (b) that he breached a professional standard on auditing by failing to properly evaluate related party relationships and transactions. 12. Mr Zeng admitted these complaints. The HKICPA Committee ordered that he be removed from the register of certified public accountants for a period of ten months, and that he pay a penalty of HK$18,000 and costs of HSK$31, Both the removal of Mr Zeng from the register and cancellation of his practising certificate took effect from 2 February Therefore Mr Zeng was able to apply to restore his name to the register and apply for a new practising certificate from 2 December

4 14. HKICPA reported the matter to ACCA on 23 January HKICPA has declined to disclose to ACCA whether the financial penalty and costs have been paid on the grounds of privacy. 15. On 3 February 2015, ACCA wrote to Mr Zeng asking him why he had failed to notify ACCA of these findings and asking for his comments in respect of them. This letter was sent by post to his registered address and by . Apart from providing ACCA with a new address and saying that the letter had been received and noted no response was forthcoming from Mr Zeng. 16. ACCA wrote again on 21 February 2015 and on 12 March 2015, chasing up a response and warning Mr Zeng of the consequences of not co-operating with ACCA's investigation. These letters were sent by post to his registered address and by to the new address. No reply to either was received by ACCA. DECISIONS ON ALLEGATIONS AND REASONS 17. The Committee considered the documents before it, the submissions of Mr Zeng on his own behalf and Mr Ismail on behalf of ACCA and the advice of the Legal Adviser. The Committee bore in mind that the burden of proving an allegation rests on ACCA and the standard to be applied is proof on the balance of probabilities. 18. At the start of the hearing Mr Zeng admitted the facts of Allegation 1(a) and Allegation 1(b)(i) and (ii). In accordance with CDR 12(3) the Chairman announced the facts in these allegations proved. Mr Zeng disputed Allegation 1(c). 19. In light of Mr Zeng s admissions the only matters the Committee had to consider were as follows. Did the disciplinary finding by HKICPA on 12 December 2014 render him liable to disciplinary action pursuant to bye-law 8(a)(vi), as alleged in Allegation 1(a)? Did the facts admitted in Allegation 1(b), namely the failure to notify ACCA of the disciplinary finding as required by bye-law 10(b) and the failure to co-operate with ACCA s investigation in breach of CDR 3(1), amount to misconduct or, alternatively, a breach of the regulations? 20. Bye-law 8(a)(vi) renders a member liable to disciplinary action if he has been disciplined by another professional body. It is clear that HKICPA is a relevant professional body for the purposes of this bye-law and therefore Mr Zeng is liable to disciplinary action as a consequence of its finding. Accordingly Allegation 1(a) is proved. 4

5 21. The Committee was satisfied that Mr Zeng s failure to notify ACCA of the disciplinary finding made in Hong Kong and his failure to co-operate with ACCA's consequent investigation amounted to misconduct. 22. The Committee concluded, given the nature of the sanction imposed on him by HKICPA, it was a serious failure on Mr Zeng s behalf not to notify ACCA of the finding. Further the fact that this body had to bring the matter to ACCA s attention brings both Mr Zeng and the profession into disrepute. Notwithstanding that English is not Mr Zeng s first language and that he claimed not to have read ACCA s rules in detail, the Committee regarded it as an important obligation of membership to know and follow the rules of the Association. It is equally important for members to cooperate with the Association s investigations, as failure to do so may prevent serious complaints from being efficiently and properly investigated and prevent ACCA carrying out its regulatory function. 23. Therefore the Committee found all the allegations proved save that there was no need for it to consider Allegation 1(c)(ii) as it was a lesser alternative to Allegation 1(c)(i). SANCTION AND REASONS 24. In light of its findings on the allegations, the Committee considered what, if any, sanction was appropriate and proportionate. It took into account ACCA s Guidance for Disciplinary Sanctions ( GDS ). The Committee bore in mind that the purpose of sanctions was not punitive but to protect the public, maintain confidence in the profession and declare and uphold proper standards of conduct and behaviour. 25. The Committee took into account in particular the following mitigating factors. Mr Zeng has been a member of ACCA for over 20 years and there are no previous disciplinary findings against him. He apologised for his actions and he made full admissions in respect of the factual allegations against him. He had shown remorse. The Committee took into account that he said he was under a lot of stress following the suspension imposed by HKICPA and this contributed to, although it did not of course excuse, his failure to engage with the ACCA investigation. To his credit, he had taken part in the hearing and the Committee noted that he regarded membership of ACCA as being important to him. The Committee could not identify any aggravating factors. 5

6 26. The Committee decided it was not appropriate to take no action given the serious nature of the allegations found proved. It therefore considered the available sanctions in ascending order of severity. 27. This misconduct was not minor and the Committee considered that neither admonishment nor a reprimand would appropriately mark the seriousness with which these matters should be viewed. On balance, and having regard to GDS, the Committee decided the proportionate sanction in this case was a severe reprimand. There was no evidence that the conduct in question had caused actual harm and Mr Zeng had shown insight into his failings. The Committee was prepared to regard this as an isolated episode against the background of a good previous record. 28. Therefore, pursuant to CDR 13(1)(a), the Committee orders that Mr Zeng be severely reprimanded. COSTS AND REASONS 29. ACCA applied for costs in the sum of 2,325. Mr Zeng did not oppose the application either in principle or in amount. The Committee considered that the application was a proper one in light of the fact all the allegations had been proved and accordingly ordered Mr Zeng to pay ACCA s costs in the sum of 2,325. EFFECTIVE DATE OF ORDER 30. The order will come in to effect from the date of expiry of the appeal period, namely after 21 days from service of this written statement of the Committee s reasons for its decision, unless Mr Zeng gives notice of appeal in accordance with the Appeal Regulations prior to that. Mrs Lubna Shuja (Chairman) 29 th April