notes to applicants basic conditions and operational ... - … · 2019. 12. 11. · certificate of...

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NOTES TO APPLICANTS

Basic Conditions and Operational Requirements for

Operators of Kaito Ferry Service

Joining the Public Transport Fare Subsidy Scheme (the Scheme)

(A) Basic Conditions

1. An operator is required to sign an agreement in the name of a sole

proprietor, partner or limited company/corporate body with the

Transport Department (TD)

to indicate that they will comply with the operational

requirements for joining the Scheme as specified in the

agreement;

to ensure that the services provided and their employees will

comply with the prescribed operational requirements.

2. The vessels providing the Kaito ferry service (Kaito) must be

installed with the Octopus fare collection system.

3. The operator is required to register with TD the information of the

routes to be covered by the Scheme, and specify the origin and

destination of the routes.

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(B) Operational Requirements

1. When a vessel is providing Kaito covered by the Scheme, the logo

of the Scheme must be displayed on the pier(s) and prominent

position of the vessel. When a vessel is providing services not

covered by the Scheme (e.g. freight service and contract hire

service), the logo of the Scheme must be removed.

2. The operator should designate an authorised person to monitor the

installation, storage and replacement of the Octopus readers, and

record all relevant vessels and the number of all Octopus readers on

them.

3. If any Octopus reader is damaged or needs to be replaced, the

authorised person should provide the TD with the relevant record

and registration as soon as possible.

4. Operation of the Kaito covered by the Scheme must strictly adhere

to all service details provided in the approved schedule of service,

including the approved routeing, vessel deployment, trips, timetable,

and fare table registered with the TD. If the operator fails to comply

with the above requirements, the Government may issue warning

letters to the operator, or even temporarily or permanently exclude

it from the Scheme.

5. The operator must upload the Octopus transaction data collected by

the payment system to Octopus Cards Limited (OCL) Settlement

Platform within 7 days after the date of transaction.

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6. To ensure that the Octopus transaction records are uploaded

properly, the operator should record the details of the Octopus

transaction (including the number of transactions, total amount of

transactions, uploading time, etc.), and verify them against the

settlement report provided by OCL on the following business day.

7. The operator should provide TD with the average daily patronage

of the route(s) on weekdays and rest days/public holidays in the past

6 months before joining the Scheme.

8. Upon joining the Scheme, the operator is required to provide

statistics on the daily passenger trips of the applicable Kaito route(s)

regularly or at least once a month under all circumstances and as

required by the Government. The operator should also keep proper

record of the time of departure from origin, time of arrival at

destination, number of passenger trips and fare revenue of each

departure for two years from the transaction date of the record

concerned.

9. The operator must submit an assurance report on systems of internal

control prepared by an independent auditor in accordance with the

standards promulgated by the Hong Kong Institute of Certified

Public Accountants before the joining the Scheme and annually

thereafter.

(C) System of Internal Controls and Assurance Arrangement

1. The operator should prepare, design and implement the system of

internal controls and ensure their employees are provided with

proper training.

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2. The system of internal controls should consist of the following basic

operational procedures (please refer to Annex 2 to the application

form):

Record and transfer of Octopus transaction data

Reconciliation with Octopus data

Storage and usage of Octopus reader

Prevention, detection, filing and monitoring of abuse cases

Application for change in information and claims procedure with

OCL

Control in Information Technology.

3. The operator is required to submit an assurance report on its internal

control system in compliance with the standard promulgated by the

Hong Kong Institute of Certified Public Accountants before joining

the Scheme and annually thereafter.

4. The operator is free to draw up the arrangement for appointment of

auditor having regard to individual circumstances.

5. The operator should provide the Government with the internal

control procedure, a system assurance report issued by an auditor

and a summary of procedures for assurance of the system of internal

control.

(D) Notes for Attention

1. If the operator, upon joining the Scheme, is given approval to revise

the items stipulated in the schedule of service (such as vessel

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allocation, timetable, etc.), the operator should complete the

prescribed form and submit it to the TD and OCL for record

updating.

2. If the operator, upon joining the Scheme, is given approval to revise

the fare table, the operator should complete the fare table

amendment form and submit it to the TD. Subject to the approval

by TD, the operator should then forward the form to OCL for

updating of fare table. It takes at least 5 working days for OCL to

revise the fare table. The operator should reserve sufficient time to

download and update the related information.

3. The operator must collect the fares of the route covered by the

Scheme with a separate Service Provider Identity Number (SPID)

and a separate Octopus reader. Fares of other services not covered

by the Scheme must be collected by another SPID and Octopus

reader, or other means (e.g. cash).

4. The operator should also reserve sufficient time to apply for

Octopus reader, and arrange for its installation with OCL as soon as

possible, in order to complete the audit and assurance procedures.

� Application Form

(Page ______ of ______)

PTFSS: Kaito (2019/09)

Confidential

By Post or by Fax (Fax No.: 3525 0040)

To: Public Transport Fare Subsidy Scheme Section

Ferry and Paratransit Division

Transport Department

11/F, South Tower, West Kowloon Government Offices,

11 Hoi Ting Road, Yau Ma Tei, Kowloon.

Public Transport Fare Subsidy Scheme (“Scheme”)

Application for Joining the Scheme

* Our company / I

(Name of Applicant Company / Applicant: ______________________________)

intend to join the Scheme and hereby submit the application with the required information. *Our

company/I agree that the Octopus Cards Limited (OCL) can provide the Transport Department

(TD) with the relevant information of our company and our affiliated partners relating to the Kaito

Ferry Services registered in OCL, so as to facilitate the Government to further process the

application for the concerned routes to join the Scheme. *Our company/I understand that the TD

reserves the right to granting approval for the routes to join the Scheme, and the submission of this

application does not imply that the application is successful. Should the application be approved,

*our company/I agree to the TD using data provided in this application form and its annexes for

the purpose of preparation of the agreement document of the Scheme and the arrangements for the

signing of the agreement.

Undertaking of compliance with the operational details as specified and approved by the TD

*Our company/I undertake to comply with the requirements stipulated in the ferry service licence

(FSL) and the schedule of service attached thereto as well as the conditions for operating Kaito

ferry service as approved by the TD. *Our company/I understand that if *our company/I fail to

comply with the abovementioned requirements, TD may issue warning letters to *our company/me

or may even suspend temporarily or permanently any route under *our company/me from joining

the Scheme.

* Please delete if inappropriate

(Page ______ of ______)


Part 1 – Particulars of Applicant

English Chinese

Name of Operator

[Note: The name must be the same as

that stated in the Certificate of

Incorporation (applicable to limited

company) / the Business Registration

Certificate (applicable to partnership/

sole proprietorship)]

Address of the registered office

[Note: the address must be the same as

that stated in the Annual Return

(applicable to limited company) / the

Business Registration Certificate

(applicable to partnership/ sole

proprietorship)]

FSL No.

Name of holder of FSL

Service Provider Identity Number

(SPID) assigned by OCL (If no SPID, please provide the date of

application to OCL)

Name of Octopus Merchant (if applicable)

Correspondence address

Name of contact person :

*Mr./Miss./Ms.

*先生/小姐/女士

Tel. No.

Email Address

Fax No.


(Page ______ of ______)


Part 2 – Particulars of Authorised Signatory

For operator operating as a limited company or partnership, please fill in Part (I).

For operator registered as a sole proprietor, please fill in part (II).

(I) For Limited Company or Partnership Only

Our company hereby authorises the following *manager/director/staff member to, on behalf of our

company, enter into an agreement of the Scheme with the Government (the operator should attach

hereto the minutes of the Board of Directors’ meeting to prove that the following

*manager/director/staff member of the company has been duly authorised by the Board of

Directors to enter into the agreement on behalf of the company). The particulars of the authorised

person are as follows:

English Chinese

Name: *Mr./Miss./Ms.


Post:

Tel. No.:

*Please delete if inappropriate

Please affix the company seal/stamp

(II) For Business registered in the Name of an Individual only

I intend to enter into an agreement of the Scheme with the Government. My personal particulars

are as follows：

English Chinese



Post:

Tel. No.:

*Please delete if inappropriate

Signature:

(Page ______ of ______)


Part 3 – Particulars of Witness

(This part will be used for purpose in relation to the signing of agreement upon approval of

the application by the TD.)

*Our company/I hereby nominate the following person to act as witness in the signing of

the agreement of the Scheme between *our company/me and the Government, and the

personal particulars of the witness are as follows：

English Chinese



Post:

Tel. No.:


(If the witness is a company, please

affix the company seal/stamp here)

Part 4 – Supporting Documents

*Our company/I hereby submit a copy of the following supporting documents:

1. FSL to operate the Kaito Ferry Service and the corresponding fare table

2.

Certificate of Incorporation

Business Registration Certificate

The latest Annual Return

(For sole proprietor, only valid Business Registration Certificate is required)

3. The confirmation letter for becoming an Octopus Merchant issued by OCL (if any)

containing the information for opening an account by *our company/me in OCL

4. The schedule of service of all the routes being operated under the FSL


(Page ______ of ______)


Part 5 – Operation Details

The detailed information of the route to be operated by *our company/me is as follows:

Origin – Destination # Operating Days

and Hours

Vessel

Registration

Mark

Octopus

Reader No.^ (if any)

Route Codes (to be completed

by TD)

(Please fill in all operating routes in this sheet. If there is not enough space, please continue on a separate sheet if

necessary.)

* Please delete if inappropriate.

# Please state clearly the origins and destinations of all routes (including sub-routes).

^ The Octopus Reader No. should be matched with the vehicle registration mark. Please also provide

the spare Octopus Reader No. (if applicable, thoughmatching with the vehicle registration mark is not

required).

(Page ______ of ______)


Part 5 – Operation Details (Fare Table)

The information on the fare table of each route operated by *our company/me is as follows:

Name of operator:

Service Provider Identity Number (SPID):

Origin - Destination:

All route code included: (To be completed by TD)

Fare Details Adult Elderly Student Child Person with

Disabilities

Full Fare

(Two-way section fare)#

Section Fare


Section Fare


Section Fare


Section Fare


Section Fare


Section Fare


# Please put the two-way section fare in brackets.

(If there is not enough space, please continue on a separate sheet

if necessary.)

Signature of operator with Company seal

(Page ______ of ______)


Part 6 - Daily Average Patronage (One Sheet for Each Route)

*Our company/I hereby submit the records of the daily average patronage on weekdays and

rest days/public holidays in the past 6 months:

Origin – Destination:

Month

Daily Average Patronage on

Weekdays

(Mondays to Fridays)

Daily Average Patronage on

Rest Days/Public Holidays

(Saturdays, Sundays and Public Holidays)

(Please continue on a separate sheet if necessary)


(Page ______ of ______)


Part 7 – Audit and Assurance Arrangement

Please choose one of the followings：

□ Option 1：The Operator will engage an auditor at the Operator’s own cost Note1

If the Operator has already engaged an auditor at the time of submission of the

application, please provide the following information:

(1) Name of Certified Public Accountant /Independent Auditor ：

__________________________________________

(2) Name of Contact Person: ______________________

(3) Contact Tel. No.: ___________________________

(4) Email Address: _____________________________

□ Option 2：The Operator will engage an auditor, with the audit fees to be borne by the

Government Note1, Note2 & Note3

□ Option 3：The Government will engage an auditor, with the audit fees to be borne by

the Government Note2 & Note3

Note1. The operator is required to provide the TD with the name of the Certified Public

Accountant/Independent Auditor, as well as the name, contact telephone number and email

address of the contract person thereof within two months upon submission of application.

Note2. The auditor should be engaged in accordance with the Government’s “Stores and Procurement

Regulations” and subject to approval by the Government. The procedures may take longer time,

and the auditor to be engaged may not necessarily be the one responsible for the preparation of

the financial report of the operator.

Note3. For operators who opt for the audit fees to be borne by the Government, they must refund the audit

fees incurred to the Government if their application to join the Scheme are eventually rejected due

to failure to meet the audit and operational requirements.

The following annexes are attached to the application form:

Annex 1：Sample of Summary of Assurance Work of the Internal Control System

Annex 2：Basic Requirements of the Internal Control System

Annex 3：Sample of Engagement Letter (English Version)

Annex 4：Sample of Assurance Report of the Internal Control System (English Version)

(Page ______ of ______)


*Our company/I understand all provisions stated in this application form.

*Our company/I hereby declare and confirm that all information given in this

application form is true and correct.

Name of *Company/Person holding the FSL

for provision of Kaito Ferry Service:

Signature# :

Name of Signatory in Block Letter:

Contact Tel. No.:

Date:

# If the operator is a company, please also affix the company seal/stamp.


Acknowledgement of Application We acknowledge receipt of your company’s/your application for joining the “Public

Transport Fare Subsidy Scheme” and is scrutinising the application. If required, we will

notify *your company/you in writing to submit further information.

Name of operator:

Name of contact person:

Fax No.:

Application No.:

(Official use only)

(Stamp of Transport Department and Date)

---------------------------------------------------------------------- Acknowledgement of Application

We acknowledge receipt of your company’s/your application for joining the “Public

Transport Fare Subsidy Scheme”, and hereby confirm that *your company/you has/have

provided relevant information and documentary proof to the Transport Department (TD).

*Your company/you is/are required to submit information relating to the internal control

procedures and draft assurance report of the internal control system to TD within three

months for our scrutiny.

Name of operator:

Name of contact person:

Fax No.:

Application No.:

(Official use only)

(Stamp of Transport Department and Date)

Return Address (The address must be provided)

Name of

operator:

Name of

operator:

Address: Address:

For assurance of the system of internal controls of [Name of Public Transport Operator] under the

Public Transport Fare Subsidy Scheme as of [Date]

[ ] [ ]

[Name of Public Transport Operator]

[ ]

[Auditor]

[ ]

Control Process Control Objectives Control Description Assurance Work Procedures

Annex 1Annex 1

Annex 2

Basic requirements of system of internal control

The system of internal control submitted by kaito operators covers the following

basic requirements. The operators shall establish control objective and internal

control description for each of the basic requirements：

1. Recording and transmission of Octopus transaction data

a) Operators shall collect and upload data on Octopus transactions at regular intervals

(not more than 7 days).

b) When operators plan to use Octopus cards to conduct testing in relation to the Public

Transport Fare Subsidy Scheme (“Scheme”), operators shall notify Transport

Department (“TD”) not less than 7 days before the testing and submit relevant

transaction records to TD as soon as possible after the completion of the test. In

addition, operators should submit full year records to TD annually within 1 month

after the end of respective year end closing periods.

2. Reconciliation of Octopus transaction data

a) Operators shall reconcile their transaction records with those recorded on reports

provided by Octopus Cards Limited (“OCL”).

b) After checking the reports provided by OCL, Operators shall then check against the

bank records in order to ensure the accuracy of the amount received from OCL.

3. Management and use of Octopus Reader (“Reader”)

a) The Reader shall be securely stored in the locked location in the vessel or room.

Only authorized staff can have access to the Reader.

b) When the vessel is operating a route or during the operating hour which is not

covered by the Scheme, the captain shall cover the Reader which is applicable to

record Octopus transactions of the Scheme.

c) The serial number of spare Reader or Reader installed on each vessel shall be

accurately documented in the “Reader Record” according to the respective vessel

registration marks and storage locations. Operators shall, before informing OCL to

follow up, register with Transport Department if there is any addition of, reduction in

or replacement of Reader. Upon the completion of changes, operators shall update

the “Reader Record” accordingly.

d) When the Reader installed on a vessel need to be replaced, operators shall ensure the

firmware of the replaced Reader (e.g. spare Reader) is updated and the faretable in it

is accurate before installation.

e) The replacement of Reader shall be performed by authorized staff and properly

recorded.

4. Procedures for prevention, detection, monitoring, recording and reporting of abuse

a) Operators shall provide training and guidance to captains and relevant officers.

Annex 2

Operators shall request captains to record the patronage of each departure. The

patronage records shall be submitted to TD for review monthly.

b) Operators shall compare the current month figures with those of previous month(s)

or the same month in previous year(s) based on OCL’s reports with a view to

avoiding abuse. Operators shall report to TD immediately for any irregularity and

potential abuse case noted.

c) Operators shall compare the patronage, number of departure and vessel numbers

provided by OCL with those recorded by captions to avoid abuse of the Scheme.

Operators shall report to TD immediately for any irregularity and potential abuse

case noted.

5. Amendment of information and claim procedures

a) If there is any change in faretable, ferry service license or registration information

with OCL, after obtaining approval from or registering with TD, operators shall

complete the application form and make change request to OCL timely.

b) If there is any late transmission of transaction, loss of transaction or discrepancy

between data transmission records, OCL report or bank record, operators shall

submit the duly completed application form together with supporting to OCL for

claim application. Operators shall ensure their claims are properly handled.

c) Scheme-related claims to OCL shall be submitted by authorised staff. Operators

shall investigate the cause of the claims and review relevant procedures with a view

to reducing the number of claims and risk involved.

6. General IT Control

a) Reader installed in each vessel shall be checked regularly. The responsible staff

shall contact OCL from time to time to ensure the firmware of the Reader is properly

updated.

b) Upon the completion of capturing transaction data from Reader, the responsible staff

shall put the handheld Readers back to the locked room. Only authorised staff

could enter the room.

c) Scheme-related information shall be stored properly and operators shall perform

back up according to TD and Ordinance’s requirements.

d) All Scheme-related documents and information shall be password protected and only

authorized staff have the authority to access to these documents and information.

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(Note: This document is for illustrative purpose only and shall be refined to suit auditor�s engagement. No responsibility shall be borne by the

HKSAR Government for your reference to this document.)

System of Internal Controls � Engagement Letter

Pro-forma

Private and confidential

[Company Name] (�the Company�)

Public Transport Fare Subsidy Scheme � System of Internal Controls of the Company

relating to the Recording of Public Transport Expense

Engagement Letter

1. Introduction

The purpose of this letter is to confirm our mutual understanding of the terms of your

engagement with us in connection with the Public Transport Fare Subsidy Scheme (�Fare

Subsidy Scheme�) to offer a non-means tested subsidy that Octopus users whose monthly

public transport expenses exceed HK$400 will be entitled to a subsidy amounting to 25

per cent of the actual public transport expenses in excess of HK$400, subject to a cap of

HK$300 a month. We understand that the purpose of our engagement is to report on

assurance of the system of internal controls of the Company relating to the recording of

Public Transport Expense under the Fare Subsidy Scheme and report accordingly to the

Government of the Hong Kong Special Administrative Region as represented by the

Commissioner for Transport (�the HKSAR Government�). We confirm that we would be

pleased to act for you in this matter on the terms set out below.

2. Scope of Our Work

(a) Our scope of work is to conduct our engagement in accordance with Hong Kong Standard

on Assurance Engagements 3000 (Revised) �Assurance Engagements Other Than Audits

or Reviews of Historical Financial Information� (�HKSAE 3000 (Revised)�) issued by

the Hong Kong Institute of Certified Public Accountants (�HKICPA�). This standard

requires that we comply with the requirements of the Code of Ethics for Professional

Accountants, including independence and other ethical requirements, issued by the

HKICPA, and implement quality control procedures that are applicable to the individual

engagement in accordance with the requirements of Hong Kong Standard on Quality

Control 1 �Quality Control for Firms that Perform Audits and Reviews of Financial

Statements, and Other Assurance and Related Services Engagements� and plan and

perform our engagement to obtain reasonable assurance about whether the system of

internal controls as described by the Company relating to the recording of Public

Transport Expense under the Fare Subsidy Scheme (�Controls Description�) (the relevant

independent assurance report is referred to hereinafter as the �Internal Control Report�),

is effective, in all material respects, to achieve the related control objectives (�the Control

Objectives�) as set out in the Controls Description of the Company as of the date of the

Internal Control Report based on the work to be performed as summarised in Annex A to

the Internal Control Report.

Annex 3Annex 3

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(b) The procedures selected, and our determination of the nature, timing and extent of these

procedures, will depend on our judgement, including the assessment of the risks that the

system of internal controls relating to the recording of Public Transport Expense under

the Fare Subsidy Scheme set out in the Controls Description of the Company is not

effective, in all material respects, to achieve the related Control Objectives as of the date

of the Internal Control Report, whether due to fraud or error.

(c) In making these risk assessments, we consider internal controls relevant to the Company�s

preparation of the description of the system of internal controls, and the design,

implementation and operations of the system of internal controls as described by the

Company in order to design reasonable assurance procedures that are appropriate in the

circumstances. We will communicate to you in writing concerning any significant

deficiencies in internal controls relevant to the objectives of the engagement that we have

identified during our engagement, or other matters of governance interest that come to our

notice and to which we think attention should be drawn. We shall exercise our

professional judgement to determine the significance of any matter to be communicated

and shall decide the appropriate means of communication. However, we have no

responsibility to design or perform procedures for the specific purpose of identifying such

matters.

(d) The determination of the scope, emphasis, timing and conduct of the engagement may

change as a result of unexpected events, changes in conditions or the evidence obtained

from the results of the evidence-gathering procedures, which may require us to revise the

work to be performed as summarised in Annex A to the Internal Control Report.

Our engagement is planned and performed to obtain reasonable assurance about whether

the system of internal controls relating to the recording of Public Transport Expense under

the Fare Subsidy Scheme are free of the risk that they are not effective, whether due to

fraud or error.

Therefore, there is an unavoidable risk that some risks may not be detected by an

assurance engagement performed in accordance with HKSAE 3000 (Revised), even

though the engagement is properly planned and performed in accordance with this

standard. Furthermore, such an assurance engagement is not designed to detect matters

that are immaterial to the system of internal controls relating to the recording of Public

Transport Expense under the Fare Subsidy Scheme.

3. Responsibilities of the Board of Directors of the Company

(a) The board of directors of the Company is responsible for developing the Control

Objectives; and designing, implementing and effectively operating the system of internal

controls relating to the recording of Public Transport Expense under the Fare Subsidy

Scheme, and preparing the description of the system of internal controls in the Controls

Description, including completeness, accuracy and presentation of the description.

(b) The board of directors of the Company is also responsible for prevention and detection of

fraud and for identifying and ensuring that the Company complies with the requirements

set out by the HKSAR Government under the Fare Subsidy Scheme.

(c) The board of directors of the Company also acknowledges and understands that they have

responsibility to provide us with:

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i. a description of the system of internal controls relating to the recording of Public

Transport Expense under the Fare Subsidy Scheme;

ii. access to all information of which the Company is aware that is relevant to the

preparation of the description of the system of internal controls relating to the

recording of Public Transport Expense under the Fare Subsidy Scheme such as

records, source documentation and other matters;

iii. additional information that we may request from the Company for the purpose of the

engagement; and

iv. unrestricted access to persons within the Company from whom we determine it

necessary to obtain evidence.

4. Reporting

(a) Our report will be addressed to the HKSAR Government. We do not assume

responsibility towards or accept liability to any other person for the contents of our

Internal Control Report. The pro-forma of the Internal Control Report and the Summary

of Assurance Work Procedures on the System of Internal Controls are attached as

Attachment 1 and Attachment 2 to this letter respectively. The form and content of our

report may be amended in light of our findings.

(b) The Company shall inform us any material event occurring between the date of our report

and that of submission of the report to the HKSAR Government which may affect the

system of internal controls.

(c) We understand that the report is intended solely for the purpose of assisting the Company

in respect of its reporting obligations to the HKSAR Government with respect to the Fare

Subsidy Scheme. Our report is not intended to be, and should not be, relied upon or used

for any other purpose and we expressly disclaim any liability or duty to any other party in

this respect.

(d) Our report should not be disclosed, referred to or quoted in whole or in part, or distributed

to any other parties without our prior written consent, save that we agree that, in addition

to the HKSAR Government, a copy of our report will be provided to you without further

comment from us.

5. Applicable Criteria

(a) The system of internal controls is effective, suitably designed and operating effectively,

if: (i) the Company has identified the risks that threaten achievement of the Control

Objectives stated in the Controls Description; (ii) the system of internal controls set out

in the Controls Description would, if operated as described, provide reasonable assurance

that those risks do not prevent the stated Control Objectives from being achieved; and (iii)

the controls are to be consistently applied as designed. This includes whether manual

controls are applied by individuals who have the appropriate competence and authority.

The Control Objectives have been internally developed by the Company.

(b) The assurance report we provide will note these characteristics, as they are of particular

relevance to the intended users.

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6. Timetable

A timetable covering the completion of our work will be drawn up and agreed between

you and us on agreement of this engagement letter.

7. Representations

We may ask the Company to confirm formally its responsibility for certain information or

matters to which our services relate.

8. Fees

(a) Our fees, including outlays, for the relevant scope of work are set out below:

Period

As of the date of the Internal Control Report

Amount

HK$[xxx]

(b) Fees will be rendered upon issuance of the final Internal Control Report and the Summary

of Assurance Work Procedures on the System of Internal Controls. All fees are due and

payable within 30 days upon presentation.

(c) Under no circumstances shall the Company be required to pay further amounts than the

amount stated above in relation to this engagement. We shall not require the Company to

reimburse us for any liability (including but not limited to loss, damage, expense and legal

cost) that we may incur in connection with any claim by any third party or being required

by any court or regulatory body to provide information or to produce documents, arising

out of or in relation to the engagement.

9. Agreement of Terms

(a) This letter is effective in respect of our relevant scope of work unless it is terminated by

you, or amended or superseded by agreement in writing between you and us.

(b) The parties hereby declare that nothing in this engagement letter confers or purports to

confer on any third party any benefit or any right to enforce any term of this engagement

letter pursuant to the Contracts (Rights of Third Parties) Ordinance (Cap. 623).

(c) We should be grateful if you would kindly acknowledge receipt of this letter and confirm

your understanding and acceptance of the terms of reference by signing and returning the

enclosed copy.

(d) For the avoidance of doubt, the terms of this letter and its attachments shall apply to all

work carried out by us in connection with this engagement prior to the date of

countersignature of this letter.

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Enclosures:

Attachment 1 � Pro-forma Internal Control Report and Annexes

Attachment 2 � Pro-forma Summary of Assurance Work Procedures on the System of Internal

Controls

I have read and understood the terms and conditions of this letter and attachment and I agree to

and accept them.

For and on behalf of

[Auditor]

For and on behalf of

[Company Name]

Name : [xxx] Name : [xxx]

Position : [xxx] Position : [xxx]

Date : [xxx] Date : [xxx]

Note to Operators

Operators shall submit the pre-implementation assurance report according to the timeline as

requested by the Government before joining the Scheme. The post-implementation assurance

report shall be submitted according to the reporting period as agreed between the Company and

the HKSAR Government

1

(Note: This document is for illustrative purpose only and shall be refined to suit auditor�s engagement. No responsibility shall be borne by the

HKSAR Government for your reference to this document.)

Attachment 1

System of Internal Controls � Auditor�s Report

Pro-forma

Independent Assurance Report to the Government of the Hong Kong Special

Administrative Region as represented by the Commissioner for Transport (�the HKSAR

Government�) regarding the System of Internal Controls of [Company Name] (�the

Company�) relating to the Recording of Public Transport Expense under the Public

Transport Fare Subsidy Scheme (�the Fare Subsidy Scheme�) as of [Date]

We have been engaged by the Company to provide a reasonable assurance conclusion on

whether the system of internal controls as described by the Company set out in Annex B relating

to the recording of Public Transport Expense under the Fare Subsidy Scheme (�the Controls

Description�) was effective, in all material respects, to achieve the related control objectives

(�the Control Objectives�) set out in the Controls Description as of [Date], based on the work

performed as summarised in Annex A.

Responsibilities of the Board of Directors of the Company

The board of directors of the Company is responsible for developing the Control Objectives of

the system of internal controls relating to the recording of Public Transport Expense under the

Fare Subsidy Scheme in accordance with the requirements set out by the HKSAR Government

under the Fare Subsidy Scheme; designing, implementing and effectively operating controls to

achieve the related Control Objectives; and preparing the description of the system of internal

controls in the Controls Description, including the completeness, accuracy and presentation of

the description.

The board of directors of the Company is responsible for preventing and detecting fraud and for

identifying and ensuring that the Company complies with the requirements set out by the

HKSAR Government under the Fare Subsidy Scheme.

The board of directors of the Company is also responsible for ensuring that staff involved in the

system of internal controls relating to the recording of Public Transport Expense is properly

trained and the related information systems are properly updated.

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics

for Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants

(the �HKICPA�), which is founded on fundamental principles of integrity, objectivity,

professional competence and due care, confidentiality and professional behavior.

Annex 4Annex 4

2

Our firm applies Hong Kong Standard on Quality Control 1 and, accordingly, maintains a

comprehensive system of quality control including documented policies and procedures

regarding compliance with ethical requirements, professional standards and applicable legal

and regulatory requirements.

Our Responsibilities

Our responsibility is to carry out a reasonable assurance engagement and to express an opinion

on the system of internal controls as stated in the Controls Description, based on our work

performed. We conducted our reasonable assurance engagement in accordance with Hong Kong

Standard on Assurance Engagements 3000 (Revised) �Assurance Engagements Other Than

Audits or Reviews of Historical Financial Information� issued by the HKICPA. That standard

requires that we plan and perform our work to form the opinion.

A reasonable assurance engagement involves performing procedures to obtain sufficient

appropriate evidence whether the system of internal controls relating to the recording of Public

Transport Expense as set out in the Controls Description, was effective, in all material respects,

to achieve the related Control Objectives as of [Date] based on the work performed as

summarised in Annex A.

Procedures Performed

The procedures selected depend on our judgement, including the assessment of the risks that the

system of internal controls relating to the recording of Public Transport Expense under the Fare

Subsidy Scheme set out in the Controls Description is not effective, in all material respects, to

achieve the related Control Objectives as of [Date], whether due to fraud or error.

In making the above risk assessments, we have considered the internal controls relevant to the

preparation of the Controls Description, and the design, implementation and operations of the

system of internal controls relating to the recording of Public Transport Expense in accordance

with the Company�s description in order to design reasonable assurance procedures that are

appropriate in the circumstances.

Our procedures included testing the operating effectiveness of those controls that we consider

necessary to provide reasonable assurance that the Control Objectives stated in the Controls

Description were achieved; and evaluating the suitability of the Control Objectives stated

therein.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis

for our opinion.

Historic evaluation of the operation of an internal control system may not be relevant to future

periods if there is a change in conditions or that the degree of compliance with the Company�s

policies and procedures may deteriorate. Also, because of their nature, controls at the

Company may not prevent or detect all errors or omissions in processing or reporting

transactions.

3

Criteria

The system of internal controls is effective, suitably designed and operating effectively, if: (a)

the Company has identified the risks that threaten achievement of the Control Objectives stated

in the Controls Description; (b) the system of internal controls set out in the Controls Description

would, if operated as described, provide reasonable assurance that those risks do not prevent the

stated Control Objectives from being achieved; and (c) the controls are to be applied as designed.

This includes whether manual controls are applied by individuals who have the appropriate

competence and authority. The Control Objectives have been internally developed by the

Company.

Conclusion

In our opinion, the system of internal controls relating to the recording of Public Transport

Expense set out in the Controls Description was effective, in all material respects, to achieve the

related Control Objectives as of [Date], based on the work performed as summarised in Annex

A.

Use of This Report

This report is intended solely for the purpose of expressing a reasonable assurance conclusion

on whether the system of internal controls relating to the recording of Public Transport Expense

was effective, in all material respects, based on the work performed as set out in Annex A, as of

[Date]. This report is not intended to be, and should not be, relied upon or used for any other

purpose and we expressly disclaim any liability or duty to any party.

Other than as set out in the agreed terms of engagement between the Company and us, this report

should not be disclosed, referred to or quoted in whole or in part, or distributed to any other

parties without our prior written consent.

[Auditor]

Certified Public Accountants

Hong Kong

[Date]

Annex A : Summary of the Scope of Work Performed on the System of Internal Controls of

[Company Name] (�the Company�) relating to the Recording of Public Transport Expense

under the Public Transport Fare Subsidy Scheme (�the Fare Subsidy Scheme�) as of [Date]

Annex B : System of Internal Controls of [Company Name] (�the Company�) relating to the

Recording of Public Transport Expense under the Public Transport Fare Subsidy Scheme (�the

Fare Subsidy Scheme�) as of [Date]

4

Annex A to Attachment 1

Summary of the Scope of Work Performed on the System of Internal Controls of

[Company Name] (the Company�) relating to the Recording of Public Transport Expense

under the Public Transport Fare Subsidy Scheme (�the Fare Subsidy Scheme�) as of

[Date]

1. Inquire of management on the control objectives relevant to the recording of Public

Transport Expense under the Fare Subsidy Scheme.

2. Assess whether the risks that threaten the achievement of the control objectives are

identified by the Company.

3. Assess whether control procedures with respect to the Fare Subsidy Scheme are properly

established and implemented to achieve the control objectives, taking into consideration

the risks that threaten the achievement of the control objectives.

4. Test the system of internal controls for the recording of Public Transport Expense on a

sampling basis to assess whether the controls were applied as designed to achieve the

control objectives as of [Date].

5

Annex B to Attachment 1

System of Internal Controls of [Company Name] (�the Company�) relating to the

Recording of Public Transport Expense under the Public Transport Fare Subsidy Scheme

(�the Fare Subsidy Scheme�) as of [Date]

[Company Name]

Control Process Control Objectives Control Description

6

Attachment 2

Summary of Assurance Work Procedures on the System of Internal Controls of

[Company Name] (�the Company�) relating to the Recording of Public Transport

Expense under the Public Transport Fare Subsidy Scheme (�the Fare Subsidy Scheme�)

as of [Date]

[Company Name] [Auditor]

Control

Process

Control

Objectives

Control Description Assurance Work Procedures