The can-do chief - Hong Kong Institute of Certified Public Accountants

ISSUE 6 VOLUME 8 JUNE 2012
The
can-do
chief
Winnie Cheung
looks back at her
eight years as
chief executive
HK$70.00
PLUS
• Accounting for babies
• Accountants and lawyers team up
• Speaking tips for auditors at AGMs

“ Please also join me
in thanking Winnie
for her dedication
to the Institute
over the past 22
years, especially
the last eight years
as chief executive.
The Institute would
not have attained
its present level
of achievement
without her.”
President’s message
Changing of the guard
Dear members,
In May I wrote an email to all members announcing
that the council has appointed
Raphael Ding as the new chief executive
and registrar of the Institute effective 1 July
2012. He will succeed Winnie Cheung, who has
held the position since 2004 and who will retire.
With many years of experience in practice and
business and with experience in working within
the Institute’s council and committees, Raphael
has shown his knowledge and understanding of
the diverse and complex nature of the Institute
and the profession it represents. We look forward
to working with Raphael and please join
me and the council members in welcoming him
into this challenging and rewarding role.
Please also join me in thanking Winnie for
her dedication to the Institute over the past 22
years, especially the last eight years as chief executive.
The Institute would not have attained
its present level of achievement without her energy,
commitment and deep expertise. She will
definitely be missed when she retires at the end
of this month.
During this transition, the council and the
management will ensure all projects continue
as smoothly as usual. In particular, we expect
the business conference on 1 June to be another
success, with top speakers from China and
Hong Kong coming together to talk about some
of the most important issues facing professional
accountants in business today.
This high level conference gives CPAs a premier
forum to meet other professionals who
face similar challenges. They tell us they often
discover new solutions to problems through
dialogue at these conferences. With these real
benefits, we are planning to hold another big
conference later this year and will keep you
posted on the progress.
We have expanded our cooperation with the
Open University of Hong Kong to provide more
online continuing professional development
programmes to our members. There are more
than 50 courses, most of which are related to
law, such as contract, intellectual property and
economic law. You can check the full list online
and register to learn at your own convenience.
On a legislative issue that affects our auditors,
we have raised our concerns with the
government on a proposed revision under the
Companies Ordinance rewrite, which is about
offences relating to the contents of auditor reports
and the potential implications for criminal
liability of our members. The Companies Bill
team later amended the wording, but questions
remain whether criminal sanctions are necessary
given the Institute’s power to discipline
auditors. We urged the committee to halt the
revision until there are fully rounded proposals
on auditor liability reform. We will continue to
follow up with the Financial Services and the
Treasury Bureau to resolve this.
Lastly, I want to congratulate the good work
of our 25.35 group. Their programmes are hosted
by well-known speakers and cater to the diverse
interests of its members. Whether you are
young or just young at heart, I encourage you to
join the group or come mingle with them.
Keith Pogson
President
June 2012 1
COLIN BEERE

REGULARS
01 President’s message
04 Institute news
06 International news
10 Greater China news
FEATURES
14 Accounting for babies
As Hong Kong’s fertility rate falls, Liana Cafolla asks if accounting
firms are doing enough to support CPA parents
20 A fond farewell
Winnie Cheung is retiring after eight years as the Institute’s chief
executive. She looks back with George W. Russell
26 The odd couple
Accountants and lawyers team up in multidisciplinary firms.
George W. Russell finds out if they get along
32 Success ingredient
Mary Au, CFO of the WWF in Hong Kong, tells George W.
Russell why she decided to commit her career to a charity
38 Tough crowd
A new stock exchange rule means auditors must speak at AGMs.
Helen Dalley asks CPAs with speaking experience for advice
SOURCE
44 Auditors at AGMs
As auditors begin attending AGMs, Nathan Dentice and Veronica
To from Reed Smith Richards Butler discuss the legal implications
46 TechWatch 115
The latest standards and technical developments
48 Tech Q&A
Your questions about standards answered
54 Events
A guide to forthcoming courses, workshops and member activities
LIFESTYLE
56 Business travel
Honnus Cheung goes to Bangkok
58 After hours
Aloysius Tse on wine; Reno Ong on watches
60 Let’s get fiscal
Nury Vittachi checks out his company’s health plan post-audit
2 June 2012
CONTENTS
ISSUE 06 VOLUME 08 JUNE 2012

26
Your chop Your Logo
About our name: A PLUS stands for excellence, a
reference to our top-notch accountant members who
are success ingredients in business and in society. It
is also the quality that we strive for in this magazine —
going an extra mile to reach beyond grade A.
President: Keith Pogson
Email: president@hkicpa.org.hk
Vice Presidents: Susanna Chiu, Clement Chan
Chief Executive and Registrar: Winnie C.W. Cheung
Email: ce@hkicpa.org.hk
Director of Communications: Mindee W. Hansen
Editorial Adviser: Daniel Lin
Editorial Manager: John So
Editorial Coordinator: Maggie Tam
OFFICE ADDRESS:
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Wanchai, Hong Kong
WEBSITE: www.hkicpa.org.hk
EMAIL: hkicpa@hkicpa.org.hk
M&L
Editor: George W. Russell
Managing Editor: Gerry Ho
Email: gerry.ho@mandl.asia
News Editor: Paul Bayfield
Production Manager: Jasmine Hu
Contributors: Liana Cafolla, Helen Dalley, Reno Ong
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A PLUS is the official magazine of the Hong Kong Institute of
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© Hong Kong Institute of Certified Public Accountants
June 2012. Print run: 50,500 copies
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See www.hkicpa.org.hk/aplus for details.

Disciplinary finding
Young Chi-shan, Michael, CPA
Complaint: Young committed dishonourable
conduct when he was the financial
controller of a company that was preparing
for a listing application with the Hong Kong
stock exchange at the time when he joined
the company. He was also the central liaison
between the company and its auditors.
Between 2003 and 2007, he acted as the
main witness in a criminal case relating to
the company and gave evidence under immunity.
According to the evidence, he participated
in a conspiracy to falsify the company’s
accounting records and in a scheme
to deceive the auditors. Young admitted the
complaint.
Decision and reasons: Young’s name shall
be removed from the register for a period of
five years. He must also pay the Institute a
penalty of HK$100,000 and pay HK$30,000
towards the costs of the disciplinary proceedings.
The Disciplinary Committee took
Young’s convictions, personal circumstances
and conduct during the proceedings into
consideration when making its decision.
Details of disciplinary findings are available
on the Institute’s website: www.hkicpa.org.hk
Institute interest groups
introduce Facebook pages
The Institute’s sports and recreation club
has introduced Facebook pages for their
interest groups to make it easier to connect
with members, keep updated with activities
and discover new interests. The Facebook
pages are private groups, but all Institute
members can join by completing a membership
verification request.
Members go
go-karting
Nearly 100 members
and guests took part
in a go-karting event
led by Institute member
Michael Wong on 12
May in Shenzhen. Alpha
Choi won the championship
in the 80cc category race.
4 June 2012
NEWS
THE INSTITUTE
Raphael Ding appointed
Institute chief executive
The new role starts on 1 July
The Institute has appointed
Raphael Ding as its new chief
executive and registrar. He takes
up the position on 1 July and
succeeds Winnie C. W. Cheung,
who will retire on 30 June.
Announcing the appointment,
Institute President Keith Pogson
said, “Since joining the council
in 2007, Raphael has served on
many committees, including as chairman of the ethics committee and the
professional standards monitoring committee, and has shown his knowledge
and understanding of the diverse and complex operations of the Institute.”
Ding has also advised the Institute and the Chinese Institute of Certified
Public Accountants on the convergence of Chinese auditing and financial
reporting standards with Hong Kong and international standards. He has
served as a member of the financial reporting review panel of the Financial
Reporting Council.
A fellow of the Institute and a member of the Institute of Chartered
Accountants in England and Wales, Ding has more than 27 years of experience
in the accounting profession, including 20 years at international accounting
firms and more than seven years at the Institute, then called the Hong Kong
Society of Accountants, as the director of professional conduct.
At the time of writing, Ding is a member of the Institute’s council, an
executive director of Guoco Group, a Hong Kong listed investment holding
and management company, and a non-executive director of Lam Soon, a Hong
Kong-listed food and household care products company. He plans to resign
from those positions before taking on his new role.
Incoming Hong Kong chief executive
hears accounting profession’s views
C. Y. Leung, who will become chief executive of Hong Kong on 1 July, met with
Winnie Cheung, the Institute’s chief executive and registrar, and Susanna Chiu,
the Institute’s vice president, to hear the accounting profession’s views.
The Institute, as part of the 10 professional bodies of the Coalition of
Professional Services, presented its proposals on the next round of CEPA
negotiations, which included introducing regulations as soon as possible to
enable Hong Kong CPAs, who have already passed the CICPA qualification
exam and are CICPA members, to register as partner of a mainland practice,
and developing a joint qualification programme in both languages.
Leung said he would increase government support for the professional
sector by seeking partnership with professional bodies.

NEWS
INTERNATIONAL
Facebook makes rocky debut
as regulators weigh inquiries
Price drop takes billions off market capitalization
Facebook shares experienced a
dismal first few days of trading
that saw nearly US$20 billion
wiped off its capitalization and
its underwriters stepping in
to support its US$38 per share
opening price.
The Internet social network’s
debut was beset by so many
initial problems that Nasdaq, its
exchange, said it was changing
its IPO procedures, while investors
have threatened lawsuits
and regulators may launch
investigations.
The much heralded IPO
has turned into an ordeal for
the company, its founder and
majority shareholder Mark
Zuckerberg, its lead underwriter
Morgan Stanley and Nasdaq.
A Morgan Stanley consumer
Internet analyst cut his revenue
Japan’s foreign investments
and assets grew to the second
highest level on record as
companies used the high value
of the yen to make acquisitions
abroad.
This trend might help the
Japanese economy cope with
stagnant demand at home,
analysts say. The Japanese
economy shrank in three of the
past four years, and is struggling
to recover from last year’s
earthquake and tsunami.
The country’s national debt
6 June 2012
Mark Zuckerberg seen on a
screen in New York’s Times
Square cheering Facebook’s IPO
forecasts for Facebook in the days
before the offering, reflecting information
that was not disclosed
to the market before the stock
was listed.
The issue of selective disclosure
drew the attention of the
main regulator of U.S. brokerages.
“That’s a matter of regulatory
concern to us,” said Richard
is the highest in the world, with
borrowings projected to exceed
¥1,000 trillion for the first time
during 2012. The country is
also grappling with more than a
decade of deflation.
Investments abroad grew
3.3 percent to ¥582 trillion
in 2011, rising for the third
year, the Finance Ministry
told Bloomberg, citing its latest
report.
“[This] report should
provide relief for those who are
concerned about Japan’s fiscal
Ketchum, the Financial Industry
Regulatory Authority’s chairman
and chief executive.
Securities and Exchange
Commission Chairman Mary
Schapiro said: “There are issues
that we need to look at specifically
with respect to Facebook.”
JPMorgan Chase, Goldman
Sachs and Bank of America
Merrill Lynch, which were also
underwriters on the deal, also
revised their estimates during
Facebook’s IPO roadshow,
Reuters reported.
Facebook itself had urged
analysts working for some of the
33 underwriters to lower their
estimates ahead of the IPO.
Facebook had issued a revised
prospectus on 9 May, cautioning
the possible negative impact of
users shifting to mobile.
collapse in the near future,”
said Daiju Aoki, an economist
at UBS in Tokyo. “Japan has
massive foreign assets but this
isn’t as well-known as its debt
problems or deflation.”
Currency gains cut the value
of existing holdings but encouraged
increased investment
abroad.
Foreign investors increased
Japanese assets by an extra ¥17
trillion, leaving the net credit
position of the country little
changed at ¥253 trillion.
Investment
banks await
Hanoi sell-off
Japan’s foreign assets boom helps offset stagnant demand
AFP
AFP
Investment banking fees in
Vietnam may jump at least 25
percent this year as Hanoi steps
up a push to sell assets and foreign
companies accelerate acquisitions,
according to Credit Suisse.
Vietnam has defied a drop
in investment banking revenue
elsewhere in Asia as the value of
mergers rose to a six year high in
the first quarter.
The Vietnamese government
has pledged to sell stakes in
companies, including Bank of
Investment and Development of
Vietnam.
Investment banking fees in
Vietnam jumped 24 percent last
year to US$46 million even as
revenues in Asia as a whole fell
almost 10 percent, according
to Freeman & Co., a research
company in New York.
Japan’s net foreign assets
equalled 54 percent of gross
domestic product in 2011, the
third highest in the world after
Hong Kong’s 288 percent and
Switzerland’s 157 percent, according
to the ministry. China’s
ratio was 24 percent.
Japan’s current-account surplus
shrank by 44 percent last
year, according to Bloomberg.
The March earthquake and
nuclear crisis drove up energy
imports, disrupted supply
chains and reduced exports.

World leaders support Greece’s
struggle to remain in euro zone
G8 summit offers few details on how to help Athens
Greece has the support of world
leaders in its struggle to stay in
the euro currency zone, but the
leaders failed to provide details
on how they were going to help
at a recent meeting of the G8
group of economic powers.
The meeting was focused
on the wider issue saving a
global economy increasingly
threatened by Europe’s debt
crisis. “We commit to take all
necessary steps to strengthen
and reinvigorate our economies
and combat financial stresses,
recognizing that the right measures
are not the same for each
of us,” the leaders said in a joint
statement.
The G8 summit came down
solidly in favor of a push to balance
European austerity with a
new dose of stimulus measures
Hollande calls for more stimulus measures in EU
Newly elected French President
François Hollande believes
Europe needs to adjust its
focus away from austerity and
towards economic growth.
Hollande proposed the issuance
of euro dominated bonds at
an informal summit of European
Union leaders in Brussels. Italian
Prime Minister Mario Monti
and British Prime Minister
David Cameron back the idea
for the bonds, which would be issued
and guaranteed by all euro
zone states.
Alexis Tsipras
seen as vital to healing ailing
European economies.
Amid Greece’s political and
economic upheaval and concerns
over instability in Spain
and Italy, G8 leaders sought to
present an air of calm.
However, the leaders, while
wanting Greece to remain in
AFP
AFP
However, Angela Merkel,
Germany’s chancellor, has argued
that any co-mingling of euro zone
debt would remove incentives
for southern economies to adopt
structural reforms.
Hollande’s idea has the support
of several senior officials
at influential multinational
organizations.
“We need to get on the
path towards the issuance of
euro bonds sooner rather than
later,” Pier Carlo Padoan, chief
economist of the Organization
the euro zone “while respecting
its commitments,” offered no
specific prescription for extracting
Athens from its worsening
crisis.
There has also been a rash of
speculation that Greece might
be forced to abandon the euro
currency.
Greece faces an election on
17 June, after voters toppled a
government that had agreed to
the painfully austere terms of
an international bailout plan.
The Coalition of the Radical
Left, an anti-austerity party led
by Alexis Tsipras, is poised for
victory. However, the conservative
New Democracy Party
has secured cooperation with
a small liberal grouping to oppose
any reneging of Greece’s
economic deals with the EU.
for Economic Cooperation and
Development, told the Financial
Times.
Christine Lagarde, managing
director of the International
Monetary Fund, also called
for more sharing of economic
burdens. Though she stopped
short of explicitly backing euro
bonds, she told CNN: “More
needs to be done, particularly
by way of fiscal liability sharing.”
That statement was interpreted
as a veiled reference to
such debt instruments.
OECD upbeat
about India’s
GDP growth
India’s gross domestic product
growth is likely to rise to more
than 7.5 percent in 2013, but
continued government policy
uncertainty could erode the
country’s longer term growth
prospects, the Organization
for Economic Cooperation and
Development said in a report.
A cyclical upturn in investment,
stronger external demand
and the effects of recent monetary
easing will boost growth,
the report said. Although it
warned that high inflation
would dampen the investment
climate.
The prediction of higher
growth in the OECD report
stood in stark contrast to the
pessimistic view offered by
Morgan Stanley, which cut its
growth forecasts for India, citing
a high budget deficit and slowing
private investment. It said it
now expected the economy to
grow by 6.8 percent, instead of
7.5 percent, in 2013.
The Standard & Poor’s
ratings agency has also cut its
outlook for India’s credit rating
to negative from stable in April,
reflecting worries about high
deficits and political paralysis
that has stalled progress on
major economic reforms.
India’s economic growth
slowed to 6.1 percent in the three
months to December, the weakest
annual pace in almost three
years. “A moderate cyclical pickup
in investment is projected in
the near term,” the OECD said.
June 2012 7

Groupon replaces two
of its board members
Discount coupon website Groupon reshuffled
its board last month, replacing Starbucks Chief
Executive Howard Schultz and venture capitalist
Kevin Efrusy with American Express CFO Daniel
Henry and retiring Deloitte vice chairman Robert
Bass. The company said the appointments
would strengthen the board’s accounting experience.
Meanwhile, analysts told the Chicago Tribune
that the amount Groupon owes merchants
has been growing faster than revenue, suggesting
future pressure on profit margins.
Pirc calls for KPMG’s
ousting from StanChart
Pirc, an independent research and advisory consultancy
that provides services to institutional
investors, has called on shareholders to vote
against KPMG’s re-appointment as auditors of
Standard Chartered. Accountancy Age reported
that Pirc urged institutional investors to vote
against the bank’s annual report, auditors and
audit committee chair because Pirc claims the
bank has failed to provide a “true and fair view”
of its financial position. KPMG and Standard
Chartered were both unavailable to comment.
PwC “near deal” over
Centro class action
PricewaterhouseCoopers Australia is close to
reaching an agreement to share settlement costs
in a class action case. PwC admitted negligence
but not liability in relation to a A$1.1 billion short
term loan to failed shopping centre company Centro
that had been misclassified as long term. PwC
might pay up to a third of a A$200 million settlement
to Centro shareholders who claim they were
misled, The Sydney Morning Herald reported.
KPMG quits as auditor
to Pyne Gould group
KPMG has quit as auditor to Australian-New
Zealand asset and wealth management business
Pyne Gould Corp in a row over whether some
transactions should be considered as related
party transactions and amid concerns about the
adequacy of PGC’s governance. The dispute has
been referred to New Zealand’s financial regulator,
the Financial Markets Authority.
8 June 2012
NEWS
INTERNATIONAL
Big Four auditors back
China’s localization rule
Firms see few problems, but don’t comply yet
Three of the biggest global auditing firms said a new directive from China to put
locally licensed accountants in charge of operations fits with their strategies as
the country shifts to an international business model.
Chief partners in the world’s second-largest economy must within three years
be locally certified Chinese citizens, a requirement that none of the so-called Big
Four auditors meets, the Ministry of Finance said. Affiliates of Ernst & Young,
KPMG International and PwC International said they support the move.
The firms, which operate as joint ventures, must restructure to comply
with international practice, the ministry said. China is moving to adopt global
standards after dozens of companies disclosed auditor resignations or accounting
irregularities last year, leading to the suspension or delisting of their shares.
“This is not protectionism, it’s to encourage local partners to grow faster,”
said James Lee, regional director for Greater China of the Institute of Chartered
Accountants in England and Wales. “In other countries, this is normal.”
“We will respond positively to the programme by ensuring a smooth and
successful transformation of the firm from the existing joint venture structure,”
KPMG’s Chinese affiliate said in a statement, adding it “welcomes” the directive.
Ernst & Young said the new rules are “in line with” its strategy and PwC China
said it has been “actively localising its China practice”.
The four firms, with 25 subsidiaries in China, had US$1.5 billion of revenue
in 2010, representing 26% of the industry’s total, according to the Ministry of
Finance.
UK authorities to choose own
auditors under draft legislation
The British government is planning a draft bill setting out measures to shut
down the Audit Commission and establish new arrangements for the audit of
local government bodies.
The draft bill would require local councils to appoint their own auditors on
the advice of an independent panel and establish an audit regime regulated by
the Financial Reporting Council along lines similar to private sector practice.
Responsibility for developing the code of audit practice would transfer to the
National Audit Office.
“Local Authorities will not mourn the passing of the Audit Commission but
they will want to know that any new arrangements can be effective in giving
the public confidence and helping local authorities to improve the effectiveness
and value for money of local services,” said Andy Sawford, chief executive of the
Local Government Information Unit, a think tank.
However, Sir Stephen Bubb, head of the Association of Chief Executives of
Voluntary Organizations, said he would miss the Audit Commission because of
its power to question councils’ spending. “The Audit Commission interrogated
local decisions,” he told The Guardian.

NEWS
GREATER CHINA
Alibaba prepares IPO with buyback
of Yahoo stake for US$7.1 billion
Deal cemented after years of tough talks
After years of sometimes
strained talks, China’s e-commerce
giant Alibaba Group is to
buy back about 20 percent of its
equity from Yahoo for US$7.1
billion, a move seen as paving
the way for an initial public
offering.
Although Alibaba said that
it has no timetable for an IPO at
the moment, Jack Ma, Alibaba’s
chairman and chief executive
officer, said at a press conference
that the transaction will
help the company achieve a balanced
ownership structure that
will allow it to “take the business
to the next level as a public company
in the future.”
Under the agreement, Alibaba
will pay Yahoo US$6.3 billion
in cash, plus new preferred
10 June 2012
Jack Ma
shares worth up to US$800
million, the companies said in a
joint statement.
For the struggling Yahoo it
will mean a US$4.2 billion cash
injection, less taxes. It is unclear
how this will be distributed,
but analysts said most of the
money is likely to go towards
shareholder dividends and the
rest used for its share buyback
programme.
Under the deal, Alibaba will
hold about 51 percent, while
the voting rights of Yahoo and
fellow investor Softbank will be
less than 50 percent. Limiting
outside ownership was a major
motivation for Ma, not only for
Alibaba to take control of the
boardroom, but also to meet
new Chinese regulations on
foreign-controlled Internet
companies.
When the Alibaba IPO goes
ahead, Yahoo will also have the
right to sell another 25 percent of
its stake at the opening share price.
Ma, who holds more than 7
percent of Alibaba, said the Yahoo
deal valued Alibaba at about
US$35 billion.
Beijing buys U.S. treasuries direct from the source
The revelation that China is the
only country that can buy United
States treasury bonds directly,
rather than through designated
dealers, has raised questions
about a “sweetheart” deal.
China, which holds more than
US$1.1 trillion of U.S. debt, has
been able to bid on treasury bonds
directly since June 2011, Reuters
reported. It is the only country
that does so, a treasury official
confirmed to The New York Times.
However, analysts said that
the arrangement benefitted
both sides and any country could
purchase by direct bidding.
“China, by bypassing Wall
Street, saves a bit on its debt
purchases by not moving
the market so much,” said
Daniel W. Drezner, professor
of international politics at
The Fletcher School of Law
and Diplomacy at Tufts
University. “By dealing with
Beijing directly, Washington gets
a more accurate information on
just how much U.S. debt China is
purchasing.”
Recently, big buyers of
treasury debt – including large
pension funds, mutual funds,
broker dealers and money
AFP
managers – have started
bypassing the primary dealers
on Wall Street to bid for U.S.
treasury bonds themselves.
Apart from China, no other
country has done so, but analysts
expect Japan, Singapore and
Brazil may bid directly in the
future.
The advantage for China
of direct bidding is to keep its
business private and obscure
potentially valuable information
on its bond dealings. Wall
Street dealers don’t charge
commissions to make bids for
foreign central banks.
Bank forecasts
GDP growth
at 8.2 percent
The World Bank cut its economic
growth forecast for
China this year to 8.2 percent.
It also urged China to rely on
fiscal easing to boost consumption
rather than state investment.
Previously, China was
widely expected to grow at 8.4
percent. However, an International
Monetary Fund report in
April kept its forecast for China
unchanged at 8.2 percent.
The World Bank in its East
Asia and Pacific Economic Update
said a slowing China will
drag growth in Asia’s emerging
markets, but warned that Europe’s
volatile debt crisis could
inflict even bigger damage if it
worsens.
Sluggish demand in the
United States and Europe and
a softening Chinese property
market would combine to
weigh on the Chinese economy
in the near term, it said.
But if governments and
central banks act in time to
stabilize activity, economies
should recover next year.
“The region’s authorities
should remain flexible to shift
monetary policy gears should
growth gain traction and
inflationary pressures build
up,” the bank said.
With the global slowdown
expected to continue, the Asian
region needs to reduce its reliance
on exports and find new
sources of growth, the bank
recommended in its report.

Labour shortage affects casinos
as Macau jobless rate hits low
Gambling companies press on with building resorts
The growth of Macau’s US$34
billion gaming industry is under
threat from a shortage of labour.
Casino operators such as
Las Vegas Sands, Wynn Resorts
and Galaxy are having trouble
finding workers. Rules requiring
these companies to hire
staff from Macau’s population
of about 500,000 are driving up
wages and have casino operators
scrambling for workers at
all levels of their operations.
Macau had 28 million visitors
and economic growth of 21
percent last year, while gambling
revenue was up 42 percent
to record levels.
“It’s a challenge everybody
faces,” Edward Tracy, chief executive
officer at Sands China,
told Bloomberg. “You have a
base population of 500,000 and
an unemployment rate of 2.1
percent. That is almost zero:
those people are probably not
looking for a job.”
The competition for labour is
set to increase. Wynn
Macau was given the
go-ahead to build a
second casino resort
in Macau last month.
Meanwhile, Galaxy
plans to double
the size of its resort
within three years.
The Sands Cotai
Central casino, which
opened in April, will
add 4,000 hotel rooms
and 200 gaming tables
over the next year. Tracy says
Sands China will soon have
4,000 vacant job positions in
Macau.
Joblessness in Macau is at the
lowest since Bloomberg began
tracking the data in 2002.
Dalian Wanda in spotlight with U.S. cinema buy
Dalian Wanda, a diversified but
low-key group based in Liaoning
province, will become the biggest
cinema operator in the United
States with its US$2.6 billion
purchase of AMC Entertainment.
It is Wanda’s first investment
outside China – and the largest
overseas acquisition by a
privately held Chinese company.
Chinese cinemas yielded US$2.1
billion in revenue last year
compared with US$10.2 billion
for the jointly-measured U.S. and
Canadian markets.
“For Wanda, the deal may
allow it to secure more Hollywood
movies for distribution in China
Sheldon Adelson, chairman of Las Vegas
Sands, at the opening of Sands Cotai Central.
in the long run,” Steve Chow, an
analyst with Kingsway Research
in Hong Kong, told Reuters.
“Cinema operation is a growing
business in China, as people are
willing to spend on entertainment
as their income increases. In the
U.S., it is a defensive business
which generates a relatively
steady income.”
AMC and Wanda started
talking about the deal more than
a year ago. It was when AMC,
the world’s largest operator
of IMAX screens, cancelled
its plans to go public that the
talks became more substantive,
according to media reports.
AFP
The companies said AMC
will be run by its existing team
of executives led by CEO Gerry
Lopez while its headquarters
will remain in Kansas City,
according to The Hollywood
Reporter. AMC employs 18,500
people and the transaction isn’t
expected to affect headcount.
The acquisition by Wanda
includes about US$1.9 billion
of net debt. Wanda, which
has interests in commercial
properties, luxury hotels,
tourism and department stores,
holds US$35 billion in assets,
with annual revenue reaching
US$16.7 billion.
Solar panel
war with U.S.
flares up
The United States has penalized
Chinese solar panel companies
with import tariffs of 30 percent
or more in retaliation for alleged
dumping of cut price panels into
the U.S. market.
The U.S. Commerce Department
said it sided with
American solar panel manufacturers
that had complained
a wave of Chinese imports had
wrongly undercut their pricing
and forced several American
companies out of business.
Chinese makers are putting
together a campaign to get the
tariff cut or reduced. Part of this
campaign is to mobilize Chinese
companies throughout China
via the China Photovoltaic
Industry Alliance. The alliance
remains optimistic because the
last time the U.S. imposed a
tariff on solar cells in March the
range was limited to 2.9 to 4.73
percent.
“Chinese companies should
get together and make good use
of the next few months to be
prepared for the rebuttal,” the
Chinese National Development
and Reform Commission
announced via its website.
“We need to prove to the U.S.
government that we don’t
export cut-price solar products
either by government subsidy or
dumping.”
The tariffs could backfire
on Washington too, one analyst
said, as many Chinese solar
makers import raw materials
and equipment from the U.S.
June 2012 11

ICBC wins approval
to buy bank in U.S.
Industrial and Commercial Bank of China
has gained Washington’s approval to purchase
an American bank. ICBC’s purchase
of a subsidiary of Hong Kong’s Bank of East
Asia comes after months of scrutiny by authorities
in the United States. It marks the
first time the Federal Reserve has allowed
a Chinese institution to buy an American
bank.
Chinese companies
still seek acquisitions
About one-third of Chinese companies are
planning to grow through acquisitions over
the next three years, accounting firm Grant
Thornton said in a report. Although the proportion
is a decrease from 45 percent last
year due to the economic slowdown, it is
still higher than the 26 percent reported in
2010, according to the Grant Thornton International
Business Report 2012.
IPOs riskier for bankers
as Hong Kong weighs jail
Bankers may face prison for putting misleading
information in share-sale documents under
a proposal by a Hong Kong regulator that
could raise the cost and risk of arranging initial
public offerings in the city. The Securities
and Futures Commission said it would seek
feedback on a proposal to impose criminal
penalties on bankers or companies that fail
to ensure proper due diligence in IPOs. The
SFC said tougher legislation would protect
investors after a string of accounting scandals
involving mainly Hong Kong-listed companies
from China, Bloomberg reported.
LehmanBrown sues
lawyer in IP dispute
The principals of mainland accounting firm
LehmanBrown have sued their former business
partner Edward Lehman, managing
partner of the Lehman, Lee & Xu law firm,
alleging misappropriation and infringement
of the firm’s Hong Kong and Chinese trademarks
and seeking their transfer back to
LehmanBrown.
12 June 2012
NEWS
GREATER CHINA
PCAOB forecasts access to
Chinese audit inspections
U.S. regulator confident of reaching accord
The head of the regulator in the United States that inspects audit firms has said he
believed his staff would soon be able to sit in on Chinese inspections of auditors.
“We ought to be able to observe the inspections they conduct in the late
summer or fall, and certainly by the end of the year,” James R. Doty, the chairman
of the Public Company Accounting Oversight Board, told The New York Times.
Doty was a member of Washington’s delegation to the U.S.-China Strategic and
Economic Dialogue held in Beijing during May.
U.S. law requires that the board inspects all auditing firms that certify the
books of companies whose securities trade in public markets in the U.S. but the
board has been unable to do that in many countries, including China.
Doty said the board had a number of inspectors who spoke and read Chinese
and could observe such inspections. He said the Chinese had suggested that the
Americans observe the inspections and that he hoped that would lead to joint
inspections as required.
Doty said there were “very substantive and productive discussions” that he
expected to lead to the observations of the Chinese inspections. The PCAOB
has made it a priority to gain access to China, saying it is needed to protect U.S.
investors. The issue is particularly pressing because accounting questions have
arisen about dozens of U.S.-listed Chinese companies since early last year.
Deloitte violated Sarbanes-Oxley,
SEC claims in filing over Longtop
The United States’ Securities and Exchange Commission filed an administrative
proceeding against Deloitte Touche Tohmatsu CPA, the Shanghai-based Chinese
affiliate of the Big Four accounting firm, on 9 May, The Wall Street Journal
reported. The SEC said Deloitte’s Chinese arm has violated U.S. law by refusing
to turn over documents relating to its client Longtop Financial Technologies, a
financial software company whose shares traded on Nasdaq until December 2011.
The case marks the first time the commission has brought an enforcement
action against a foreign audit firm for failing to comply with a request under the
Sarbanes-Oxley Act, which requires foreign firms that audit U.S.-traded companies
to provide documents to the SEC on request. If the proceeding is decided against the
Chinese firm, it could be barred from auditing U.S.-traded companies.
The filing intensifies the dispute between the agency and the firm that began in
September 2011, when Deloitte refused to comply with an SEC subpoena seeking
documents. Deloitte cited concerns that Chinese authorities could penalize
the firm or its partners under China’s state secrecy laws. The SEC filed a suit to
enforce the subpoena, and that case remains pending in the U.S. District Court in
Washington.
Deloitte did not comment to the Journal, while Longtop couldn’t be reached,
the newspaper said.

Childcare
ver since
C.Y. Leung, Hong Kong’s incoming chief executive,
announced he would take action to
encourage Hong Kongers to have more babies,
there has been debate about what measures
should be introduced to improve the
city’s fertility rate, which stands at a paltry
1.04 children per woman.
Leung said he will increase child tax allowances
and implement paternity leave,
14 June 2012
initiatives that are applauded by parents.
“I welcome the government giving fathers
mandatory paternity leave, preferably
two weeks, for them to share busy childcare
duties,” says new father and Grant Thornton
employee Nelson Tang, whose firm does not
offer paid time off for fathers. “The cost of a
father’s paternity leave could be considered
to be shared by the firm and the government,”
he suggests. “Frankly speaking, it is a
Helen Hsu (a CPA), her husband Edmund Chu
and their daughter Charlotte, first son Hansel
and second son Nathan
big challenge for only one of the parents to
continuously bear the responsibilities of taking
care of newborn babies.”
Paul Yip, who chairs the research committee
of the Family Planning Association
of Hong Kong and is one of the city’s leading
academics on population policy, says accounting
firms have an opportunity to lead
the way. “The Big Four are big enough to
set a really good example, to provide a fam-

Hong Kong’s incoming chief executive promises more family
friendly policies to halt the decline of the city’s fertility rate.
Liana Cafolla asks CPA mothers and fathers whether they
think accounting firms are helping
ily friendly working environment and bring
the best out of their workers, whether they
are male or female,” says Yip, who is also a
member of the Hong Kong Institute of CPAs’
Disciplinary Panel A.
Yip says Hong Kong’s labour and population
demographics are shifting and the combination
of a low birth rate and ageing population
could damage prosperity.
In addition, he points out, since more
Photography by Crystal Fung
women than men graduate from business
and economic courses, keeping mothers in
the workforce is crucial.
Maternity leave
Many accounting firms in Hong Kong are
starting to acknowledge the demands of
family on their employees and are granting
perks such as extra unpaid maternity leave
– on top of the statutory 10 weeks paid ma-
ternity leave – reduced overtime and flexible
working hours for returning mothers.
Catherine Tsang, a PricewaterhouseCoopers
Hong Kong tax partner based in Shenzhen
and a mother of three, says the firm is
very supportive of expectant mothers. “PwC
allows us to take extra weeks off work for
maternity – not just the statutory 10-week
break – and never questions our leave applications,”
she says. “Also, we can take leave
June 2012 15

Childcare
for post-natal check-ups and bringing newborns
for vaccinations,” says Tsang. “[Other]
initiatives include the arrangement of nursing
rooms, part-time work, a flexible work
schedule, sabbatical leave, among others,
which is of great help.”
Flexible working hours, however, have
widely different interpretations. Some Hong
Kong firms – like many companies here –
tend to rely more on the informal goodwill
of team members to cover for absent colleagues,
while others are starting to put in
place more extensive policies such as job
sharing or home working that are commonly
16 June 2012
found in countries with more family oriented
business cultures.
At PwC, team members are moved
around to cover for colleagues on maternity
leave. “Generally, we deal with the shortfall
by rescheduling tasks and having the support
of other team members,” a spokesman
for the firm says. “This has the added benefit
of allowing our people to have a greater
understanding of the firm, and for their
own personal development. Occasionally,
contract temporary staff may be employed
to assist with a shortfall during long term
absence.”
It is a similar situation at Ernst & Young,
where employees on maternity leave are
covered by other team members. “In practice,
a back-up staff member will be identified
by a team leader a lot earlier to look
after a pregnant staff member’s portfolio before
her maternity leave,” says Agnes Chan,
E&Y’s regional managing partner in Hong
Kong and Macau.
RSM Nelson Wheeler also fills the maternity
gap with other staff. New mother
Bertha Liu, an audit principal at the firm,
had her son in early April and says she was
happy with the support from her firm. “My

firm arranged for someone to take care of
my jobs during my maternity leave,” she
says. “Luckily, I have good bosses and helpful
colleagues.”
“Normally, we will share the workload
among the colleagues,” says Chris Wong,
a staff partner at the firm. Additional staff
are hired to replace staff on maternity leave
in the administrative side but not to replace
professionals. “It’s quite difficult to hire a
suitable person to take over the [professional]
work during the maternity leave, so
normally the work will be shared among colleagues,”
says Wong.
Family time
Taking care of a family while working an accountant’s
long hours is tough for new mothers
and fathers. Yip says the culture of long
working hours is deeply ingrained in the
profession in Hong Kong.
Employees of Big Four firms in Australia,
for example, define a long working day as
working until 7 p.m., says Yip. “But in Hong
Kong, they are having to stay until 1 a.m. or
2 a.m. I think we need to change this working
attitude. And especially the Big Four,
they’re supposed to set the benchmark.”
Liu says a lack of energy and long working
“Some mothers
just quit the job,
or find another
job or even stop
working, but if they
had a choice, they
would prefer to work
part-time or flex-hours.”
hours could deter her from having as many
children as she would like now she’s back to
work. “I can say I have a healthy work-life
balance for most of my time, although I have
to work until midnight sometimes to meet
job deadlines.”
Some firms like PwC offer a transition
period to help new mothers adjust to becoming
working mothers. “The transition period
can include the granting of additional unpaid
leave if required, or part time work based on
the needs of the individual and the firm,” says
the PwC spokesperson. In addition, fathers
are given three paid days of paternity leave.
June 2012 17

Childcare
“My firm arranged for
someone to take care
of my jobs during
my maternity leave.
Luckily, I have a good
boss and helpful
colleagues.”
E&Y offers flexible work hours to help
women meet their family obligations “without
compromising their career advancement in
the profession,” says Chan, and also offers five
days of paternity leave for fathers. “We believe
the initiatives and support we provide are attractive
enough for the new mothers to return
to work after maternity leave,” Chan adds.
At Grant Thornton new mothers are offered
some flexibility in their working hours
and overtime is kept to a minimum, says staff
partner Kelvin Kwong. Returning mothers
are allocated “assignments that involve less
overtime and less travel needs,” says Kwong,
and unpaid leave is available.
18 June 2012
At RSM Nelson Wheeler unpaid leave is
also an option for new mothers, and staff can
also apply to work flexible hours, with applications
assessed on a case-by-case basis,
says Wong. “It is our culture to have our staff
strike a balance between work and family, so
we are flexible,” he adds.
Baby steps
But while support for CPA parents is clearly
improving in Hong Kong, the fact remains
that the Big Four’s working cultures in many
other countries are often much more flexible
than here.
In PwC’s office in Sweden all staff and
Bertha Liu, a CPA, and her son Aidan
partners work to a flexible annual hours
contract. In the United Kingdom, KPMG offers
part-time work, job sharing, core hour
working, additional holiday purchase up to a
maximum of 35 days per year and the option
of working from home.
In Hong Kong, the concept of flexible
working hours is not widely enough accepted
for many working mothers to consider
asking for it, says former E&Y partner Helen
Hsu, who had three children during her 18
years with the firm. Hsu, who now runs her
own practice, thinks the large firms should
encourage more working mothers to take
advantage of flexible working hours.

“Flexible work arrangements are a very
good idea, and I would like to see more implementation
of it,” she says. “If more women
worked flex-time, or part-time, and people see
that this is common, then maybe more of us will
feel more comfortable to work in that way.”
To be effective and accepted, flex-time
needs to be explained and supported by the
whole team, she says, and firms’ human resources
departments should explain how it
works to all staff. “Some mothers just quit the
job, or find another job or even stop working,
but if they had a choice, they would prefer to
work part-time or flex-hours,” Hsu says.
As more women enter the profession and
rise to the top, the situation will improve,
says Hsu. “Firms started to implement new
initiatives a few years ago,” she says. “These
ideas and arrangements will become more
accepted, more common and more recognized
by people. Even male leaders in the
firm do already see that it is necessary to
change it. Because otherwise you’ll prevent
some high calibre women from staying with
the firm.”
Many organizations are recognizing
that flexible working arrangements are a
valuable part of investing in employees and
keeping talented staff. In the United States,
84 percent of the 1,600 employees who use
“I welcome the
government giving
fathers mandatory
paternity leave,
preferably two
weeks.”
Nelson Tang (a CPA), his wife Wing Lau,
their son Sum Sum and daughter Tan Tan
E&Y’s flex programme say it’s the main reason
they stay with the firm, Denny Marcel
of E&Y’s office for retention told Workforce
magazine. Meanwhile, the American Institute
of CPAs offers flexible hours to its employees
and cites a broad range of benefits,
including increasing the AICPA’s attractiveness
when recruiting, helping to retain valuable
employees who might otherwise leave
and reducing absenteeism.
Says Yip, “The flexibility of the company
towards working mothers looking after children
is an important gesture of support. These
measures would help to enhance the sense of
belonging and loyalty to the company.”
June 2012 19

Chief executive retirement
A fond
farewell
Winnie C. W. Cheung leaves the
Institute after 22 years, eight of
which were as chief executive
and registrar. She looks back
with George W. Russell at the
profession’s many achievements
during her tenure
Photography by Samantha Sin
Winnie C.W. Cheung puts her Institute
career down to destiny. It
was a chance meeting with an old
friend in Hong Kong that led her
to the then Institute offices in Belgian
House and a stellar 22-year tenure as technical director,
professional development director, senior director and,
finally, the first chief executive and first female registrar.
In 1989, Cheung seemed settled in London. A young
auditor, married with a toddler, Hong Kong was far away,
the city of her childhood. She had already found primary
and secondary school places for her son, who was then
only two years old.
She was on the verge of a big change, but a traditional
one for an accountant: leaving a major accounting firm for
one of its clients. Cheung had begun her career at Ernst &
Whinney in London, and was being wooed for a senior position
at Generali, the Italian insurance company.
Cheung had already been interviewed and expected
the Generali board to approve her appointment. In the
meantime she took time off to make her once-every-fewyears
visit to Hong Kong to see her parents. However,
fate – and her reputation – intervened.
For two years, the Hong Kong Society of Accountants,
as the Institute was then known, had sought a technical
director. In Hong Kong, her friend told her about the opening.
“I had no intention of looking for a job in Hong Kong,”
she recalls. “I had a career in England and I had just done
20 June 2012

June 2012 21

Chief executive retirement
an interview with a client.” However, her
friend pressed her, saying this position would
be a good fit. “I thought, ‘I’d never worked in
Hong Kong and I’d never seen Asia. Why not
give it a go?’”
Cheung typed up her resume, which
hadn’t been updated since her university days,
with her dad’s ancient typewriter. When the
Society agreed to interview her, the omens
were not good. She was pickpocketed near
Central MTR station the day before. “I had no
ID on me but they agreed to see me anyway.”
Louis Wong, then the registrar, had organized
a selection panel for another candidate
the next day and after meeting with her for
an afternoon, asked her to return for the interview
with the panel, comprised of Marvin
Cheung, now chairman of the Airport Authority,
and former Institute presidents Eric Li
and Selwyn Mar.
“I had a very enjoyable interview with
them and afterwards, Louis called me to ask
if I would accept the job. But I had to go back
to England. I said send me the contract and
I’ll see,” Cheung recalls. Winnie received the
appointment contract from the Society when
she returned to London after the holiday. “I
decided to take the offer and the opportunity
it offered to explore the city and the rest of
Asia because I had left Hong Kong at a young
age,” she explains. “Also, the contract term
was two and a half years, and my son was only
two years old at the time, so I thought I should
go to see the other side of the world before settling
down when my son started school.”
“Generali called to say welcome aboard.
I said, ‘I’m sorry but I’ve got this job in Hong
Kong.’”
Destiny calls
Cheung immediately realized she had made
the right choice. “Once I got here, I’d never
been so busy. The breadth of the job was tremendously
interesting. I’d never have had
this kind of experience if I’d stayed in England,”
she says.
It was a very different office that Cheung
joined in 1990. “We only had about 50 staff
and 7,000 square feet of space at Belgian
House,” she remembers. Her first challenge
was to organize the department of which she
had been put in charge, together with Nick
Baldwin who also joined at the same time.
“When we joined, the technical staff was –
nobody. The technical department was nonexistent
for two years so two of us made a start
from nothing.”
Moreover, there was a difficult financial
22 June 2012
environment. The then colony had been in a recession
since 1987, was reeling from a stock exchange
corruption scandal and had been buffeted
by the Tiananmen Square crackdown.
Given the circumstances, Hong Kong’s
government was in a reformist mood and
quickly sought out Cheung’s technical skills.
She was first tasked with advising on the issue
of B shares by mainland companies, which
could be denominated in Hong Kong dollars
and traded in Shenzhen. The shares were
marketed in Hong Kong and the Companies
Ordinance required a prospectus.
With the handover looming, China began
to occupy more space in the Society’s
dealings. “There were a lot of activities with
China,” she remembers. “There were three
exchange rates: the black market rate, the official
rate and the exchange shop rate. How do
you account for this? And how do you consolidate
joint ventures – are they JVs or subsidiaries?”
She had to draw up technical guidance
on these issues which were unique with little
reference that can be drawn from anywhere.
In 1991, Charles Lee, then stock exchange
chairman, held talks with Premier Zhu
Rongji, who decided that Hong Kong was the
best place to raise funds for mainland enterprises.
“Why?” Cheung asks rhetorically. “Because
we have the accounting standards and
legal system and professionals that overseas
investors trust.”
She was invited to join the government
team to advise on the accounting and auditing
framework for the introduction of H
shares, shares of companies incorporated in
mainland China that are traded on the Hong
Kong stock exchange. Tsingtao Brewery Company
issued the first H shares in 1993. “Today
we have over 650 mainland companies listed
in Hong Kong,” says Cheung. “It was very interesting
work to be part of the creation of the
framework that brought these companies to
Hong Kong to list. It was history.”
Cheung remained part of the fabric of
Hong Kong history throughout the 1990s.
As the liaison person between the Institute
and LegCo, Cheung worked closely with the

LegCo representatives Peter Wong and Eric
Li, making many representations for the accounting
profession before Hong Kong’s
legislature. She continued to advise the
government on a broad range of issues and
found many of the proposals she submitted
ended in government plans, including the
MPF scheme, double taxation arrangements
between Hong Kong and the mainland, and
company and insolvency law reform.
Other matters ranged from the budget
to the territory’s books themselves. “I remember
being invited in 1994 to advise on
whether government accounts should be
changed from cash basis to accrual basis,”
says Cheung. “In the end we decided not to at
the time, because 1997 was coming and if you
suddenly changed the government’s accounting
there might have been suspicion about the
British motives.”
By 1994, the technical department had
grown so large it was split into three sections:
standards, development and compliance.
Cheung decided she would head develop-
PHOTO: BRIAN CHING
ment herself. Baldwin left to join KPMG after
his contract was up.
In her new role, Cheung focused on corporate
governance and technology. “Because I
knew that in the next century, those would be
the drivers for us.”
In 1992, the British government, alarmed
at the number of companies going bankrupt,
commissioned an inquiry headed by Sir
Adrian Cadbury, which developed a code that
aimed to raise the standards of corporate governance
and financial reporting. “I read the
Cadbury report,” says Cheung, who thought
Hong Kong should pay attention.
Edward Chow, an Institute council member
who went on to become president, asked
Cheung to set up a corporate governance
working group in 1995 to see how Hong Kong
fared. “We produced our first corporate governance
report with 19 recommendations for
change. This I think must have been the first
corporate governance report on Hong Kong.
It received a lot of attention but also controversy
on a number of its more forward think-
ing proposals,” she recalls. “Now everyone in
town is involved in corporate governance in
one form or another. You look back and there
was nothing. Now it is the norm.”
Cheung created the Institute’s Best Corporate
Governance Disclosure Awards in 2000,
which are still running and are considered
the most prestigious out of a raft of awards.
As the end of the century approached in
the late 1990s, the potential fallout from the
millennium bug was worrying Hong Kong accountants.
“We created the information technology
committee and interest group, which
engaged in dialogue with organizations in
the United States and Europe.” Driven largely
by Cheung and her counterparts in the U.S.,
Canada, U.K. and France, the International
Innovation Network, a group where many of
the world’s accounting bodies work together
to develop technology used by the profession,
was formed in San Francisco. “I hosted
a meeting in Hong Kong over three days prior
to that where the agreement of 16 bodies was
gained to form the IIN. That was the beginning
of my global relationship building with
different cultures.”
A new era
By 2002, Cheung felt her work at the Society
was almost done. “In 2002, I was thinking of
retiring, actually,” she reveals. “My son was
going to university in England in a couple of
years time and I was thinking I should be returning
to the United Kingdom. At that time
I was very interested in child psychology. I
thought I could have another career. I would
take leave to attend courses on how to talk to
children – it helped me talk to adults too!”
At the same time, Cheung was forming a
vision of how the Society could be reinvented.
“When I qualified as a chartered accountant
in England, it was one of the proudest moments
of my life. Chartered accountants were
so respected in the U.K. community. When I
came back to Hong Kong, respect for accountants
was not the same.” Cheung thought the
root of the problem was the Society’s lack of
its own qualification programme, its own
brand and independence.
This, says Cheung, left the Society without
a soul. “We didn’t produce our own product.
We outsourced it through the ACCA examination.
That was something I carried in my
heart for a long time.” Cheung was determined
to remake the image of accounting
in Hong Kong. “We’d been talking about rebranding
to CPA for a while.”
Although the Society’s qualification pro-
June 2012 23

Chief executive retirement
24 June 2012
gramme had been created in 1999, it had a
low take-up. “The QP was crafted to cater for
the 21st century,” says Cheung. “It’s not just a
Q&A exam. You have to solve cases, present at
workshops and people were not used to that.”
Students thought the QP was too hard and
most opted for programmes perceived to be
easier and which could still give automatic
membership into the Society. “At that time,
the Society recognized 14 overseas qualifications
unilaterally, so people could take any
one of those exams to join us without doing
our programme,” she says.
Then the registrar, Lee Kai-fat, announced
he was leaving in December 2003. The Society
began looking for his replacement and
created a five-person selection panel. “Each of
the panel members came to talk to me to see if
I was interested,” Cheung recalls. “I remember
telling them there are plenty of excellent
people out there. If you find somebody better
than me, I’d be happy to serve under them.”
Cheung credits then President David Sun,
chair of the selection panel, for convincing
her to take the top job. “When after a period
of search, I was asked again to consider going
for the job by the head hunting firm. I said ‘I
need to be called chief executive,’ a title the
Society had not had before, and ‘I need to
have this ability to be at the heart of policymaking.’
David went to council and got both
of my requests granted.”
“I went home to my two children, Steven
and Sara. Sara was 10 at the time; her brother
five years older. I said to them, ‘If I take this
job, I may have to work weekends and come
home very late.’ My son said, ‘Don’t worry. If
you want to do it, do it. I’m old enough and I
can look after Sara.’ And my daughter said,
‘Yes, give Steven a chance.’ Two months later,
my daughter said, ‘Mommy, can you give your
job back?’” They of course settled on mum
coming home earlier and Sara continued to
enjoy her new freedom.
Her first year as chief executive – 2004–
was a whirlwind. She had to shepherd
through a private members’ bill that amended
the Institute’s name and members’ designation,
and enhanced independence in Institute’s
governance.
“Eric Li, our LegCo representative at the
time, sponsored the bill. LegCo formed a committee
to review the bill and we only had a couple
of months until the LegCo went into recess
in June 2004 to pass the bill, or else we’d have
to start all over again when the new LegCo was
formed. It was a challenge – the bill changed
almost every section of the Professional Ac-

countants Ordinance. We didn’t know what
the legislators would ask.” It was passed.
This was the second bill Cheung took to
the LegCo on behalf of the profession. The
first in 1997 was to allow CPA practices to
incorporate and bring limited liability to the
audit profession for the first time.
In September 2004, the Society became
the Hong Kong Institute of CPAs. “We rebranded
ourselves and what we produced was
of such quality I think people were proud and
glad. Why do we want to be in a profession?
It’s the pride and the quality that it brings.”
Cheung redefined relationships and agreements
with overseas accounting bodies that
year. Cheung wrote to all 14 bodies to tell
them the Institute would end its recognition of
their qualification by June 2005.
That approach was rooted in a belief that
the QP was as good – or superior – to any other
programme. “Our QP was developed by local
and overseas experts with the assistance
of the Australian, New Zealand and Scottish
chartered accountant bodies and put through
very comprehensive market research and
stakeholder consultation. We created a competency
framework benchmarked against
our QP. We set two conditions for recognition
of any other qualification with overseas institutes.
One is that it had to be mutual. Two,
the programme had to meet our competency
benchmark. The assessment would be performed
by an independent expert agreed by
both sides. That was fair and reasonable.”
In the following years, she gained global
recognition of the Hong Kong Institute of CPAs
qualification by establishing mutual recognition
agreements with almost every one of the
14 bodies based on the Institute’s qualification
standard. She also co-founded the Global Accounting
Alliance with the most important accounting
institutes around the world.
With the QP’s success came growth. In
2005, Cheung made the purchase for the Institute
of the two floors in Wu Chung House,
expanding space from 20,000 to 50,000
square feet to accommodate the increasing
staff, students and members, and gaining a
training and conference centre and lounge
for member activities. “The value doubled in
five years with a gain of HK$250 million.”
Cheung’s elevation to the chief executive’s
job also put her back in the China spotlight.
“I didn’t know Mandarin – I’ve had very few
lessons. But Mandarin was learned by being
forced to negotiate.”
Learning quickly, Cheung worked to develop
closer ties between the professions in
Hong Kong and the mainland.
“In 2004 we got CEPA and that was my
chance to negotiate a better deal than anybody
else, such as mutual examination paper
exemptions with the CICPA. We obtained
four out of seven paper exemptions from the
mainland CPA qualification exams.”
And she crafted the Institute’s policy in
2001 that led to Hong Kong’s convergence
with IFRS in 2005 and at the same time,
crafted the model for Hong Kong’s own SME
financial reporting framework and standards.
She also later in 2006 and 2007 led
the China and Hong Kong financial reporting
and auditing standards convergence project
that resulted in a joint declaration of convergence
in December 2007. For the following
three years, she attended every half yearly
tripartite meeting between the International
Accounting Standards Board, China’s Minis-
“The joy of working
for the Institute
in these 22 years
was the chance
of working with
the profession’s
best and brightest
people.”
try of Finance and the Institute and published
an annual convergence update each year. She
believes China has embraced the international
financial reporting standards with clear
commitment and sincerity.
“China is a developing country. It’s had a
very short time to grow very quickly. It undertook
to benchmark its rules and regulations
with the rest of the world. You have to praise
all the officials involved. I’ve worked with
them closely and they put their whole heart in
it.” Director General Liu Yuting at the Ministry
of Finance led the project on the China side.
Cheung also fulfilled the Institute’s social
responsibility by introducing the award winning
May Moon children’s book series and the
“Rich Kid, Poor Kid” community project to
use the skills of accountants to teach young
people about money.
“I am really proud of the May Moon storybooks.
It is an amazing way to reach children
to teach them about money, and to teach
them what it is that accountants do,” she says.
“If we can reach just a few bright boys and
girls with our message about how great it is to
be an accountant, those books will have done
their job.”
Crossroads
On the eve of Cheung’s departure, she gives
these final words for the future. “We have
built ourselves a very strong foundation. To
sustain our growth, our brand name and influence,
we need to continue to evolve and to
open doors, expand our geography as well as
our service boundaries. The next five years is
critical to secure an open rather than closed
door policy for Hong Kong practitioners in
China following the end of the Big Four joint
ventures. Post qualified specialization and
demand driven continuing professional development
are key to our next generation in
today’s knowledge and technology world. We
need to expand our role in these areas. We
need to take bold steps to face our challenges
with a global mindset and China focus. We
live in a global world, there will be increasing
pressure on us to conform to global policies
and regulations. We need to be bold to ask
questions rather than blind copying. The conflict
between cross border regulation and national
boundaries remains an issue and needs
our resolve. The Hong Kong Institute of CPAs
is a public body serving 1 percent of our working
population with diversified interests and
needs. This will be an increasing challenge
with the added political environment we are
in today. We need to be strong to lead the way.”
Cheung is sure she made the right decision
by joining the Institute. “I really treasure the
unique experience and satisfaction I had when
going through all these challenging ventures,”
she says. “The joy of working for the Institute
in these 22 years was the chance of working
with the profession’s best and brightest
people and in seeing the positive changes and
advancements that we’ve been able to realize
together for the Institute, the profession and
Hong Kong. I’m proud of what we’ve achieved,
especially the projects that have made a difference.”
She thanks everyone who has been
with her on this journey. “There are too many
to name them all but they know who they are.
And I must thank my husband John for the
freedom he gave me to pursue my goals.”
Since she’s realized the goals she set upon
becoming chief executive, Cheung says it’s
time for her to leave the Institute with the
good memories. She says she’ll take a “gap
year” to find out where her next journey will
take her. “I am grateful for the past journey
and happy to be embarking on a new one.”
June 2012 25

Accounting and law
THE
ODD
COUPLE
Accountants and lawyers
are getting together on
multidisciplinary projects
and in multidisciplinary firms.
George W. Russell reports on
how they’re getting along
Illustrations by Tree Tree Tes
26 June 2012

Are accountants and lawyers a
marriage made in heaven or hell? It’s a metaphorical
union that will raise a smile from
those in both professions, but one that may
soon be put to the test in England and Wales,
where legislative changes mean the two professions
might start practising together in
multidisciplinary firms.
Before the Legal Services Act 2007 came
into effect in October 2011, lawyers there
could only practise law as sole traders (solicitors
or barristers), partners in firms, or an
employee providing legal services to an employer.
Now, they are able to practise in socalled
alternative business structures, which
can add non-law services – such as accounting
– to their practice and have non-lawyers
in professional, management or ownership
roles. It opens up the possibility of British
professional service super firms.
The change has led PricewaterhouseCoopers
in the United Kingdom to explore fully
meshing PwC Legal with its accounting unit.
On the other side of the coin, Irwin Mitchell,
a London law firm, announced in January
that it had hired Glyn Barker, a former PwC
vice chairman, as its new chairman, signalling
a push into accounting services.
A survey released in February by London
accounting firm Smith & Williamson showed
the trend is speeding up. The firm surveyed
126 of the top 250 law firms in England and
Wales and found that one third were interested
in merging with a non-law practice in
the next two years. “We could see a number
June 2012 27

Accounting and law
28 June 2012
of mergers… with their equivalents from the
surveying or accounting fields,” says Giles
Murphy, a professional practice partner at
Smith & Williamson.
Super firms
Multidisciplinary firms are not new. In Germany,
multidisciplinary firms have provided
law and accounting services since
the 1940s. Most provinces in Canada
have allowed multidisciplinary practices
progressively since the late 1990s,
although they remain under the control
of lawyers. South African lawyers and
accountants voted in favour of allowing
multidisciplinary practices a decade
ago, and several professional firms,
such as Germany’s Rödl & Partner, have
had Johannesburg offices since 2008.
More jurisdictions are yielding to the
trend. The legislative changes occurring in
England and Wales are being echoed across
the sea in Ireland, where the similar Legal
Services Regulation Bill is expected to pass a
parliamentary vote this year. And in Australia,
where multidisciplinary practices have
been permitted since the Legal Profession
Act 2004 was passed, accounting firms are
bolstering their legal capabilities at the expense
of law firms.
“It has clearly become a growth area for
the Big Four,” says Michael Bersten, head of
the tax risk practice at PwC in Sydney.
Last year, KPMG in Sydney introduced
its Australian tax dispute service, hiring a
well-known barrister, Jeremy Geale, to lead
it. This year it appointed Matthew Stutsel, a
partner from the Freehills law firm, to a senior
tax role, while Ernst & Young hired Sue
Williamson, a partner with law firm Clayton
Utz, to head its tax team in Melbourne.
The changes have already had startling
results: accounting firms, not law practices,
represented a number of companies, including
Australian airline Qantas and Italian eyewear
maker Luxottica, in recent court victo-

But it’s the
safest way
ries against the Australian Tax Office.
“Over the next few years, I believe we will
see the Big Four accounting firms much more
prominently involved in the legal marketplace,”
says Richard Susskind, professor of
law at the University of Strathclyde in Scotland
and author of The End of Lawyers? published
by Oxford University Press.
Susskind says lawyers have stood by idly
while accountants have taken the initiative
and ramped up their services to clients.
“I stand by the view that, if law firms do not
modernize, then accounting firms will capitalize
on the market opportunities,” he says.
“Clients are looking for better, cheaper, more
imaginative legal service providers.”
Hong Kong
In Hong Kong, the rise of multidisciplinary
practices has been hampered by a legal restriction.
Hong Kong legislation prohibits
solicitors from sharing profits with those not
qualified in law.
As a result, Hong Kong lawyers remain
cautious about multidisciplinary practices,
but have noted that the city’s law firms may
be getting left behind by accounting firms.
“The question now is whether Hong Kong
is going to sit back and relax while multidisciplinary
practices are all the rage elsewhere,”
former Hong Kong Law Society President
Huen Wong wrote recently. “Accountants
[have] been actively stretching beyond
their traditional scope of accounting and
auditing services to cover a diversified
range of consultancy work including tax,
mergers and acquisitions, business recovery,
capital markets, risk controls, visa solutions
and human resources.”
Despite the legislative handicap, Hong
Kong lawyers and accountants already work
together in myriad ways and say it’s a beneficial
relationship. “CPA firms and law firms
have been working closely with and cross
referring clients to each other,” says Frances
Chan, a Hong Kong Institute of CPAs
June 2012 29

Accounting and law
member and a director of KCS, which provides
corporate secretarial services. “It is a
good thing to consider things from both legal
and accounting perspectives before giving
advice to clients.”
PwC Legal, the most prominent Big Four
law services arm globally, doesn’t operate in
Hong Kong. “Our firm does not provide legal
services either through its own members or
in conjunction with an external law firm,”
says a PwC spokesman, although its website
offers solutions to a range of legal matters –
such as employment and immigration law
and corporate secretarial services – in Hong
Kong and China.
Accounting-law tie-ups don’t have a happy
history in Hong Kong. Kwok & Yih was the
last law firm to join Andersen Legal in 2001,
months before its demise along with the rest
of Arthur Andersen’s empire. “I’m personally
in favour of multidisciplinary firms,’’ says
Kwok & Yih cofounder Larry Kwok, now China
managing partner of King & Wood Mallesons,
a large law firm.
Heaven or hell?
Some in the field have pondered whether
someday we might see a full global merger between
a Big Four accounting firm and an international
law firm. “There are a number of
30 June 2012
challenges to that happening and one of them
is conflicts of interest,” says Jeremy Black, a
partner in Deloitte’s professional practices
group in London. “I think you would get into
a position where you were precluded from
acting for quite a large number of large companies
because either you were doing legal
work for them or doing audit work,” he adds.
“That would make life difficult.”
Accountants and lawyers don’t necessarily
get along under one roof, experts say.
“Historically, integration of accounting and
law haven’t always been successful, largely
because of the fact that the professions have
a different cultural and behavioural heritage,”
says David McCleery, a member of the
Institute of Chartered Accountants in Australia
and executive director of MCP Group in
Melbourne, a multidisciplinary firm. “I find
that ethical calls in accounting can be more
subjective,” he explains. “The law in many respects
is very clear on a number of processes
and policies surrounding proper conduct.”
McCleery adds the cultural divide can
be bridged, however. “I do believe that they
can exist in harmony,” he concludes. Indeed,
there are some good skill transfers that can
arise from working closely together, says
McCleery, in fields such as tax. “Lawyers are
often concerned with the protection of assets
as a priority while accountants may focus on
tax effectiveness,” he says.
Corporate restructuring and insolvency
are other areas for cross fertilization. “CPAs
are often the first port of call in respect of
matters such as restructuring but might need
input from lawyers with regard to legal issues,”
notes Yeeling Wan, a solicitor with Stephenson
Harwood and an Institute member.
Compliance can benefit from both law
and accounting expertise, says Institute
member Jenny Fung, executive director of
global compliance at Goldman Sachs, who is
both an accountant and lawyer.
Accounting and law cross over in the corporate
secretarial field too, says Chan at KCS,
which was formed from the merger of the
corporate services units of Grant Thornton
and KPMG.
Meanwhile, legal accounting – accountants
applying their corporate financing and
business assurance skills to a law firm itself –
is emerging as a specialized field. “A qualified
accountant can share in a law firm… the
understanding of the financial structure, financial
management and financial controls
required in the firm,” says Des Murray, finance
director of the Dublin law firm Mason
Hayes & Curran and a member of Chartered
Accountants Ireland.

Those who advocate for
multidisciplinary practices
say client service is the
end goal and overrides
any differences between
lawyers’ and accountants’
viewpoints.
Dual identity
Many Institute members hold both accounting
and law qualifications, including Fung
and Wan. Wan also holds the Institute’s specialist
qualification in insolvency.
“I think both qualifications equipped me
with more well-rounded knowledge and
skills, which add value to my personal and
career development,” Fung says. “The accounting
qualification enables me to interpret
financial implications while the law
qualification enables me to understand the
underlying legal principles and interpretation,”
she says.
Institute member Bo Tse, vice president
of finance at IC Intracom Trading in Shanghai,
says his double qualification gave him
business sense and analytical thinking. “I
can give a legal consideration to all related
aspects of the manufacturing and exportimport
businesses.”
Those who advocate for multidisciplinary
practices say client service is the end goal and
overrides any differences between lawyers’
and accountants’ viewpoints. “Identification
of potential issues is of real value to a client,”
says McCleery. “And on many issues the client
does not see the line between lawyer, accountant
or general adviser. They just want
the right advice.”
January June 2012 31

Success ingredient
Mary Au, CFO, WWF
Giving
nature
Mary Au, CFO of the WWF in
Hong Kong, explains to George
W. Russell her decision to move
from corporate life to the uncertain
world of nonprofit organizations
Photography by Kees Metselaar
Mary Au
grew up in a world of compassion. Her father
was a doctor, treating the ill and disabled.
Her mother was a nurse. Even the family pets
32 June 2012
were somehow imbued with a sense of giving:
“Our dog used to leave food for the cat,”
she recalls with a chuckle.
Today, Au combines her job as chief financial
officer of an environmental charity, the
WWF in Hong Kong, with a part time pursuit
as a counsellor to the emotionally troubled.
Au had a scientific mind as a child. Even
watching her mother boil water for tea set
her thinking about how to use energy more
efficiently. “I was always looking for faster
and easier ways,” she says.
Not all her thoughts were rewarded:
teachers would scold her for her mental calculations,
which they dismissed as daydreaming.
Au eventually settled down into a mathematics
stream that led to her present career.
“In form five I did some commercial courses,”
she recalls. “That was my first experience of
the commercial field, and I wanted to work
with people.”
She graduated from Hong Kong Polytechnic
University with an accounting degree and
emerged as an accountant after briefly think-

ing about following her father into medicine.
“When I was young I was thinking about being
a doctor but was concerned by the transience
of relationships. You might have a patient
but he comes in and he goes again,” she
says. “In the commercial field you have a lot
more lasting interactions.”
Office jobs
Initially, Au’s career followed a familiar pattern.
“I moved to Ernst & Young as an audit
trainee.” There she completed her training as
a CPA, before she moved to an E&Y client as
a financial controller after deciding the commercial
field was for her. “Being an accountant
is not just about looking at the numbers
but making use of those numbers,” she says.
Meanwhile, she pursued a master’s in business
administration, graduating from the
Chinese University of Hong Kong.
Au – in many ways still the same curious
girl she had been – kept her insatiable desire
to acquire more knowledge. She completed
a post-graduate degree in Chinese law at
Tsinghua University in Beijing, a master’s
in information technology at Curtin University
and a doctorate in accounting from
Polytechnic University. Finally, in 2009, Au
obtained a master’s of social science in counselling
from the University of Hong Kong.
She stayed in the private sector for more
than decade, working with several companies
in manufacturing, trading, pharmaceuticals
and logistics. “My hours at Hutchison Ports
were 8:30 a.m. to 3 a.m.,” she remembers.
In her last commercial role, Au was finan-
June 2012 33

???????????
Success ingredient
“Hong Kong is the second
largest consumer of seafood
in Asia. We need to eat in
such a way that you’re also
doing something good for
your environment.”
cial controller at Schmidt Electronics Group
for six years until 2010. During that time she
became aware of the WWF through its promotion
of Earth Hour, an annual event during
which people are encouraged to turn off their
lights and other electrical appliances.
Au was also familiar with the WWF’s tours
to the Mai Po wetlands of the New Territories,
a popular weekend destination and a haven
for migratory birds, unusual insects and fat
gei wai shrimp.
It was during her counselling course at the
University of Hong Kong that she reached a
personal epiphany that it was important for
her “body, mind and spirit to be in harmony.”
From there it was a short leap to appreciating
the harmony of nature. “After working
in the commercial field for many years, I
decided to make a change.” When she heard
about the WWF posting, it became an obvious
choice. “It tied in with what I believe.”
Back to nature
Au acknowledges that friends, colleagues
and family questioned whether she knew
what she was doing. “They said, why not stay
in a commercial position?”
But her mind was made up. “They ought to
know me,” she says. “They only need to look
at my pastime of working as a counsellor and
providing emotional help to people.”
Au moves easily between working with
34 June 2012
people, animals and ideas. “My job has many
aspects,” she says. “One of which is process
reengineering – making use of available resources
to get the job done.”
Shifting from profit to nonprofit was not
without its adjustments, however. “I would
consider that with working in nonprofit,
there’s a big difference when it comes to implementing
policy,” she says. “At a for-profit
company you generally use a top-down approach.
Employees need to obey and there’s
no collection of comments.”
The WWF has a different approach. “Here
we always try to get consensus among colleagues.
As CFO, it is important to get people’s
consent – it is better than if you try to impose.
You need more lobbying time but it’s better to
see other people’s point of view.”
Despite the consensual approach, Au says
the WWF staff has a serious, committed approach
to their work. “No, we don’t give ourselves
100 days of annual leave,” she says.
Au says her commercial background is
a big help when it comes to negotiation with
companies about donations or cooperation.
She adds that working with companies includes
a deeper involvement than merely extracting
donations.
“Look at our programme for offices in
Hong Kong,” she suggests. “We give them
some guidelines on how to operate in such a
way that it’s a win-win situation. They help
save the environment by reducing energy usage
but they also save money.”
Au says there has been a sea change when
it comes to Hong Kong companies being more
environmentally aware. “Companies are much
more positive on the environment,” she says.
“Many companies in Hong Kong are our supporters
and our donors and are very keen to
promote corporate social responsibility.”
While corporate funding and cooperation
are important, the WWF also tries to engage
with individuals, communities, officials and
other nongovernment organizations. “We try
to do something to pass the message of education
and conservation to all our stakeholders,
not just companies.”
One example of this is the WWF’s seafood
conservation programme, a worldwide initiative
against consumption of bluefin tuna
that was localized to include shark fins and
locally endangered species. Various messages
were composed for the fishing industry,
wholesalers, restaurants and diners. “Hong
Kong is the second largest consumer of seafood
in Asia,” says Au. “We need to eat in such
a way that you’re also doing something good
for your environment.”
More than money
Like every organization, the WWF was hit by
the global downturn crisis and is trying to get
its finances back on track. “When the finan-

A PLUS
June 2012 35

Success ingredient
cial crisis came, people became less likely to
donate,” says Au.
Indeed, fundraising was already a challenging
task because many people are sceptical
about giving money to charities, she adds.
Au says she uses her CPA skills to create transparency
and set standards for the WWF’s corporate
governance. “We try to provide transparency
to our donors,” she says, “and we try
to provide confidence to our donors through
our corporate social responsibility and donors’
code of practice.”
Asked how donors can be sure funds are going
to the right targets, Au points to the WWF’s
36 June 2012
long record with corporate sponsors. “Many
companies have long term relationships [with
the WWF] and have a strong trust in us.”
Corporate sponsors help plan projects
and get regular updates. “With our corporate
membership programmes, we offer talks and
other help so they can organize their staff to
be our volunteers,” Au says. “That way, donors
know what we are doing.”
Au also draws on her long experience of
cost control to make sure money is well spent.
“We’re very cost conscious,” she says of the
WWF. “We can still get the message across
but minimize the costs. For every project we
“In a commercial
position you’re
focused on profit and
so on, but working
here... you are doing
your job and also
doing something for
the environment and
the planet.”
need to have a budget and make sure its status
is always in line.”
Au has no regrets about her move to the
WWF. “It’s great,” she says. “In a commercial
position you’re focused on profit and so on, but
working here it’s a nonprofit organization and
you are doing your job and also doing something
for the environment and the planet.”
She is also connected to her coworkers in
a different way. She enthuses, “Last Saturday
we had Earth Hour and I noticed my colleagues’
commitment. I’m very touched. It’s
something not easily found in a commercial
environment.”

Public speaking
38 June 2012
TOUGH
CROWD
New Hong Kong stock exchange rules mean auditors of
listed companies must attend AGMs to answer questions,
which might be an unnerving ordeal for the inexperienced.
Helen Dalley asks CPAs who know the ropes for advice
Illustrations by Tree Tree Tes

While a brilliant
public speech
has the power to
dazzle your audience,
an ineffectual
one will leave
your crowd bored or,
worse, confused by your message.
Even if you are well prepared, an attack
of the nerves can ruin your chances of successful
delivery by leaving you tongue-tied,
while PowerPoint and other technological
aids may serve to trip you up.
It’s important to remember, however,
that you are not alone if you have a fear of
public speaking. Even the most confident
people can become nerve-racked at the
thought of addressing a crowd, and many
public figures from Tiger Woods to Julia
Roberts have confessed to a fear of public
speaking. Those with an intense fear of pub-
lic speaking suffer from glossophobia and
avoid any event where they are likely to be
the focus of attention.
But like it or not, most of us will have to
address an audience at some point and that
point has come for auditors of publicly listed
companies in Hong Kong, because new
stock exchange rules dictate that they must
attend annual general meetings held on or
after 1 April 2012 to talk to shareholders.
AGMs in Hong Kong can be unscripted
and even rowdy affairs, as anyone who’s witnessed
corporate governance activists such
as David Webb badger Bank of East Asia
chief executive David Li or PCCW chairman
Richard Li can testify.
Webb welcomes the presence of auditors
at AGMs. “They are responsible for signing
off on the accounts and of course they should
be there to answer shareholders’ questions,”
he tells A Plus.
June 2012 39

Public speaking
Experienced public speakers say there
are frightening scenarios when speaking to
an audience, but following some straightforward
guidelines can help you put in a respectable
performance at an AGM or other
speaking engagement.
Practice makes perfect
Daniel Lin, managing partner at Grant
Thornton, a member of the Hong Kong Institute
of CPAs and an editorial adviser to A
Plus, believes you can learn a lot from others
by attending seminars or watching TV, and
adapting the presentation styles and habits of
successful orators into your own repertoire.
“Practice over and over so you don’t fluff
your lines and mentally rehearse what you
are going to say on the day, then visualize
the rundown,” he suggests. “If it’s a speech
40 June 2012
on a technical subject, familiarize yourself
with the topic, and be prepared for tough
questions.”
On the day, he adds, make sure you arrive
early, as this will settle you down. And when
you begin to talk, set the scene by giving the
audience plenty of eye contact. “You’ll lose
them without it,” Lin says.
Lin also believes that fledgling speech
givers shouldn’t be too reliant on audio visual
help such as PowerPoint. “It can be helpful
to break down a difficult topic – just don’t let
it be the main attraction and don’t just repeat
what’s on the PowerPoint presentation. Use
it to communicate key messages and display
charts and graphics instead.”
Lin notes that as most auditors are likely
to speak at an AGM on behalf of a client,
it’s worth remembering that you’re not the
focus of attention; you’re there to support
management as an auditor. “Some clients
will ask you to read the audit report, while
others will just want a few paragraphs. Find
out what they want beforehand and practise
reading it so you are familiar with the topic.”
Engaging the audience
Jim Woods, risk and control solutions leader
for PricewaterhouseCoopers in China and
Hong Kong and an Institute member with
more than 20 years of public speaking experience
– agrees with Lin that speakers shouldn’t
rely on PowerPoint. “Have some high level
notes written down to jog your memory so you
can engage with your audience. This also reduces
your reliance on technology, so if there
is a technical error you can still carry on with
your presentation.”

Woods also advises that those with little
public speaking experience should build up
their skills by starting small, and speaking
on an easy, informal topic. “Make a speech
at a friend’s birthday or leaving party so you
are not under any pressure and know most of
the audience.” This, he says, can help build
your confidence and ensure that you don’t
feel so nervous when you need to make a
professional presentation.
As for pre-speech preparations, Woods
advises that you put yourself in the audience’s
shoes and deliver a speech from their
perspective. He notes that accountants are
frequently overly technical and should try to
speak in layman’s terms instead. “It’s also a
good idea to research your audience – try to
find out their names and job titles before the
event, and speak to them beforehand. Find
out what they’re interested in. Build some
rapport and then you will feel more comfortable
if you can pick out friendly faces in the
crowd when you’re speaking.”
As for the presentation itself, Woods says,
“think of it as a diamond shape. At the top is
the key message, the middle is an elaboration
on that, and the bottom is a wrap-up, a
re-cap of your key messages.”
Even the most captivating public speakers
are likely to lose their audience after
around 20 minutes according to Woods,
who consequently advises it’s better to under-run
than over-run.
“Think about introducing an interactive
element such as a video, or enquire about
the possibility of taking a colleague along
and get them to speak as well. You should
also give the audience some discussion time
“Some clients will
ask you to read the
audit report, while
others will just want
a few paragraphs.
Find out what they
want beforehand
and practise reading
it so you are familiar
with the topic.”
June 2012 41

Public speaking
if possible to make your presentation more
dynamic, so they feel they are not just being
talked at.”
Regular public speaker and author Laurence
H. Lipsher believes his success comes
down to not thinking of himself as an accountant
making a speech but as an actor
giving a performance.
“I don’t prepare a speech; I prepare a
script – and I rehearse the hell out of it,” says
Lipsher, who is an Institute member. “The
more one rehearses, the easier it is to get
yourself out of trouble when you screw up,
and all speakers, at some point in their performance,
screw up.”
Lipsher also stresses the need for a physical
presence during a speech. “I also try to be ani-
42 June 2012
mated, using hand gestures, changing voice
intonation, not standing still but walking
around. Cordless microphones are far more
effective than standing solely in front of the
podium.”
Think before you speak
Clement Chan, a managing director of BDO
and an Institute vice president, says one big
fear about public speaking is the fear of not
being able to give instant answers to questions
from the audience.
He says a wrong answer is much worse
than a late answer and there is nothing
wrong with saying, “I’ll get back to you on
that.”
Chan also notes that accountants at AGMs
are responding to queries about the audit and
shouldn’t answer any questions relating to
the business and commercial decisions of the
company, which are the responsibility of the
management.
Webb, the governance activist, says
exactly this scenario might crop up with
boards referring awkward questions to the
auditors. “Auditors need to have the courage
to say ‘that’s not my job’ and refer the question
back to the board,” he says.
Most importantly, perhaps, is that you
shouldn’t put too much pressure on yourself:
no one is expecting perfection. As Lin notes,
accountants aren’t renowned public speakers,
and any audience is likely to recognize
this and cut you some slack.

Corporate governance
Auditors’ liability and duty of care
when responding to AGM questions
Nathan Dentice and Veronica To examine possible effects of
changes to the Code on Corporate Governance Practices,
which forms part of the stock exchange Listing Rules
In October 2011, the Hong Kong
stock exchange published various
changes to the Code on Corporate
Governance Practices, which forms
Appendix 14 of Listing Rules. The revised
code came into effect on 1 April. Among
other matters, the revised code requires
a listed issuer to ensure that the issuer’s
external auditors attend annual general
meetings to answer questions about the
conduct of the audit, the preparation and
content of the auditor’s report, accounting
policies and auditor independence. This
changes the previous position under section
141(7) of the Companies Ordinance, in which
auditors were entitled, but not required, to
attend AGMs.
The new requirement to attend and
answer questions at AGMs raises a question
as to whether the revised code might extend
an auditor’s legal duties and liabilities
for negligence and economic loss to the
company’s shareholders as individuals,
in addition to the auditor’s existing duties
towards the company.
The current position under Hong Kong
law is that, generally, auditors only owe a
duty of care to their client, being the company
they are auditing. Nevertheless, a duty of
care to third parties, such as shareholders,
creditors and potential investors, may arise in
exceptional circumstances.
The leading case on the question of an
auditor’s duty of care to third parties is
Caparo Industries plc. v Dickman [1990]
2 AC 605. In that case, Caparo brought an
action against the auditors of an electronics
company, Fidelity, after an accomplished
takeover of Fidelity. Caparo began to buy
shares shortly before Fidelity published its
annual audited accounts to shareholders.
44 June 2012
Caparo then purchased more shares in
reliance on those accounts so as to take over
Fidelity. In its claim against the auditors of
Fidelity, Caparo asserted that the audited
accounts were incorrect and that it would not
have purchased the shares had it known of
Fidelity’s true state of affairs.
The House of Lords determined that, in
general, auditors only owe a duty of care to
shareholders as a body and not to individual
shareholders. They reasoned that the
purpose of audited accounts is to enable the
company’s management and shareholders
to make informed decisions in respect of
the company and not to assist potential
investors in deciding whether or not to
invest in the company. To impose a duty on
the auditors to all such investors would be to
expose them to (in the words of Lord Oliver
of Aylmerton) “a liability wholly indefinite in
the area, duration and amount and would
open up a limitless vista of uninsurable risk
for the professional man.”
As regards existing shareholders, the
House of Lords held that, while existing
shareholders are entitled to rely on the
audited accounts to protect their collective
interest in the proper management of the
company, they are not entitled to rely on
the auditor’s statutory report as a basis for
making their own investment decisions.
The House of Lords then adopted a
threefold test for the purpose of determining
whether the auditors nevertheless owed
a duty of care to Caparo in the particular
circumstances of the case. First, the
damage must be reasonably foreseeable
as a consequence of the auditor’s conduct.
Second, there must be a close relationship
of proximity between the parties such as
to justify the imposition of a duty of care.
Proximity for a duty of care would arise
where (i) advice is required for a purpose
and the auditor was fully aware of the nature
of the transaction that the advisee had in
contemplation; (ii) the auditor knew that
the advice would be communicated to the
advisee; (iii) the auditor knew that it was
very likely that the advisee would rely on that
advice in deciding whether to engage in the
transaction; and (iv) the advice was so acted
upon by the advisee to his detriment. Third,
the situation must be such that it is fair, just
and reasonable that the law should impose
a duty upon the auditor. After examining the
circumstances of the case, the House of Lords
determined that no duty of care was owed to
Caparo by the auditors of Fidelity.
The decision in Caparo Industries plc.v
Dickman represented a deliberate effort
by the House of Lords to restrict the extent
to which auditors might be liable to third
parties. Underpinning the decision were
important policy considerations, including
a recognition that, if auditors routinely
owed duties to all those parties who might
rely upon audited accounts, the potential
liabilities in respect of audit work would
be enormous and unquantifiable, placing a
heavy burden on auditors and potentially
resulting in significant increases in the costs
of audit services.
While the decision in Caparo Industries
plc. v Dickman represents the leading case
on the question of an auditor’s duty of care
to third parties, there exist two other legal
approaches that the courts might adopt for
the purposes of deciding whether to impose
a duty of care in a particular case. One is the
“assumption of responsibility” approach,
which arises from Hedley Byrne & Co. Ltd. v
Heller & Partners Ltd. [1964] AC 465. In this

case, the House of Lords ruled that a person
may be liable to another party in respect of
statements that they make or advice that they
give if they voluntarily assume responsibility
to that other party, and the other party relies
upon their judgment or skill. Lightman J.
in the case of Anthony v Wright [1995] BCC
768 summarized this in the context of audit
reports as follows:
“The law is well established that auditors
do not in respect of their audits owe a duty
of care to anyone other than the company
itself save in exceptional circumstances
where a special duty has been treated
as assumed to a third party… A special
relationship is required and in particular
intention (actual or inferred) on the part of
the auditors that the third party shall rely,
and reliance by the third party, on the audit,
before a claim in negligence against the
auditor can be maintained.”
The other is the incremental approach
suggested by Brennan J. in his judgment in
the High Court of Australia in Sutherland Shire
Council v Heyman [1984] 157 CLR 424, being
that the law should develop new categories
of negligence incrementally and by analogy
with established categories. In the case
of James McNaughton Paper Group Ltd. v
Hicks Anderson & Co. [1991] 2 QB 113, the
court identified six factors to be considered
when deciding whether to impose a duty
of care in relation to statements or advice.
In particular, the court will consider (i) the
purpose for which the statement was made;
(ii) the purpose for which the statement
was communicated; (iii) the relationship
between the adviser, the advisee and any
relevant third party; (iv) the size of any class
to which the advisee belongs; (v) the state
of knowledge of the adviser; and (vi) the
reliance on the statement by the advisee.
Each of the three approaches discussed
above were reviewed in the context of
audit negligence in the case Bank of Credit
Commercial International (Overseas) Ltd. v
Price Waterhouse (No. 2) [1998] PNLR 564.
In that case, Sir Brian Neill concluded that the
court should apply all three tests, and if the
facts were properly analysed, it was likely
that they would all lead to the same result.
Against the background set out above,
it would appear that, to the extent the
revised code introduced by the stock
exchange requires auditors to attend
AGMs and answer questions, the revised
code will not (in and of itself) alter the
existing principle that, in general, auditors
will not owe a duty of care to individual
shareholders. Nevertheless, by putting
auditors in direct discussions with individual
shareholders, there is now greater scope
A PLUS
for circumstances to arise in which a duty
of care to individual shareholders might be
imposed in a particular case.
Auditors should therefore be cognizant of
the legal position when answering questions
and should avoid conduct that might bring
them within the exceptional circumstances
described by the approaches discussed.
An effective precaution that auditors
may take to minimize the risk of a duty
of care to individual shareholders arising
is for auditors to circulate or read a short
disclaimer prior to answering questions,
to the effect that, notwithstanding any
answers they give or statements they make
at the AGM, they shall not have any liability,
responsibility or duty of care towards
individual shareholders or third parties.
This is likely to be sufficient to put
the auditors outside the exceptional
circumstances described by the legal
approaches.
Nathan P.W. Dentice is a partner and Veronica Siwang
To is an associate solicitor in the Hong Kong office of Reed
Smith Richards Butler, an international law firm. This article
is intended for general information purposes and does not
constitute specific legal advice. Reed Smith Richards Butler
shall not have any legal liability in respect of the matters
discussed. Where auditors have questions in relation to their
legal duties, it is recommended they seek specific legal advice.
June 2012 45

115
TechWatch
The latest standards and
technical developments
Members’ handbook
Handbook updates
Update no. 114 relates to the issuance
of amendments to HKFRS 1 First-time
Adoption of Hong Kong Financial
Reporting Standards – Government Loans.
The amendments add an exception to
the retrospective application of HKFRSs
to require that first-time adopters apply
the requirements in HKFRS 9 Financial
Instruments and HKAS 20 Accounting
for Government Grants and Disclosure
of Government Assistance prospectively
to government loans existing at the date
of transition to HKFRSs. This means that
first-time adopters shall not recognize the
corresponding benefit of the government
loan at a below-market rate of interest
as a government grant. However, entities
may choose to apply the requirements of
HKFRS 9 and HKAS 20 to government loans
retrospectively if the information needed
to do so had been obtained at the time of
initially accounting for that loan. These
amendments give first-time adopters the
same relief as existing preparers of HKFRS
financial statements. Entities are required to
apply these amendments for annual periods
beginning on or after 1 January 2013. Earlier
application is permitted.
Update no. 115 relates to the changes to
Statement 1.500 Continuing Professional
Development to reflect (1) the mutual
recognition agreement between the
institutes of CPAs in Hong Kong and the
United States and its recognition of each
other’s CPD requirements for maintaining
the CPA designation of the other body; and
(2) the resultant change of CPD recognition
away from membership of the American
Institute of Certified Public Accountants.
The agreement does not have retrospective
46 June 2012
effect and the mutual CPD recognition is
effective from the CPD reporting period
beginning on 1 December 2011 for holders
of an active licence issued by a U.S. state
board of accountancy who are not practising
certificate holders. AICPA members cannot
opt for recognition of AICPA’s CPD by the
Institute from 1 December 2011.
Update no. 116 contains amendments
to the standards, basis for conclusions
and implementation guidance which were
previously set out in the appendix to the
standards as they were not yet effective. The
Institute has incorporated the amendments
applicable on 1 January 2012 in the affected
standards, basis for conclusions and
implementation guidance, for greater clarity.
Financial reporting
Institute comments on HKEx
consultation paper
The Institute made a submission to Hong
Kong Exchanges and Clearing’s consultation
paper on the environmental, social and
governance reporting guide. This recognizes
the increasing importance of these issues to
company valuations and of the development
and implementation of areas of corporate
reporting on these issues that is occurring
globally.
Hong Kong will benefit from the
introduction of a consistent approach to
environmental, social and governance
reporting which is practical for low-cap
companies. The stock exchange proposals
provide a welcome starting point. There
are, however, a few areas that the Institute
believes need to be further considered in
formulating final guidance.
The guide is mainly a list of key
performance indicators. There is risk that
this will lead to a “tick box” response
where companies provide data without
identifying their key environmental, social
and governance issues.
In preparing its environmental, social
and governance guide the stock exchange
has taken items from different international
standards and the mixture of standards
adds complexity and inconsistency.
The Institute would encourage the stock
exchange to make its environmental, social
and governance guide a subset of the Global
Reporting Initiative’s framework for two
reasons: it is the only one of the international
standards quoted by the stock exchange
which provides a comprehensive set of key
performance indicator definitions, and it
has become the de facto global standard
for environmental, social and governance
reporting with many more companies
following it than any other system.
If the stock exchange’s reporting
guideline is a subset of the Global Reporting
Initiative then it is easier for companies
using it to graduate to reporting to a Global
Reporting Initiative application level
and thus gain greater credibility for their
reporting.
The stock exchange leaves it for companies
to define each key performance indicator
rather than providing supporting information.
This makes the environmental, social and
governance guide more difficult to implement
than adopting a subset of Global Reporting
Initiative where such guidance is provided.
The stock exchange should apply its
successful approach to internal control and
risk management to environmental, social
and governance reporting. It should ask for
statements in annual reports that “the board
considers the company’s most significant
environmental, social and governance issues
to be [ ].” The statement should explain the
process the board followed to arrive at this

conclusion and discuss the action that is
being taken on the issues.
The stock exchange does not recommend
companies to seek independent assurance
on the environmental, social and governance
information they report given the cost of
such assurance and the absence of other
stock exchanges encouraging assurance. It is
difficult to see why independent assurance
should not be a best practice.
Audit and assurance
AATB2 Guidance to the Auditor when
Responding to Questions at an AGM
As reported in the May issue of TechWatch
on the Auditing and Assurance Technical
Bulletin 2 guidance to auditors on responding
to questions at an annual general meeting
of a company listed on the Hong Kong stock
exchange, it should be further noted that
in general, the auditor does not owe a duty
of care to individual shareholders or third
parties when carrying out the audit work
save in exceptional circumstances (for
example, where damage is foreseeable and
there is a special relationship of proximity
between the auditor and the individual
shareholder or third party such that it is
fair, just and reasonable for the law to
impose a duty of care; or where the auditor
has voluntarily assumed responsibility to
the individual shareholder or third party
concerned).
If the auditor believes such exceptional
circumstances will arise, the auditor
should be cautious in answering questions
raised at AGMs and seek legal advice
when in doubt. The auditor may consider
reading or circulating a short disclaimer
before answering questions to the effect
that, notwithstanding any answers he or
she gives or statements he or she makes,
the auditor shall not have any liability,
responsibility or duty of care towards any
individual shareholders or third parties.
Professional accountants
in business
Comments to the Committee of
Sponsoring Organizations of the
Treadway Commission
The professional accountants in business
committee of the International Federation of
Accountants submitted a comment letter to
the Committee of Sponsoring Organizations
of the Treadway Commission in the United
States, which suggests broadening the
scope of the framework and the definition
of internal control as well as including a
strategic objective and an objective setting
component.
Proposed changes to the code of ethics
The International Federation of
Accountants’ professional accountants
in business committee provided the
International Ethics Standards Board for
Accountants with its comment on the Code
of Ethics, including expansion of some of
the definitions and parameters to better
cover the work and domain of professional
accountants in business. It also suggested
how professional accountants in business
can further an ethics-based culture in
their organizations, including developing
a code of conduct in line with the relevant
provisions with the code.
Corporate finance
Hong Kong stock exchange’s plans for
renminbi futures
Hong Kong Exchanges and Clearing has
recently announced plans to introduce
renminbi currency futures in the third
quarter of 2012, subject to regulatory
approval and market readiness. The aim
is to provide a way for investors to hedge
renminbi exposures. The futures contract
requires delivery of U.S. dollars by the seller
and payment of the final settlement value in
renminbi by the buyer at maturity.
Legislation
A PLUS
Legislation on price sensitive information
disclosure passed
After extensive deliberation by the Bills
Committee, the Securities and Futures
(Amendment) Bill 2011, which was
introduced to the Legislative Council in
mid-2011 to give statutory backing to
price-sensitive information disclosure
requirements, was passed on 25 April.
The Institute issued two submissions
on the bill. See TechWatch no. 109 (item
20) and no. 111 (item 20), respectively, for
further details. It is noted that a number
of the Institute’s recommendations, in
terms of clearer guidance on dealing
with media reports, market rumours and
analysts reports, the interpretation of what
constitutes “material” or “significant,” the
scope of “officer” and officers’ liabilities, will
be addressed in the SFC guidelines on the
application of the legislation.
Please refer to the full version of TechWatch 115,
available as a PDF on the Institute’s website:
www.hkicpa.org.hk
June 2012 47

Tech Q&A
The Institute has issued Ethics Circular 1 Guidance for Small and Medium
Practitioners on the Code of Ethics for Professional Accountants, in December
2011, which contains guidance on determining public interest entities. Could you
provide details of that guidance?
Ethics Circular 1 was issued by the
Institute to provide guidance to
assist small- and medium-sized
practitioners on adopting the Code of
Ethics for Professional Accountants on the
following areas of nonassurance services
and other topical issues without modifying
the requirements as set out in the code:
• Determination of public interest entities;
• Provision of company secretarial services
to audit clients;
• Provision of accounting services,
preparing accounting records and
financial statements for audit clients; and
• Provision of taxation services for audit
clients.
Ethics Circular 1 does not constitute an
ethics standard in itself.
Public interest entities, for the purpose
of auditor independence, is defined in
paragraph 290.25 of the code to include:
• all listed entities; and
• any entity (a) defined by regulation or
legislation as a public interest entity
or (b) for which the audit is required
by regulation or legislation to be
conducted in compliance with the same
independence requirements that apply
to the audit of listed entities. Any relevant
regulator, including an audit regulator,
48 June 2012
may promulgate such a regulation.
Paragraph 290.26 of the code further
requires the firms to determine whether to
treat additional entities, or certain categories
of entities, as public interest entities because
they have a large number and wide range
of stakeholders. Factors to be considered
include:
• the nature of the business, such as the
holding of assets in a fiduciary capacity
for a large number of stakeholders.
Examples may include financial
institutions, such as banks and insurance
companies, and pension funds;
• size; and
• number of employees.
It is also stated in footnote 1b of the code
that under Hong Kong legislation, there is
no definition of public interest entities or
requirement for the audit of an entity to be
conducted with the same independence
requirements applicable to the audit of listed
entities. Therefore auditors have to review
their own client base and determine whether
any clients, other than listed entities, should
be treated as public interest entities.
Some practitioners have expressed
their concerns on the practical application
of paragraph 290.26 of the code. While
there are some broad guiding principles
within paragraph 290.26, there are
no mandated criteria for identifying
public interest entities. It is possible for
different practitioners to make different
determinations based on different facts and
circumstances. However, it is important for
practitioners to document and to be able to
explain the thought process that they have
gone through and judgments involved in
considering whether any of their clients are
public interest entities.
Ethics Circular 1 clarifies the following

common concerns in determining public
interest entities:
Nonlisted companies
A nonlisted company is not a public interest
entity unless the firm considers it to be one
based on professional judgment in accordance
with paragraph 290.26 of the code.
Securities firms
Neither the code nor Hong Kong legislation
contains a requirement to include securities
firms to be public interest entities. Therefore,
a securities firm is not a public interest entity
unless the firm considers it to be a one based
on professional judgment in accordance with
paragraph 290.26 of the code.
Subsidiary of a listed entity
Paragraph 290.25(b) of the code does
not contain an explicit requirement for
a subsidiary of a listed entity to itself be
regarded as a public interest entity. Auditors
should therefore exercise their professional
judgment in considering whether to treat
subsidiaries of listed companies as public
interest entities as they would do with any of
their clients under paragraph 290.26 of the
code. If a subsidiary of a listed entity is not
a public interest entity, the requirements in
the code relating to public interest entities
(including the mandatory key audit partner
rotation requirement under paragraphs
290.151-155) are not applicable to the auditor
in relation to the audit of that subsidiary,
subject to any specific requirements
imposed by the group or group auditor.
The group auditor would of course need to
observe the requirements specific to public
interest entities for the purpose of auditing
the group’s consolidated financial statements
and may impose specific requirements on
the auditors of individual subsidiaries for the
purpose of compliance with the code.
Establishing in-house criteria to determine
public interest entities
Paragraph 290.26 of the code requires
the firm to determine whether to treat
additional entities, or categories of entities,
as public interest entities on the basis that
they have a large number and wide range
of stakeholders. While each case should
be considered based on its own merits,
practice units should consider establishing
appropriate in-house criteria in order to
ensure consistency in determining public
interest entities under paragraph 290.26 of
the code.
Send your questions and comments to
commentletters@hkicpa.org.hk. The standard setting
team will answer these questions in accordance
with its policy, posted on the Institute's website.
June 2012 49

Events
Your guide to courses, workshops and member activities
Auditing and assurance
How to do an even better job on
auditing through a closer look
at the implementation of HKSAs
is a technical update evening that discusses
standards that have particular application
issues.
CPD hours: 1.5
Languages: Cantonese and English
Date: 5 June
Time: 7:00 - 8:30 p.m.
Business finance
Corporate liquidity and bank
lending after Basel III takes a look
at how the new regulation, which will be
fully implemented between 2013 and 2018,
might discourage commercial banks from
providing corporate loans. The seminar
will discuss corporate funding and liquidity,
and the role of CPA firms in the credit rating
process.
CPD hours: 1.5
Language: English
Date: 6 June
Time: 6:30 - 8:00 p.m.
Understanding bank facility
letters and term sheets will
introduce basic credit terms, amendments
and waivers, representations and warranties
and covenants.
CPD hours: 3.5
Language: Cantonese
Date: 9 June
Time: 9:30 a.m. - 1:00 p.m.
Financial accounting
and reporting
Financial reporting seminar on
business valuation looks at valuing
an asset and purchase price allocation in
relation to HKFRS 3.
54 June 2012
CPD hours: 1.5
Language: English
Date: 7 June
Time: 7:00 - 8:30 p.m.
Quality assurance forum –
upholding the quality and
reputation of the audit
profession in Hong Kong explains
the objectives and outcomes of the Institute’s
practice review and professional standards
monitoring programmes, and practical ways
in which practitioners and audit staff can
address review findings.
CPD hours: 1.5
Language: English
Date: 12 June
Time: 6:30 - 8:00 p.m.
Management accounting
Behavioural framework for
investment decisions looks at
finance theories that are based on the
assumption that investors are rational decision
makers and explores how psychological
factors and misconceptions of risk and return
weigh on investment decisions.
CPD hours: 3
Language: English
Date: 11 June
Time: 6:30 - 9:30 p.m.
Personal and
interpersonal skills
How to understand and
resolve conflicts will help
participants prioritize the disagreements
they encounter at work and develop
resolution skills.
CPD hours: 3
Language: English
Date: 6 June
Time: 6:30 – 9:30 p.m.
Wellbeing and stress
management in the workplace
is split into two parts. The information
seminar provides information about stress,
its effect on performance and how it can be
managed. The interactive workshop helps
members identify the causes of stress at
work and at home and introduces group
exercises that identify practical responses.
Information seminar
CPD hour: 1
Language: English
Date: 8 June
Time: 7:00 - 8:00 p.m.
Interactive workshop
CPD hours: 3
Language: Cantonese
Dates: 16, 20 June
Times: 9:30 a.m. - 12:30 p.m. (16 June),
6:30 - 9:30 p.m. (20 June)
Write, publish and market your
books worldwide will explain to
members how to discover their inner author.
Topics covered include spotting a niche,
finding the courage and inspiration to keep
going and negotiating a publishing contract.
The speaker is an author of three books
successfully published worldwide.
CPD hours: 3
Language: English
Date: 20 June
Time: 6:30 - 9:30 p.m.
Visit the Institute’s website for other programmes and
to enrol and pay online: www.hkicpa.org.hk

Buzzing Bangkok
The Chao Phraya has been described
as Asia’s most underappreciated
river. Once virtually
inaccessible behind warehouses,
military bases and royal residences, it has
been opened up more to the average Bangkok
resident.
Hotels, spas and restaurants are springing
up along both banks to create a lively riverside
ambience. With a variety of traffic – from
overloaded lighters and busy tugs to party
56 June 2012
Business travel
Thailand’s capital is famed for spicy cuisine and spicier
nightlife, but as Institute member and CFO of Travelzoo Asia
Pacific Honnus Cheung explains, it has a rich cultural heritage
boats and the king’s barge fleet – the Chao
Phraya is cementing its position as Bangkok’s
most vibrant artery.
One stretch has been opened to foot traffic
with a concrete walkway that passes by the
Pak Khlong flower market, an ancient Chinese
temple and the 1913 Santa Cruz church.
For as little as 8 baht – about HK$2 – Bangkok’s
water taxis speed up and down the rushing
river. Well signposted and reliable, they’re
one of the great value tourist jaunts of Asia.
The Khlong Saen Saep public taxi takes in the
Wat Saket temple and the Golden Mount, a giant
temple on an artificial hill overlooking the
old city.
Away from the Chao Phraya’s fast moving
waters, Bangkok remains one of the most exciting
destinations in Asia. Once thought of
as little more than a destination for spicy food
and steamy sex, Bangkok has transformed itself
over the past 10 years to become a proud
sponsor of arts and crafts.

Previous page: Vendors at the Amphawa floating market
This page (from top): The Grand Palace and Wat Phra
Kaew; a water taxi on the Chao Phraya; hotels on the east
bank of the river; a woman cooks at a street noodle stall
PHOTO: GEORGE W. RUSSELL PHOTO: GEORGE W. RUSSELL
PHOTO: GEORGE W. RUSSELL
Royal patronage has helped with developments
such as the Arts of the Kingdom exhibition of royal
treasures in the European-style Ananta Samakhom
Throne Hall, which is part of a project to preserve
the work of traditional Thai artisans.
Bangkok has also undergone a partial modernization
of its transport infrastructure with the construction
of the Skytrain aboveground rail link to
add to its modest but efficient underground system.
Bangkok’s modern commercial core is the area
around Siam Square, centred on its Skytrain station.
Its main thoroughfares – at least for the casual
visitor – include Sukhumvit Road, which is lined
with hotels, restaurants, pubs and nightclubs.
Sukhumvit is studded with soi – alleys branching
off the main road – that include some of the
raunchier areas, such as Soi Cowboy and Nana. Silom
Road is a financial centre by day but includes
the racy Patpong bar area that comes alive after
sunset. Nearby Sathorn Road is best known as the
diplomatic enclave but also includes a range of new
hotels and spas.
Between the river and the central core lies Rattanakosin
Island, the old city and site of the Grand
Palace complex, which includes Vimanmek Palace,
Wat Phra Kaew (home of the 15th century Emerald
Buddha) and other major temples. To its north is the
backpacker district of Khao San Road.
Of course, Bangkok is a popular shopping destination.
Major malls include Central World Plaza,
Siam Discovery Centre and Gaysorn Plaza for
brand names in fashion, computer accessories and
souvenirs. The annual Amazing Thailand Grand
Sale, which kicks off this year on 15 June, offers discounts
across the city’s stores.
Meanwhile, the historic Jim Thompson’s House
celebrates the life of the American art collector and
silk entrepreneur and features an array of clothing
and accessories for sale.
For more traditional shopping, try the Chatuchak
weekend market for food, clothing, antiques and
homewares or floating markets such as touristy
Damnoen Saduak or less well-known Amphawa.
Despite the emergence of celebrity chefs, haute
cuisine and Thai fusion food, Bangkok is still
crowded with tasty street stalls selling an endless
range of local delicacies. Vendors offer an array of
noodles (including paad thai, almost the national
dish), omelettes, meatballs, seafood, vegetables
and red and green Thai curries. There are also significant
pockets of South Asian, African and Middle
Eastern food, thanks to the attraction of Bangkok to
traders and business people the world over.
Where to eat
• Baan Khanitha Traditional Thai dishes
amid art and handicrafts. 36/1 Soi
Sukhumvit 23 (Soi Prasarnmit), Klong
Toey Nuea, Wattana. 2258 4181.
• Patara Gems of Thai cuisine hidden
behind a main street – book ahead. 375
Soi Thonglor 19 Sukhumvit 55, Klong
Tan Nuea, Wattana. 2185-2960.
• Secret Garden Thai fusion with coffee
shop and English tearoom. 17/1 South
Sathorn Road, Sathorn. 2286-2464.
• Sirocco Mediterranean fare, billed as
world’s highest al fresco restaurant.
63/F Lebua at State Tower, Silom Road,
Bangrak. 2624-9999.
• Thang Long Vietnamese cuisine. 82/5
Soi Langsuan, Ploenchit, Patumwan.
2251-3504.
• The Local by Oamthong Fine Thai
food. 32 Soi Sukhumvit 23, Klong Toey
Nuea, Wattana. 2664 0664.
Where to stay
• Anantara Bangkok Sathorn Urban
sanctuary. 36 Narathiwat-Ratchanakarin
Road, Sathorn. 2210-9000.
• Arun Residence Historic Art Nouveau
boutique hotel. 36-38 Soi Pratoo Nok
Yoong, Maharat Road, Rattanakosin
Island. 2221-9158.
• Banyan Tree Bangkok Attentive service
amid luxury. 21/100 South Sathorn
Road, Sathorn. 2679-1200.
• Lebua at State Tower Opulence within
a skyscraper. Lebua at State Tower,
Silom Road, Bangrak. 2624-9999.
What to see
• Damnoen Saduak Metropolitan
Bangkok’s biggest and most popular
floating market. Damnoen Saduak,
Ratchaburi province.
• Grand Palace Historic royal complex.
Na Phralan Road, Rattanakosin Island.
2224-3328.
• Health Land Popular massage spot –
great value. 70/21 Moo 2, Sirnakarin
Road, Nongbon, Phawat. 2748-8135.
• Longtail boats Explore the atmospheric
klong (canals) on a traditional vessel.
Tha Chang Pier (near Grand Palace) or
Na Phralan Road.
June 2012 57

Stored value
Keeping wine under ideal
conditions is a challenge,
warns Aloysius Tse
Wine, like any organic substance,
changes with time. Unlike fresh
food items from the market, it
does not deteriorate with time but improves
with age. With its increasing popularity, more
emphasis has now been placed on how to store
wine to bring out the most desirable qualities
from bottle maturation.
Most wine made today is ready to drink
within 12 months or less of being bottled.
Most inexpensive wines – especially the less
complex whites and rosés and most light-bodied,
low-tannin reds such as Beaujolais and
simple Pinot Noirs – are at their best when
young. These are consumed early for their
freshness and fruitiness.
Most of the great whites and almost all
the best reds require ageing. If consumed too
young, they tend to be acidic, astringent and
unpleasant. Adequate storage time will help
develop the complex interaction between
the primary grape aromas and the secondary
flavours from fermentation and oak barrel
ageing. This complex flavour is often
described as the “bouquet” of a wine.
Wine can only be stored if there is an effective
and appropriate stopper. A closure must
protect the wine from harmful elements until it
is consumed. There are three types of stoppers:
• Thetraditionalcorkwhich,whenincontact
with chlorine and mould, will develop the
unpleasant damp cardboard-like mustiness
caused by a chemical called 2,4,6-tricholoroanisole.
It has been the experience
of winemakers that 5 to 8 percent of wine
will develop this unpleasant taste, commonly
referred to as “corked” wine.
• Synthetic corks, usually made from plastic,
have become popular, particularly with
winemakers in the New World. However,
58 June 2012
After hours
Wine should be stored to
protect it from temperature
and humidity extremes and
variations.
synthetic corks are unsuitable for longer
periods of storage as they offer insufficient
protection against oxygen. (Wines tend to
oxidize rapidly.)
• The cap screw is used by producers in Australia
and New Zealand. Cap screws are
most common for aromatic wines such as
Riesling and Sauvignon Blanc or simple
fruity reds such as Shiraz and Pinot Noir.
Whether cap screws are suitable for fullbodied
reds is still being debated and it
is unlikely that we will know the answer
for decades. While cap screws help to get
around the problem of cork taints, they
deprive wine lovers of the pleasure of
smelling the cork after it’s been pulled.
There is nothing mysterious or difficult
about storing wine. Wine is relatively sensitive
to storage conditions, and it is one of the
very few products that can improve with age.
Once the wine is firmly stoppered in a bottle,
it should be protected from any contact with
oxygen, the culprit responsible for the majority
of mould. The cork should also not be
allowed to dry out and shrink to let in oxygen.
Given high property prices in Hong Kong,
few people can afford to have a wine cellar at
home, so it has become quite common to have
wine stored by professionals able to monitor
your stock and advise you when to consume
each bottle. The main challenge is to find
a wine merchant who is reliable and who
charges reasonable fees.
Wine collectors who do not want to pay for
professional storage have to improvize. Some
may want to store their wine in temperature
and humidity controlled wine coolers that
are available in various shapes and sizes. For
someone who has sufficient space at home,
building a cellar from scratch, either by excavating
a new basement or heavily insulating
an existing room, is an expensive alternative.
Wine deteriorates rapidly if kept too hot or
exposed to strong sunlight, while wild temperature
fluctuations can damage the stopper.
Therefore, it is important that the bottle
be kept away from strong direct light and
temperatures exceeding 25 degrees Celsius.
For long term storage, the temperature for all
wines should be cool and consistent, preferably
between 10 and 15 degrees Celsius, as
extremes of cold and heat can cause damage.
Some degree of humidity is preferable to
keep the cork moist and oxygen out. If wine
is stored in too dry an atmosphere for a prolonged
period of time, the cork can dry out and
will no longer be an effective seal. Although
damp storage conditions can be good for the
condition of the wine, they can cause serious
damage to the labels.
Bottles are best kept lying horizontally in
a wine rack. This enables easy extraction and
identification. Lastly, a maturing wine should
be kept in a stable condition. It is essential that
ageing time should be spent unagitated and
undisturbed.
Aloysius Tse is chairman of Bacchus Fine
Wines (Asia) Limited and a past president of
the Hong Kong Institute of CPAs.

The German alternative
Reno Ong looks beyond
the Swiss frontier to find
watchmaking excellence
By itself, the Tuscan
region of
Italy allegedly
has more examples of
Renaissance art than
the whole of Spain,
and certainly more than
other countries. In fact,
you can easily make the
argument that the city of Florence
alone embodies humanity’s
artistic prowess.
In the horological world,
watchmaking is to Switzerland
what Renaissance art is
to Italy: irreplaceable, celebrated and iconic.
As for the Swiss equivalent of Tuscany, various
regions can make their claim to that
comparison.
First off there’s Geneva, whose name
has become synonymous with haute horology.
(Literally, too: the Hallmark of Geneva,
reserved for movements assembled in the
Swiss canton, is internationally regarded as a
benchmark for excellence.) Home to industry
giants Patek Philippe, Vacheron Constantin
and a host of other illustrious names, Geneva
has a manufacturing tradition that’s best
manifest by a museum Patek opened in 2001.
Affectionately called a “temple to watchmaking,”
the Patek Philippe Museum houses a
comprehensive array of rare timepieces tracking
the progress of an industry largely intertwined
with that of the brand and the region.
Vallée de Joux, in the canton of Vaud, is
another candidate for the title of “Swiss Tuscany.”
Nestled in the Jura Mountains, this
scenic area accounts for more than 20 watch
factories, among them Audemars Piguet and
Jaeger-LeCoultre. The valley’s watchmak-
The A. Lange & Söhne
Datograph Perpetual
ing heritage started as a natural
progression from its iron industry,
once prominent because of the
proximity to mountains, and has
since become the region’s core
enterprise.
Then there’s the Jura and Three
Lakes, where different historic watchmaking
towns such as La Chaux-de-
Fonds and Le Locle are located. With
a history spanning more than
three centuries, these areas
have depended heavily on tourists
visiting museums and
other sights of horological
interest, although boutique
watchmakers have kept the
tradition alive. Also in the
region are cities like Biel/
Bienne, where Omega, the
Swatch Group and Rolex have
a significant portion of their
operations.
It is, however, important to
realize that the frequent praise
heaped on cities like Geneva distracts
people from appreciating
screwed gold chatons, among other things.
Another interesting feature about A. Lange
watches is that words on them are often written
in German. In the Datograph series, for
example, you get this linguistic difference
with the month and the day of the week. A
minor detail, but a refreshing one for collectors
accustomed to reading French or English
on their watches.
Another manufacturer, Glashütte Original,
was formed out of a watchmaking
conglomerate that once included
A. Lange, so the two share a similar
heritage. As such, Glashütte Original
productions have many of
the technological innovations
present in A. Lange watches,
like the swan-neck fine
adjustment. Aesthetically,
Glashütte Original’s timepieces
also exhibit many of
the design features found in
the older company’s products.
But when it comes to regional
pride, the Senator Meissen is a
standout example from Glashütte
Original. Though it has a simple
centres outside Swiss borders.
Glashütte, the birthplace of Ger-
white dial with Roman numerals,
The Glashütte Original
Senator Meissen this watch involves a high level
man watchmaking, is one such
of craftsmanship, and not just
centre. Though it only has 5,000 or so because of its dependable hour-minute cali-
inhabitants, the town boasts a proud tradibre. The dial, made of porcelain, is meticution.
For one, it is home to A. Lange & Söhne, lously painted and finished by artisans at
a manufacturer with a 165-year history, Meissen, a renowned porcelain company in
which is often placed at the industry apex. the eastern state of Saxony, where Glashütte
Aside from its technical achievements, is located. Two crossed swords in blue, the
A. Lange had a hand in developing many Meissen logo, are marked below the watch
design characteristics that now define hands on the dial, a subtle hallmark of an
watches made from the area: the three- outstanding timepiece you can’t find anyquarter
Glashütte plate, blued screws and where else – not even Switzerland.
June 2012 59

60 June 2012
Let’s get fiscal
Get your daily dose of Nury’s humour at www.mrjam.org
More mean than lean
Auditors are spreading financial
efficiency everywhere, including
into company medical schemes,
says Nury Vittachi
NOTICE TO ALL EMPLOYEES.
Many of you have noticed that we
have switched to what appears to
be a superficially less impressive health plan.
Let me tell you the background behind this
tough decision.
During these difficult economic times,
our chief financial officer called in his professional
friends (“homies”) from his accounting
training days and asked them to do a comprehensive
health plan audit. They trimmed
unnecessary costs using a pruning technique
inspired by a movie called Total Carnage 2:
Devastated Planet. The result is a slimmeddown
company medical scheme which enables
us to make dramatic cost cuts with zero
forced redundancies.
Now, the management is not entirely stupid,
and has heard the rumours that the new
health plan is designed to cause staff to resign
so that we can close the firm without paying
severance fees. We would like to state for the
record that this is entirely false, despite the
fact that it’s so obviously true.
For staff yet to resign, feel free to avail
yourself of our revised, post-audit health services
at any time. Notes:
1. The stationery cupboard, storing supplies
such as Stanley knives, staplers and
Sellotape, will now be found in the staff medical
clinic. In case of dispute, accountants take
precedence.
2. Yes, the clinic’s tongue depressors
have orange stains and taste faintly of fruitflavored
ice popsicles. But is this a bad thing?
Everyone likes popsicles.
3. Blocked vein operations and proctology
have been outsourced to a plumbing firm
specializing in easy 24-hour drain clearing.
They promise fast, efficient service and will
even lay old newspapers on the floor to make
sure spillages don’t affect the carpets.
4. All medicines from now on will be free.
You get a choice of two prescriptions from the
in-house clinic’s pharmacy: congee for Asian
staff and chicken soup for Western staff.
5. For people who prefer pills, we have
free tablets from a company called Placebo
Manufacturing Co. Ltd. Each comes with a
label you can fill in yourself and a Hallmark
card saying: “Believe.”
6. Pregnancy coverage and full-pay maternity
leave is now written into the scheme.
However, the senior management’s new religion
stipulates that it applies only to male
staffers.
7. The engineering department will now
carry out dental operations and other surgical
procedures, since these guys like a challenge
and their equipment lies idle most of the year.
8. Some staff members have pointed out
that the doctors at the in-house clinic look
similar to staff at the research and development
division we closed last year. Hey, a guy
“ For staff yet to
resign, feel free to
avail yourself of our
revised, post-audit
health services at
any time.”
in a white coat is a guy in a white coat, right?
9. As in the best schemes, staff may choose
outside doctors. You can select from a list of
two excellent physicians, conveniently located
in nearby slums, both with realistic-looking
practice certificates.
To sum up, we are satisfied that no company
on the planet has a health plan like ours.
You’ll soon find this to be true. Please do not
reply to this memo, as the CEO and CFO are
away from the office at a nightclub, congratulating
the auditor on his work. Would the last
person to leave the office please turn off the
lights?
Nury Vittachi is a bestselling author, columnist, lecturer and
TV host. He wrote the Institute’s first storybook, May Moon
and the Secrets of the CPAs, and the latest one, May Moon
Rescues the World Economy, published in 2010.