What is false accounting in HK?

iii. The Companies Ordinance (Cap 622) also provides that the directors must comply with the requirement for the financial statements to present a true and fair view if the financial statements are to be laid at the annual general meeting of the Company. (Section 379 and Section 380 of the C.O.)

iv. Non-compliance with result in a fine and/or imprisonment (section 379).

Q. If the statement of financial position (balance sheet) is not in agreement with the accounting records to a material extent, then the financial statements are not true. What is the legal implication?

A1. It depends on whether the financial statements are used for approval by the members at the annual general meeting (the AGM), or for purpose of obtaining a bank loan (or for a share buy-back, etc).

A2. If it is the financial statements are used for AGM purpose and the non-agreement has arisen by error, then the directors are liable to a fine of HK$300,000. If the directors are aware of the error and the financial statements are tabled at the AGM, then it is a fraud. The directors are subject to a fine of the same amount and an imprisonment for 12 months upon conviction.

A3 if the financial statements are prepared with a view to deceiving the users, then the directors may also be charged under the Theft Ordinance, and subject to a maximum penalty of 10 years of imprisonment upon conviction.

Chapter: 210 
Title: THEFT ORDINANCE
Section: 21 Heading: False statements by company directors, etc. 
(1) Where an officer of a body corporate or unincorporated association (or person purporting to act as such) with intent to deceive members or creditors of the body corporate or association about its affairs, publishes or concurs in publishing a written statement or account which to his knowledge is or may be misleading, false or deceptive in a material particular, he shall be guilty of an offence and shall be liable on conviction upon indictment to imprisonment for 10 years. (Amended 13 of 1974 s. 9; 46 of 1986 s. 6)
(2) For the purposes of this section a person who has entered into a security for the benefit of a body corporate or association is to be treated as a creditor of it.
(3) Where the affairs of a body corporate or association are managed by its members, this section shall apply to any statement which a member publishes or concurs in publishing in connection with his functions of management as if he were an officer of the body corporate or association.

See the legal text at {read}