Core Viewpoint - The Hong Kong Accounting and Financial Reporting Council has publicly reprimanded Wang Tianze, an independent non-executive director of Bank of Communications, and imposed a fine of HKD 416,000 due to multiple deficiencies in audit procedures during his tenure as a project partner for two former Hong Kong listed companies [1][2][4]. Group 1 - The fine imposed on Wang Tianze is a result of his failure to obtain sufficient appropriate audit evidence and a lack of professional skepticism in addressing significant misstatement risks related to revenue recognition and external confirmation procedures [4]. - The regulatory body acknowledged that Wang Tianze admitted to the violations and proactively engaged in discussions leading to an early settlement, resulting in a 20% reduction in the fine for each case [4]. - Bank of Communications stated that the regulatory body did not find any intentional, dishonest, or willful misconduct by Wang Tianze, and his ability to serve as an independent non-executive director remains unaffected [4]. Group 2 - Wang Tianze, born in 1964, is a member of the Association of Chartered Certified Accountants in England and Wales and has held various significant positions at Deloitte, including Chief Business Officer and Partner in Risk Consulting [5]. - He has been serving as an independent director at Bank of Communications since October 2023 [4].

Group 1 - The Hong Kong Accounting and Financial Reporting Council (AFRC) imposed penalties totaling HKD 1.912 million on Deloitte, Wang Tianze, and Mai Zhilong for multiple audit deficiencies related to revenue recognition and other violations [1] - Deloitte was responsible for the audit reports of Tianhe Chemical Group Limited and its subsidiaries for the years ending December 31, 2011, 2012, and 2013, as well as for Sander International Limited and its subsidiaries for the years ending December 31, 2012, and 2013 [1] - The AFRC found that the auditors failed to obtain sufficient appropriate audit evidence and lacked professional skepticism in addressing significant misstatement risks related to revenue [1] Group 2 - All three regulated parties admitted their violations and engaged in early settlement discussions with the AFRC, resulting in a 20% reduction in penalties for each case due to their cooperative attitude [2] - The final penalties were HKD 1.16 million for Deloitte, HKD 416,000 for Wang Tianze, and HKD 336,000 for Mai Zhilong [2] - This case marks the first disciplinary actions completed through cross-border regulatory cooperation, supported by the Ministry of Finance of the People's Republic of China, which involved obtaining audit working papers from the mainland [2]

Core Viewpoint - The Hong Kong Institute of Certified Public Accountants (HKICPA) has imposed penalties on Deloitte and two partners for multiple audit deficiencies related to revenue recognition in two former Hong Kong listed companies, Tianhe Chemical Group and Sander International Group, highlighting the importance of professional skepticism in auditing practices [2][4][5]. Group 1: Audit Deficiencies and Penalties - HKICPA publicly reprimanded Deloitte, partner Wang Tianze, and partner Mai Zhilong, imposing a total fine of HKD 1,912,000, which includes HKD 1,160,000 for Deloitte, HKD 416,000 for Wang, and HKD 336,000 for Mai [4][5]. - The penalties are part of the first disciplinary cases completed through cross-border regulatory cooperation with the Ministry of Finance of the People's Republic of China, allowing HKICPA to access audit working papers stored in mainland China [4][5][6]. - The audit deficiencies included failures in revenue recognition and external confirmation procedures, leading to insufficient audit evidence and a lack of professional skepticism regarding significant misstatement risks related to revenue [4][5][6]. Group 2: Specific Findings on Tianhe Chemical Group - Tianhe Chemical Group, primarily engaged in the production and sale of fine chemical products, reported sales of RMB 3.2 billion, RMB 4.09 billion, and RMB 4.84 billion for the years 2011, 2012, and 2013, respectively, accounting for 95.3%, 97.5%, and 96.1% of the group's total sales [5][6]. - The audit for Tianhe Group identified revenue recognition as a significant risk area, with potential for material misstatement due to fraud [5][6]. - Specific deficiencies included inadequate assessment of internal controls over revenue cycles, failure to obtain sufficient audit evidence regarding the effectiveness of operations, and misjudgment of internal controls as effective and reliable [6][9]. Group 3: Specific Findings on Sander International Group - Sander International Group, involved in water supply and sewage treatment contracting, reported revenues of RMB 2.45 billion and RMB 2.88 billion for 2012 and 2013, respectively, representing 92.2% and 91.8% of total revenue [7][9]. - The audit for Sander International revealed significant misstatement risks related to revenue and bank balances, with deficiencies in handling revenue from contracting projects and issuing external confirmation letters for bank balances and trade receivables [7][9]. - The HKICPA emphasized the importance of external confirmation letters as a key audit procedure to verify the financial information provided by the audited companies [7][9].