President's Message
Atty. Benedicta Du-Baladad Message from the President:

Benedicta Du-Baladad

To FINEX members and friends,

PRESIDENT’S REPORT
July 2017 Issue

Last June 21, in celebration of the Philippine Independence, we had two of the country’s prime-movers of arts and culture. Arch. Paulo Alcazaren shared with us the relevance of national heritage conservation, and Direk Joel Lamangan on the state of the local film industry and how it is developing as an art. Our June GMM was a diversion from our usual topics.

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US Oversight of Accounting Firms: the Hong Kong & Big Four Experience (Can an Override Be Allowed?)
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By Dr. Conchita L. ManabatBy Dr. Conchita L. Manabat

BUSINESS MIRROR (FINEX Free Enterprise)
August 11, 2017

US Oversight of Accounting Firms: the Hong Kong & Big Four Experience (Can an Override Be Allowed?)

Finex Free Enterprise is a rotating column of members of the Financial Executives Institute of the Philippines appearing every Wednesday & Friday in BusinessMirror, banking & finance Section.

“In the absence of sound oversight, responsible businesses are forced to compete against unscrupulous and underhanded businesses, who are unencumbered by any restrictions on activities that might harm the environment, or take advantage of middle-class families, or threaten to bring down the entire financial system.”

- Barach Obama


On July 25, 2017. Michael Rapoport of the Wall Street Journal Online reported that the US Public Oversight Board (Public Company Accounting Oversight Board or “PCAOB”) sanctioned Crowe Horwath (HK) CPA Ltd. from auditing US traded companies for three years. This translates to the revocation of the accounting firm’s US registration, though it may reapply after the period of restriction.

The sanction was on account of the accounting firm’s refusal to turn over the audit work papers and related documents re audits of un-named Chinese company that PCAOB was investigating. (The oversight of PCAOB on audits of all entities traded on US stock markets extends beyond the US shores.) It was reported that Crowe Horwath admitted to its conduct in settlement with the US government audit regulator.

The report further stated that the sanction is the second that PCAOB took against a Hong Kong audit firm. The Hong Kong accounting firm PKF was barred by PCAOB in January 2016 due to the firm’s refusal to cooperate in PCAOB’s investigation.

The sanctions by PCAOB also covered the “Big Four” accounting firms in the past. Rapoport cited that in 2015, PriceWaterhouseCoopers, Deloitte Touche Tohmatsu, KPMG and Ernst & Young paid US $2 million in a settlement with the US Securities & Exchange Commission over their past refusal to hand over required work papers and documents.

One major observation worth citing on the news affecting the accounting profession is the role of the professional accountant in an engagement to express an opinion on the financial statements of a client. One basic principle that the professional accountant observes is the principle of confidentiality.

The Code of Ethics for Professional Accountants (developed by the International Ethics Standards Board for Accountants) enumerates circumstances where disclosure of confidential information may be appropriate (Section 140.7) –

a. Disclosure is permitted by law and is authorized by the client;

b. Disclosure is required by law; and

c. There is a professional duty or right to disclose, when not prohibited by law.

In the cases mentioned by Rapoport, jurisdictional considerations may have been a factor in the professional accountants’ decisions not to cooperate with the US regulator and possibly, the clients’ wishes.



Close to home, there had been incidents of late involving listed companies that may have references to audited financial reports of publicly listed companies. While it could be a wish to have a Philippine counterpart of PCAOB to protect the interests of the investing public and other third parties, of what relevance would it be if matters may be settled for a consideration?

Dr. Conchita L. Manabat is the President of the Development Center for Finance and a Trustee of the FINEX Development & Research Foundation. A past Chair of the International Association of Financial Executives Institutes (IAFEI), she now serves as the Chairperson of the Advisory Council of the said organization. She is a member of the International Auditing & Assurance Standards Board (IAASB) Consultative Advisory Group (CAG) and the International Ethics Standards Board for Accountants (IESBA) CAG. She can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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