In this chapter of our Annual Insurance Review 2018, we look at the main developments in 2017 and expected issues in 2018 for accountants.
Key developments in 2017
The publication of the Paradise Papers in the later part of 2017 brought focus on to an array of celebrities and the accountancy world alike. As with the Panama Papers in 2016, the inadvertent release of some 13 million documents has placed further pressure on HM Revenue and Customs to be seen to be properly investigating tax arrangements. Even before the Paradise Papers, we saw the Requirement to Correct penalties laid before Parliament in the Draft Finance Bill 2017 (requiring taxpayers to ensure they have declared their interests in offshore investments) and the implementation of the Criminal Finance Act (introducing a new corporate criminal offence of failing to prevent criminal facilitation of tax evasion).
In the Hong Kong Court of Appeal we saw an interesting development when an accountant successfully appealed against a disciplinary decision by the Hong Kong Institute of Certified Public Accountants (HKICPA). The Court of Appeal found that HKICPA’s complaint against the accountant and its later finding were “wholly different”, meaning that HKICPA’s penalty and costs sanctions were overturned. As this case is understood to be the first time a disciplinary decision by the HKICPA has been successfully challenged, we will have to see whether this encourages other Hong Kong-based practitioners to take a more robust approach in challenging the findings of their regulatory body.
What to look out for in 2018
Cyber fraud and IT security is high on the risk agendas of most accountants for 2018 (or if not, it should be). Solicitors firms have historically found themselves to be the principal targets of so-called Friday afternoon frauds, resulting in improved security processes.
The fraudsters are now targeting accountants – particularly those who offer payroll or bookkeeping services, where fraudulent email instructions can result in payments being made to fraudsters if suitable checks are not in place.
Separately, the news that Deloitte’s IT systems were hacked, resulting in confidential client information being compromised, has reminded accountants that the nature of the information they hold makes them prize targets for cyber attacks. The costs and reputational damage caused by such a security breach can affect all sizes of accountant firms, and the impact this can have on a business can be substantial.
On a related note, the introduction of the General Data Protection Regulation (GDPR) in May 2018 will place further obligations on firms to put in place clear policies and procedures to protect personal data. The clock is ticking for firms to ensure they do not fall short of the GDPR requirements. The potential penalties for breaching the GDPR requirements will also be of concern, given fines can be handed out of up to 4% of the business’s annual worldwide turnover or €20m, whichever is the greater.
It is also notable that the responsibility for disciplinary proceedings against auditors of Hong Kong-listed companies is shortly due to transfer from the HK Institute to the Financial Reporting Council (FRC). As it stands, the FRC only has investigatory powers. But 2018 will see the FRC’s powers expanded to take on the HK Institute’s role of dealing with disciplinary proceedings. This move will give the FRC further power to regulate auditors of some 2,000 Hong Kong-listed companies.
Download our full Annual Insurance Review 2018 for more insights.