Read the full judgment text of CACV 000260/1997 on BabelCite. This Court of Appeal judgment was delivered on 3 June 1998 before Godfrey, Liu and Leong, JJ.A..
Disciplinary proceedings – professional accountants – reliance on specialist valuation – Statement of Auditing Standard 3.101 paragraph 7 – Auditing Guideline 3.282 paragraphs 15-17 – duty to give reasons – natural justice – professional judgment of disciplinary tribunal – appellate review. The appellant, a partner in Deloitte Touche Tohmatsu responsible for the audit of the financial statements of Kong Tai International Holdings Company Limited for the year ended 31 March 1995, was found by the Disciplinary Committee of the Hong Kong Society of Accountants to have neglected to observe, maintain or otherwise apply a professional standard, in breach of section 34(1)(a)(vi) of the Professional Accountants Ordinance, Cap. 50. The complaint concerned his failure to comply with paragraph 7 of SAS 3.101 in the audit of the valuation of two properties (the Sheen Profit Centre and the Pegasus Property) held for redevelopment, valued at HK$441,000,000 in the audited accounts but with a true valuation of HK$215,000,000. The valuations, prepared by Vigers Hong Kong Limited, were on a gross development value basis without deduction of redevelopment costs, which the company's auditors and management did not detect. The Disciplinary Committee, constituted under section 33(3)(a), ordered pursuant to section 35(1)(b) that the appellant be reprimanded. On appeal under section 41 of the Ordinance, the appellant contended (i) that the Disciplinary Committee was obliged to give reasons for its decision, the absence of which materially prejudiced his right of appeal, and (ii) that, since the only expert evidence supported his position, no reasonable tribunal could have found the complaint proved. Held, dismissing the appeal: (1) The Disciplinary Committee was under no statutory or common law duty to give reasons, and the absence of reasons did not, on the facts, materially prejudice the appellant's prosecution of his appeal; there was no evidence all one way, the issue was straightforward, and the appellant was fully aware of the charge and had every opportunity to meet it. (2) An appellate court will not second-guess the professional judgment of a disciplinary committee of a professional body unless the committee plainly misread the evidence or reached a conclusion contrary to it (per Libman v General Medical Council); the Committee was entitled to prefer the Society's evidence over that of the appellant's expert witnesses (Mr. Brown, a chartered surveyor, and Mr. Morrison, a chartered accountant), and its conclusion that paragraph 7 of SAS 3.101 and the requirements of Auditing Guideline 3.282 (paragraphs 15-17) had not been complied with was reasonably sustainable on the evidence. The case turns on the proper evaluation of specialist evidence: given the materiality of the amounts (shareholders' equity increased by 43%), the change of basis from prior years, the absence of valuation certificates, and the higher relative values of the two properties, the auditor was required to make a detailed examination of the Vigers report and could not simply accept it at face value. Appeal dismissed.
Legal issues: Obligation of a disciplinary committee to give reasons for its decision · Whether the Disciplinary Committee's finding of breach of professional standard was reasonably sustainable
Outcome: Appeal dismissed; the Disciplinary Committee's order reprimanding the appellant is upheld.