The sales representatives committed an offence under Section 9(3) of the Prevention of Bribery Ordinance (POBO) offence if they had submitted false documents i.e. claims of commissions or entertainment expenses to deceive their principal i.e. the company.   

Furthermore, the offering of illegal commissions to agents of business clients with a view to obtaining or securing business might constitute a bribery offence under the POBO.   Agents of clients should obtain permission from their principals, i.e. their employers, for accepting advantages or commissions in relation to their work.  As approval should be given by the principal of the acceptor not the offeror, the Managing Director’s approval on the expense payments would not be considered the principal’s approval in this case.  

Although the clients were located in the Mainland, if any part of the act of bribery (including offering, soliciting or accepting a bribe) takes place in Hong Kong, the case may still be pursued by the ICAC under the POBO.  In any case, customary trade practice could not be a defence in any proceeding for a bribery offence under the POBO.  

Andrew should bring the issues to the attention of the company management and avoid involve in any acts that might call his integrity and professionalism into question. He should take into account his own views on ethics and legality and offer advice to the management if there were better alternatives.  

If corruption involving senior management was suspected, and all his attempts to find legal and ethical alternatives were rejected, then Andrew should consider resigning from the company and refuse to carry out any illegal transactions. He should consider reporting corruption to the ICAC and other crimes to the police.

The offering of “reward” by Billy as an inducement for Jimmy to misrepresent the financial position of B&B Co. Ltd. was a breach of Section 9 of the Prevention of Bribery Ordinance (POBO).  Jimmy should refuse Billy’s offer and make it clear to Billy that while B&B Co. Ltd. was an important and valued client of his firm, no financial inducement or veiled threat would cause him to compromise his independence and professional integrity in connection with either the company's forthcoming audited financial statements or any other professional engagements carried out for B&B Co. Ltd.

Jimmy might consult a fellow partner at this stage in considering his alternative responses to this sensitive situation and in clarifying his own professional responsibilities in the circumstances, although remaining mindful at all times of the need to preserve client confidentiality.  In the event that Jimmy had no appropriate internal channel for such consultation, he might consider consulting the Hong Kong Institute of Certified Public Accountants.

As Billy’s close friend, Jimmy should explain to Billy that the use of “whatever device he could to improve the financial position of B&B Co. Ltd.” was inappropriate, and that he and his firm would endeavor to help the company overcome the current challenges by legitimate means.

If Billy was unwilling to change his position and insisted on carrying through his threats, Jimmy should point out that, having substantially completed the audit that they were engaged to perform, his firm would propose to issue a qualified report if B&B Co. Ltd.’s financial statements did not give a true and fair view. 

Having fulfilled their statutory responsibility by reporting to the shareholders, Jimmy should explain that his firm would tender their resignation.  Details of these circumstances would also be given to any proposed successor firm of auditors in etiquette correspondence.  In the event that B&B Co. Ltd. attempted to remove Jimmy's firm from office, Jimmy should explain that he would consider making similar representations to the shareholders as entitled under the Companies Ordinance.

Jimmy was suggested to report the attempted bribe to the ICAC to safeguard his own interests.  

Ben could consider the following major factors when handling Dale’s request:

Professional / Company code of conduct

The Hong Kong Institute of Chartered Public Accountants (HKICPA) requires a professional accountant to comply with relevant laws and regulations, and avoid any conduct that the professional accountant knows or should know might discredit the profession.  Also, a professional accountant needs to comply with the fundamental principles of integrity and objectivity as stipulated in the HKICPA’s Code of Ethics for Professional Accountants which requires an accountant to be straightforward and honest in all professional and business relationships and avoid any conflict of interest situations.   Meanwhile, Ben also needs to observe his company’s code of conduct governing the above behaviours.

Legal Requirements

Ben might violate the Section 9(1) of the Prevention of Bribery Ordinance (POBO) if he accepted the advantage (luxury clubhouse membership) offered by Dale for helping Dale to obtain the bank loan by manipulating ABC’s accounting records; whereas Dale might violate Section 9(2) of the POBO by offering bribes.

Uncompromising Self-values

Helping Dale to get a bank loan by manipulating ABC’s accounting records might undermine Ben’s self-values of honesty, integrity and responsibility to his accounting firm.

Sunshine Test

If Ben accepted Dale’s offer and helped him to get the bank loan, he would fail to disclose his decision and the situation openly and honestly without misgiving.

When facing the above situation, Ben should avoid involve in any acts that might call his integrity and professionalism into question. He must take into account his own views on ethics and legality and offer advice to Dale if there were better alternatives.  

Zero tolerance to attempted bribes

If Dale insisted on asking for Ben’s help to get the bank loan, Ben should decline the advantage offered by Dale and report the attempted bribe to his accounting firm and the ICAC as soon as possible.

Leonard could refer to the ETHICS PLUS ethical decision making model in solving his ethical dilemma at work. The following factors should be taken into consideration when identifying viable alternatives and choosing the best course of action:

1. Any violation to his professional, industry specific, or company code of conduct?
2. Is it against the Law?
3. Does it correspond with his self-values such as responsibility, fairness and honesty?
4. Can he disclose his decision to others openly and honestly without misgivings?

As far as professional conduct is concerned, Leonard should observe the fundamental principles of integrity, professional competence and professional behavior and comply with the Code of Ethics for Professional Accountants (HKICPA Code) when carrying out his duties as the accounting manager.  As the company policy stated very clearly that padding travel expenses was strictly prohibited, he should perform a guardian role and report any non-compliance to the management. He shall discuss with his immediate superior or a higher authority in the company, take appropriate steps to rectify or mitigate the consequences of the non-compliance, and decide whether it should be disclosed to the external auditor.

Moreover, it is an offence under Section 9(3) of the Prevention of Bribery Ordinance (POBO) for any employee to use false documents / receipts / account records with an intention to deceive the employer.  Customary behavior or ignorance of law is no defence. Department heads might have committed the above offence for using false expense vouchers and invoices to deceive the company. They might also have committed a criminal offence of deception contrary to Section 17 of the Theft Ordinance.

Professional accountants have a guardian role in safeguarding the governance of the company and protect the interests of different stakeholders. They should take remedial actions to help the company foster an ethical culture and enforce any related policies.

Financial Projection for Listing

Surely Patrick should handle the financial estimates and anticipated sales growth meticulously.  He should document his bases of assumptions and agree those with the Managing Director.  All these would be reviewed by the merchant bank which sponsored the listing as well as the reporting accountant, and the eventual delivery of the forecasts would be a matter of public and regulatory scrutiny once the company got listed.  Although the Managing Director did not bother which accounting method to use, Patrick should ensure that the accounting method followed all applicable Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and interpretations issued by the Hong Kong Institute of Certified Public Accountants.

Managing Director's Request for Manipulation of Management Accounting Data

Patrick should explain to the Managing Director that, first of all, a wilful act of manipulation of accounting data is a criminal offence.  Secondly, accounting information presented to banks would most likely be audited.  Once the banks realised that there were significant discrepancies between management accounting data previously presented and the audited accounting data, they would ask for explanations which would well call into question the credibility of the company.  In the worst case, banks could withdraw financial support to the company.

Request for a Cheque by the Assistant to General Manager

It would be a breach of the Section 9(3) of the Prevention of Bribery Ordinance (POBO) if the General Manger used false document e.g. false reimbursement records, to deceive his company. Furthermore, if the cheque payment was offered by the General Manager to the Mr Wong as an advantage in disguise to induce or reward for latter’s assistance in granting credit facilities to the company, both the General Manager and Mr Wong would breach Section 9 of the POBO.

Patrick should report the matter to the Managing Director and explain the legal consequences of being involved in such an act.  Patrick should take the opportunity to urge the Managing Director to issue a set of code of conduct to strengthen internal control of the company. He should report to the ICAC if corruption was suspected.

Offering of ‘Valuable Information'

The valuable information provided by Benny is likely to be insider information which, if used to deal in listed securities, could have severe legal consequences.  Patrick should make it clear to Benny that his evaluation of the banks was done in an objective manner and there would be no need for Benny to reciprocate with any 'gift' as a result of OPQ bank being appointed.  If Patrick's dinner with Benny is no more than a social entertainment, Patrick does not need to avoid it.  If by accident Patrick had heard of the valuable information from Benny but he did not deal, counsel nor procure other persons to deal in the securities, he would not breach the insider dealing provisions under the Securities and Futures Ordinance.