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Issue 1 Volume 18 January 2022 DRIVING BUSINESS SUCCESS PLUS: THE NEXT BIG THING CPAs share their views on the trends accountants should look out for in 2022 GREATER BAY AREA How companies and accounting ƂTOU ECP FGXGNQR KP VJG Greater Bay Area SECOND OPINIONS How can Hong Kong maintain its status as an international IPO hub? THE BIG RETHINK Loretta Fong CPA (practising), the Institute’s President, on what will be a critical year for the Hong Kong profession

PRESIDENT’S MESSAGE APLUS January 2022 1 I am thrilled to have been elected as President of the Hong Kong Institute of CPAs. 2022 is a critical year for the Institute – it’s a year where we have to rethink what we do, reposition ourselves as a body, rebuild our image in society, and reinforce our members’ trust in us. The regulatory reform this year will transform the Institute. We will work hard with the Financial Services and the Treasury Bureau and the Financial Reporting Council to ensure that the reform is implemented smoothly and efficiently, so that the profession can be confident in the new regime. The reform is a good opportunity to reposition the Institute, to refocus on supporting members with more technical matters, and provide a new level of support and have more flexibility in what we do. Although the Institute will be changing, we will still remain the profession’s voice in Hong Kong, and Hong Kong’s voice on the international stage, reflecting the views of our members to government and standard setting bodies. On the international stage, the development of the International Sustainability Standards Board under the IFRS Foundation will provide the profession the opportunity to contribute to this important area. Our Qualification Programme (QP) has trained generations of accountants for over 20 years. After the Capstone was sat for the first time in the December 2021 examination session, the new QP, which reflects our key stakeholders’ demands for what they need from professional accountants, is fully introduced. The QP will be training the future generation of Hong Kong’s accountants in the technical and soft skills necessary for success. In order to reposition the Institute, the Council must work closely with the various committees, working groups and advisory panels to ensure that our strategic initiatives are implemented efficiently. We must clearly communicate in order to develop and implement our plans that support the profession. As the President in the 49th year of our Institute, I aim to lay a good foundation so that we can celebrate our 50th anniversary, our golden anniversary, from a position of strength. You can read more about me, and my plans for the year ahead in my interview with A Plus on page 8. Advocating for a better future for Hong Kong and improvements to the business regime is an important task that the Institute undertakes. In mid-January, we held a media briefing on our budget submission for 2022-23. Under the theme “Building a Sustainable Future for Hong Kong, its Economy and Community,” the submission includes more than 40 measures, both immediate and longerterm. These are aimed at maintaining the city’s competitive edge, ensuring a sustainable tax system, rolling out relief measures to help businesses and citizens ride through these challenging times, and helping Hong Kong achieve the goal of carbon neutrality by 2050. You can find the submission on the Institute’s website, and there will be a budget response after the financial secretary delivers his budget next month. As professional accountants we all know the importance of maintaining work-life balance. Yoga is important to me and what keeps me balanced. I’ve been practicing yoga for over 10 years now, and find that it helps me to de-stress after a busy day and stay fit and healthy. It allows me to calm down and have a moment of clarity, refreshing my mind and enabling me to concentrate again on my work. To encourage members to give this activity a go, I helped to lead an e-seminar in mid-January organized by the Sports and Recreation Committee on some simple yoga poses that I find help me to relax my tight muscles and ease pain in your neck, shoulders and back after a long working day. I recorded a video to celebrate the Chinese New Year, and set out the Institute’s tasks for the year ahead. You can find it via the Institute’s website and YouTube channel. The year of the tiger will be a transformative year for the Institute. During my presidency, I intend to imbue in the Institute the attributes of the tiger: power, determination and adaption, so that we can succeed. With Chinese New Year just ahead, I wish you all safe times, good health, and prosperity. Loretta Fong CPA (practising) President Dear members, “As the President in the 49th year of our Institute, I aim to lay a good foundation so that we can celebrate our 50th anniversary, our golden anniversary, from a position of strength.”

CONTENTS Issue 1 Volume 18 January 2022 NEWS 01 President’s message 04 Institute news 07 Business news FEATURES 08 Leadership: Loretta Fong CPA (practising) The Institute’s President outlines her goals for the profession this year 14 Taking the future into account What trends will have a big impact on the accounting profession this year? 20 Positioned for greater success There are still ways for companies and accounting firms to carefully position themselves for the Greater Bay Area market, even as the border remains closed 26 Second opinions How can Hong Kong maintain its position as an IPO hub? 28 How to Irene Siu CPA, Senior Director, Disputes and Investigations, at Alvarez & Marsal, on what companies should keep in mind when working with forensic accountants 29 Thought leadership: Simon Ng The Business Environment Council’s Chief Executive Officer on how companies can improve their sustainability disclosures 30 Q&A with a PAIB Allan Lam CPA, Finance Director at Tory Burch Far East 31 Q&A with a PAIP Candy Fong CPA, Partner at Foremost Consultants Limited 32 Meet the speaker What to expect from an e-Series course on virtual meetings for directors and board members SOURCE 33 A proposed IFRS with reduced disclosure requirements An overview of the Institute’s 20Positioned for greater success While the Mainland China border is still closed, diverse opportunities still remain in the Greater Bay Area for Hong Kong businesses. Experts discuss how companies and accounting firms can seize opportunities and create business connections until travel restrictions are relaxed 30 Q&A with a PAIB 31 Q&A with a PAIP

DRIVING BUSINESS SUCCESS About our name A Plus stands for Accounting Plus. It represents a profession that is rich in career options, stays relevant amid rapid changes, and adds value to business. This magazine strives to present the global mindset and varied expertise of Institute members – Accountants Plus. Editor Gerry Ho Email: gerry.ho@mandl.asia Managing Editor Jemelyn Yadao Copy Editor Jeremy Chan Associate Editor Nicky Burridge Contributor Thomas Lo ,i}ˆÃÌiÀi` "vwVi 2/FWang Kee Building, 252 Hennessy Road, Wanchai, Hong Kong Advertising enquiries Advertising Director Derek Tsang Email: derektsang@mandl.asia ISSN 1815-3380 President Loretta Fong Vice Presidents Roy Leung Edward Au Chief Executive and Registrar Margaret W. S. Chan Director of Corporate Communications Dr Wendy Lam Associate Director of Corporate Communications Paul Smith Editorial Coordinator Maggie Tam "vwVi č``ÀiÃà 37/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong Tel: (852) 2287-7228 Fax: (852) 2865-6603 Member and Student Services Counter 27/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong Website: www.hkicpa.org.hk Email: hkicpa@hkicpa.org.hk response to the IASB’s exposure draft 34 Professional accountants’ behaviour beyond their professional work A look at scenarios adapted from real-life cases, highlighting the importance of upholding fundamental principles of the code of ethics 36 Technical news WORK-LIFE BALANCE 40 Staying on course Team captains of the 2021 virtual Oxfam Trailwalker recount their experiences and the lessons that previous races have taught them 46 Young member of the month Allan Au-Yeung CPA, Finance Manager at Queen Elizabeth Hospital 48 After hours Institute members recommend their favourite ways to unwind 14 Taking the future into account The disruption caused by the COVID-19 pandemic has pushed businesses to embrace new ways of working. How can accountants and firms make the most of these changes and continue creating value for clients this year and beyond 48 40 Staying on course After hours A Plus is the official magazine of the Hong Kong Institute of Certified Public Accountants. The Institute retains copyright in all material published in the magazine. No part of this magazine may be reproduced without the permission of the Institute. The views expressed in the magazine are not necessarily shared by the Institute or the publisher. The Institute, the publisher and authors accept no responsibilities for loss resulting from any person acting, or refraining from acting, because of views expressed or advertisements appearing in the magazine. ©Hong Kong Institute of Certified Public Accountants January 2022. Print run: 7,100 copies The digital version is distributed to all 47,331 members, 17,435 students of the Institute and 2,358 business stakeholders every month.

NEWS Institute news Business news 4 January 2022 The Institute released its tax policy and proposals for the Hong Kong government’s 2022-23 budget. Under the theme “Building a Sustainable Future for Hong Kong, its Economy and Community,” the proposals include more than 40 immediate and longerterm measures. These are aimed at maintaining the city’s competitive edge, ensuring a sustainable tax system, rolling out relief measures to help businesses and citizens ride through these challenging times, and helping Hong Kong achieve the goal of carbon neutrality. The Institute estimates that the fiscal deficit for 2021/22 will reach HK$25.2 billion. This is significantly less than the government’s original estimation of over HK$100 billion, as a result of better-than-expected economic performance in the second half of 2021 and robust land sales, which indicates that developers have an optimistic outlook for the property market in the coming few years. Fiscal reserves are expected to stand at HK$902.6 billion at 31 March 2022. “Despite these positive signs, the situation remains very uncertain,” says Loretta Fong CPA (practising), Institute President. “Our proposals recommend that the government adopt a number of specific short-term relief measures, while, at the same time, enhancing the Hong Kong economy by promoting digital transformation, and building on the opportunities presented by the development of the Greater Bay Area. More also needs to be done to maintain our competitive edge and build a sustainable future.” The full budget proposal is available on the Institute’s website. New committee appointments The appointments to the new term of the Institute’s committees and panels to support the activities of the Council have been finalized. Learn about the committees and their composition for the year ahead through the “Committees” section of the Institute’s website. Net zero commitment and ESG Information Centre The Institute has joined 13 other accounting bodies, all members of The Prince of Wales’s Accounting for Sustainability Project Accounting Bodies Network, in publicly committing to achieve net zero greenhouse gas emissions within their own organizations, as well as provide an enabling environment for their membership to do the same. As part of our net zero efforts, a new ESG Information Centre is now available on the Institute’s website to provide members with regular updates on the latest market development and thought leadership. The Institute has also appointed a Sustainability Lead and formed a task force to develop our net zero pathway going forward. Stay tuned for our further support and development on ESG matters. Code of ethics webpage The Institute has launched a new webpage on the Code of Ethics for Professional Accountants to help members uphold professionalism. The page includes links to educational material, and other relevant information. Visit now via the Institute’s website. Minutes of the 49th AGM The minutes from the Institute’s 49th annual general meeting (AGM) held on 9 December 2021 are now available for members to read. Council meeting minutes The abridged minutes from the December 2021 Council meeting are now available for members to read. They can be found in the “Members’ area” of the Institute’s website. Blessings for the year of the tiger The Institute wishes you and your family, friends and colleagues a prosperous and fruitful year of the tiger. Visit the celebration webpage to watch greeting videos featuring the President, and download some e-fai chun to deliver blessings. Institute releases proposals for 2022-23 budget From left: Eugene Yeung CPA, Convenor of Budget Proposals Sub-Committee, Institute President Loretta Fong CPA (practising); and Sarah Chan FCPA, Chairman of the Taxation Faculty Executive Committee.

APLUS Resolution by agreement Chung Koon Shing, Patrick CPA (practising) Complaint: Failure or neglect to observe, maintain or otherwise apply the fundamental principle of professional competence and due care under sections 100.5(c) and 130 (for the 2013 to 2018 audits) and sections 110.1 A1(c) and R113.1 under Chapter A (for the 2019 audit) of the Code of Ethics for Professional Accountants. Chung was the honorary auditor of an entity registered under the Trade Unions Ordinance (Cap. 332). He issued an unmodified auditor’s report on the statement of account of the entity for each of the seven years ended 31 August 2013 to 2019. However, the audit procedures performed by Chung were deficient in that he did not (i) evaluate how the limited extent of the audit work performed on the entity’s receipts and expenditures met the statutory requirements; (ii) adequately analyse the nature of the receipts to support his conclusion that the entity was exempted from profits tax; and (iii) obtain an adequate understanding of the internal controls related to the entity’s recording of its receipts and expenses. Furthermore, Chung failed to specify the accounting framework under which the statement of account had been prepared, and the auditing and assurance standards under which the engagement had been conducted. As a result, Chung failed to (a) design and perform audit procedures to obtain sufficient appropriate audit evidence in accordance with Hong Kong Standard on Auditing (HKSA) 500 Audit Evidence; (b) obtain an understanding of the client, its environment and internal controls in accordance with HKSA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment; and (c) prepare sufficient audit documentation to support his audit conclusion in accordance with HKSA 230 Audit Documentation. When considering the sanctions to be imposed against Chung, the Institute took into account the circumstances of this case, including the mitigating circumstances of Chung. Regulatory action: In lieu of further proceedings, the Council concluded the following should resolve the complaint: 1. Chung acknowledges the facts of the case and areas of non-compliance with professional standards; 2. Chung be reprimanded; and 3. Chung pays costs of the Institute of HK$15,000. Disciplinary finding Wong Ho Yuen, Gary CPA (practising) and Chan Lap Chi CPA (practising) Complaint: Failure or neglect by Wong to observe, maintain or otherwise apply HKSA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Hong Kong Standards on Auditing, HKSA 230 Audit Documentation, HKSA 500 Audit Evidence, and HKSA 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures. Failure or neglect by Chan to observe, maintain or otherwise apply HKSA 220 Quality Control for an Audit of Financial Statements. Wong was the engagement director and Chan was the engagement quality control reviewer in an audit carried out by Confucius International CPA Limited on the consolidated financial statements of a Hong Kong listed company and its subsidiaries for the year ended 31 December 2018. The audit was selected for review as part of the Institute’s practice review. The practice reviewer identified significant deficiencies in the audit procedures carried out by the audit team on impairment assessment of the company’s intangible assets, comprising technological know-how, a distribution vending system, and deferred development costs for patents. Chan failed to perform an adequate engagement quality control review of the significant judgements made and conclusions reached by the audit team in the impairment assessment. Decisions and reasons: The Disciplinary Committee reprimanded Wong and Chan. In addition, the committee ordered Wong and Chan to pay penalties of HK$100,000 and HK$50,000 respectively, and to pay costs of the disciplinary proceedings of HK$104,394. When making its decision, the committee took into consideration the particulars in support of the complaints, the agreed mitigating factors, and the conduct of Wong and Chan throughout the proceedings. Details of the resolution by agreement and disciplinary finding are available on the Institute’s website. January 2022 5

NEWS Business 6.4% What Paul Chan FCPA, Hong Kong’s Financial Secretary, said he estimated Hong Kong’s gross domestic product (GDP) growth figure in 2021 to reach. This follows 18 months of recession. Chan said 2022 could follow a positive trajectory, but that the pandemic still posed a significant threat. 8.1% Mainland China’s GDP growth in 2021, beating the government’s own 6% target. However, growth in the fourth quarter (4%, year on year) slowed significantly to an 18 month low. Observers expect continued uncertainty around the real estate market to be a significant drag in the first quarter of this year. 102 The number of billionaires and millionaires that signed an open letter sent to leaders at the virtually held World Economic Forum in Davos. Signatories including Nick Hanauer, an early investor in Amazon, called for more wealth taxes globally, saying the ultra wealthy should pay more to help world economies recover from the pandemic. Chapter 18B Where the new rules from the Hong Kong Stock Exchange specifically relating to SPACs are set out. The new rules took effect on 1 January. Retail investors will be barred from investing in SPACs. More details on Technical News on page 39. 75% Howmuch lower than forecast the Hong Kong government’s fiscal deficit is estimated to be, according to the Hong Kong Institute of CPAs’ tax policy and budget proposals for 2022-23. The Institute estimated that the deficit for 2021/22 would be HK$25.2 billion, well below the HK$101.6 billion forecast set out in February 2021. Asia’s first special purpose acquisition company (SPAC) finished 1 percent higher on its first day of trading in Singapore on 20 January. Vertex Technology Acquisition Corporation said it aims to acquire at least one company within two years of listing, with a focus on fintech, artificial intelligence and cybersecurity. 25-50% January 2022 7 The salary premium job candidates with environmental, social and governance (ESG) expertise can command in Hong Kong and Mainland China, according to recruitment firms. Companies are increasingly being compelled by regulators and investors to add ESG metrics to their disclosures. China Merchants Bank The parent of the first company to file an application to list a SPAC in Hong Kong. In its filing, Aquila Acquisition Corporation said the SPAC aims to acquire “a technologyenabled company in ‘new economy’ sectors (such as green energy, life sciences, and advanced technology and manufacturing) in Asia, with a focus on China.” Guidelines for Effective Audit Committees – Selection, Appointment and Reappointment of Auditors Title of the first of a new publicaton series by the Financial Reporting Council that provides practical guidelines for audit committees to achieving audit quality. More details on Technical News on page 37.

LEADING A NEW ERA Photography by Calvin Sit It’s time to chart a new course for the Hong Kong Institute of CPAs, says Loretta Fong CPA (practising). The Institute’s President tells Jeremy Chan how she plans to lead the Institute through regulatory reform, and why focusing on the development of members, especially younger members, will be key to strengthening the profession both locally and globally When Loretta Fong CPA (practising) was a secondary school student, becoming an accountant one day was the furthest thing from her mind. She ended up studying for a popular business administration degree in university, but after balancing her first balance sheet during an accounting module, something clicked. “It was very satisfying, and I found it to be more practical than other modules I was studying at the time,” she says. Fong then switched to studying accounting, and joined Arthur Andersen, which later merged with PwC in Hong Kong in 2002, right after graduating. “I didn’t think twice about entering a Big Four firm. I knew that laying a solid foundation and getting a professional qualification would be necessary after studying accounting for so many years, and before moving into something else if I wanted to – but I didn’t.” Fong has witnessed how the profession has changed over the years, with firms expanding their service offering in response to PROFILE Loretta Fong CPA (practising) 8 January 2022

APLUS January 2022 9

PROFILE Loretta Fong CPA (practising) client demand and new technology, and with the growth of accounting specialisms. Now, as the Hong Kong Institute of CPAs’ President, Fong is using this insight to lead the organization through a transitional period, with changes soon taking place to its responsibilities, and to help all Institute members take advantage of future opportunities. “I am thrilled to be elected,” says Fong. “This year is a critical year for the Institute; it’s the year of rethink. The Institute needs to reposition itself, rebuild its image and reinforce members’ trust in us.” New direction, new objectives For Fong, navigating the regulatory reform of the profession and ensuring a smooth transition of powers to the Financial Reporting Council (FRC) will be top of her mind. The reform of the regulatory regime of the accounting profession was first announced on 8 June 2021, and the Financial Reporting Council (Amendment) Bill was passed by the Legislative Council on 22 October 2021, signalling the shift of powers from the Institute to the FRC later this year. The move, which will see the FRC be renamed the Accounting and Financial Reporting Council, will see the FRC responsible for the issuance of practising certificates, registration of practice units, carrying out practice reviews, inspections and investigations, and imposing disciplinary penalties on CPAs, practice units and public interest entity auditors. Fong views the reform as a way for the Institute to reorient itself, and play a bigger role in supporting its members. “Historically, our hands have been tied,” says Fong, explaining that the Institute’s role as a regulator has made it challenging to provide detailed technical support as it posed a “threat of self-review.” Before becoming President, Fong has played an active role within the Institute, having served as a member of various committees since 2012, including the Corporate Finance Committee from 2012 to 2016, the Auditing and Assurance Standards Committee since 2015, and on the Council since 2017. “I’ve put forth suggestions with regards to helping our members. The feedback I’ve received has usually been ‘we can’t help to that extent because we are also regulators who are regulating them.’ With the reform, the Institute can provide more support to our members and give them more specific advice.” Fong notes that change is not just driven by the reform. “Helping our small and medium practitioners (SMPs) to upskill and to digitalize has been on the agenda for a while now,” she notes. “We hope to take a big leap forward and really help SMPs to digitalize, such as through the digitalization of audit processes, and further continuing professional development programmes.” Fong is well aware that some members may be worried about the changing regulatory regime, and emphasizes that the Institute will communicate closely with them on the matter to allay any concerns. “I understand that small practitioners Loretta Fong CPA (practising) has played an active role in the Institute, having served as a member of the Corporate Finance Committee from 2012 to 2016, the Auditing and Assurance Standards Committee since 2015, and on the Council since 2017. 10 January 2022

APLUS might be especially anxious as they may be unsure of the benchmarks the FRC is going to use. With this in mind, more communication needs to happen with these small practitioners in a transparent manner – not just from us, but also from the FRC – so members can understand what is going to take place this year,” she says, adding that dialogue about the changes is also needed with non-practitioners. As President, Fong will focus on ensuring all arrangements will be in place in time for the transition of powers later in the year. “Everything will need to be finalized by summer, so we only have half a year to make arrangements and publicize them to members. The speed in which this transition is happening will be a challenge,” she explains, pointing out that meetings and discussions are taking place between the Institute and the FRC. “However, details still need to be worked out in terms of how the transfer will take place operationally. This needs to happen quite quickly.” The Institute, she stresses, will continue to play a key role in the profession following the transfer of powers. The Institute will maintain important responsibilities, including registering CPAs, and setting professional examinations and continuing professional development requirements. It will also retain its role as a standard setter, setting ethical, financial reporting, and auditing and assurance standards. According to a survey of members and Qualification Programme (QP) students the Institute carried out in July 2021, respondents indicated that they believe the Institute should continue representing the views of the profession and ensure that its professional development programmes match changing practices and expectations. “It is important that the Institute stays focused in these areas and provide value to our members,” she says, noting that the Institute will continue to administer the QP, participate in the international space in ref lecting the views of Hong Kong accountants in standard setting, and provide local guidance for practitioners. Fong is confident that the QP, which held its Capstone level for the first time in the December 2021 examination session, will continue to attract both fresh graduates and young professionals and nurture them into full-f ledged accountants. “I am delighted with the rollout of the new QP. It’s a ref lection of what our key stakeholders demand from our members,” she says. “QP graduates are trained to not only be proficient in accounting, but also in finance and other disciplines, and to have an analytical mindset, which will prepare them to survive in the business world.” Another one of Fong’s key objectives will be to forge better connections between the Council and the committees, with the aim of ensuring the Institute meets both short-term and long-term goals. “We have had three- or five-year plans in the past. How we execute these plans and communicate all ideas to our committees has to be done more effectively; there needs to be more collaboration,” she says. Council members, Fong notes, should participate in various committees, and vice versa. “This is something I’m really hoping for. We have a number of committees for various initiatives, and these committees may or may not be led by Council members. We need more committee chairmen or committee vice-chairmen participating in our Council meetings,” she says, adding that increased communication between both Council and committee members would help to align goals and implement new plans. Building trust Fong also notes the importance of the Institute’s image in society, and wants to enhance society’s trust towards the profession. “As President, I really hope to rebuild society’s image of accountants by showing what accountants are capable of and how we contribute,” she says. Having a better online presence, she says, will be key to achieving this goal. “People rely a lot on social media these days, so we need to do more in this area.” Increased awareness of members and the important roles they play in society, she adds, will also help to reinforce their trust. “The public has to understand how accountants serve society. I haven’t seen enough member engagement in the past, so I really want to do more with respect to that,” Fong says, highlighting that there is a need for the Institute to communicate to the public that CPAs specialize in a wide range of fields beyond accounting. “Over 80 percent of our members are nonpractising certificate holders and they contribute to society in many different ways. Members may not even be working on accountingrelated tasks anymore, which goes to show how versatile and valuable to society our members are. Accountants should be proud of the fact that they are part of the Institute.” Fong is proud that the Institute is globally recognized, and stresses that its international recognition Loretta Fong’s focus areas for this year include: navigating the regulatory reform of the profession; building better connections between the Council and the committees; enhancing the image of the accounting profession in society; reinforcing trust with members; developing the careers of young members; promoting sustainability; and enhancing the Institute’s relationship with the Mainland and other overseas accounting institutes. “Everything will need WR EH ȨQDOL]HG E\ summer, so we only KDYH KDOI D \HDU WR PDNH DUUDQJHPHQWV DQG SXEOLFL]H WKHP WR PHPEHUV 7KH VSHHG LQ ZKLFK WKLV WUDQVLWLRQ LV KDSSHQLQJ ZLOO EH D FKDOOHQJH ȉ January 2022 11

PROFILE also needs to be communicated in order to build a stronger sense of belonging among members. “The Institute is, without a doubt, well known. I’ve participated in international standard setting board meetings, and they indeed always seek comments from Hong Kong as the city is an international financial centre, and a bridge between Mainland China and the west. Our comments are always very valuable,” explains Fong. She points out that the Institute has representatives within committees under the International Federation of Accountants (IFAC), such as past president Johnson Kong, who has represented Hong Kong in its Small and Medium Practices Advisory Group since 2017. “However, I believe that more can be done to promote our responses to international papers and consultations, for example. I don’t think that we have made this too evident to our members. More communication is needed to show how we have been interacting internationally with the IFAC board or other international standard setters. The Institute also needs to stay focused and continue ref lecting our members’ views in the international arena.” Nurturing the next generation The Institute needs to continue its efforts in nurturing its younger demographic, notes Fong. According to data from the Institute’s Annual Report 2021, more than 60 percent, or around 24,600 members, are at or under the age of 44. “The Institute has a big role to play in helping members, and young members are essential for the future development of Hong Kong and the Greater Bay Area (GBA),” notes Fong. She praises the Institute’s specialist training programmes in financial controllership, insolvency, taxation, business valuation and forensic accounting, noting that they have nurtured hundreds of CPAs, who have graduated from those programmes and then gone on to specialize in those respective fields. “Helping our young members to specialize, whether in audit or other fields, is particularly important.” Fong hopes to help young members by making sure they receive tailor-made career advice. “I propose providing young members with customized training advice, through aptitude tests for example, to identify areas where they need to improve and then design training programmes for them – this will greatly help them to improve. This is one thing I have in mind.” Fong also hopes to introduce programmes that help CPAs add value to global business trends, such as sustainability, for example, by delivering accreditation programmes in partnership with other bodies. “Environmental, social and governance (ESG) matters have been receiving tremendous attention recently, and enhancing our members’ capabilities in ESG by designing an ESG training programme, could be one of our key focuses this year,” she says. And the next specializaton With the spotlight on ESG, Fong is confident the profession will continue leading the way when it comes to promoting sustainability among companies, and supporting accountants in providing ESG assurance. “The Institute is a forerunner in this aspect; we have been holding our Best Corporate Governance Awards since 2000, and last year, we introduced the ESG Awards, which recognize companies that are outstanding in this initiative,” she says. In December 2021, the Institute issued ESG Assurance in Hong Kong: A snapshot of the situation, a study on the current ESG assurance landscape in Hong Kong with information on the percentage of companies with ESG assurance, the standards and benchmarks being used, and the assurers of ESG reports. “Based on that report, less than 5 percent of listed entities are providing ESG assurance reports, out of which less than 50 percent of those are issued by CPAs,” notes Fong, emphasizing that the creditability of such reports is becoming more important to stakeholders. The Institute issued circulars such as Auditing and Assurance Technical Bulletin (AATB) 5 Environmental, Social and Governance Assurance Reporting in December 2020, which was revised in August 2021, and issued AATB 6 Non-Authoritative Guidance on Applying HKSAE 3000 (Revised) to Extended External Reporting Assurance Engagements, also in August 2021, to help CPAs with ESG assurance work. “We need to promote the importance of ESG assurance to the public and the investors, and to train our CPAs to provide such services.” In November 2021, the Institute joined together with 13 other accounting bodies of The Prince of Wales’s Accounting for Sustainability Project Accounting Bodies Network and publicly pledged to achieve net zero greenhouse gas emissions. “It is important that we practice what we preach,” says Fong, noting that the commitment matters to the profession, Hong Kong and the planet itself. “It’s essential for us to make this commitment to be a good corporate citizen. By signing this commitment, we demonstrate to others that we are committed to net zero.” Loretta Fong CPA (practising) Ȉ 7KH ,QVWLWXWH KDV D ELJ UROH WR SOD\ LQ KHOSLQJ PHPEHUV DQG \RXQJ PHPEHUV DUH HVVHQWLDO IRU WKH IXWXUH GHYHORSPHQW RI +RQJ .RQJ DQG WKH *UHDWHU %D\ $UHD ȉ 12 January 2022

APLUS Fong is Partner in PwC’s Entrepreneurial Group of the Assurance Division in Hong Kong. Opportunities next door Fong is also hoping for possible quarantine-free cross-border travel between Mainland China and Hong Kong this year. This, she says, will allow for business opportunities and cross-border audit engagements to take place in person, and for the Institute to resume dialogue with its counterparts on the Mainland. “The demand for CPAs in Mainland China is huge,” notes Fong. “There are approximately 300,000 CPAs under the Chinese Institute of Certified Public Accountants out of the 1.4 billion people in the Mainland, while there are over 47,000 members of the Institute. There are a lot of opportunities across the border, and many companies within the GBA – an area whereby the gross domestic product is one of the highest in various regions within China – are demanding CPAs for their business expansion.” A fully-open border will also facilitate talent and knowledge transfers with other cities in the GBA, Fong adds. “Our young accountants here in Hong Kong are very willing to travel, and if they could, they’d be able to witness the business opportunities in the GBA first hand.” Laying a bedrock for success Outside of her professional life, Fong enjoys slowing down and seeking a sense of calm through her favourite hobby – yoga. “Practicing yoga is part of my life – I’ve been practicing for over 10 years,” she says. “Some of the poses are very challenging, so that helps me to not think about work at all. I always feel so refreshed after practicing.” She also enjoyed travelling before the pandemic, and appreciates how her work as an auditor brought her to places she’d never even imagined visiting. “Auditing gave me the opportunity to travel to many places in the world and learn so much during my trips. I’ve been to Israel, India, and Myanmar for work, to name a few.” Her passion for her work continues to drive her as a partner at the firm. “Accounting is in many ways an art rather than a science; there could be many possibilities and alternatives in the accounting treatment for transactions, but there’s always a best option after considering all the facts and circumstances. I could be very technical, while at the same time very practical. I enjoy arriving at a solution after the consideration of many aspects.” Above all, she is committed to fulfilling her role as President, and is equally intent on laying the right groundwork to ensure a prosperous future for the profession. “This is the year we strengthen our members’ trust,” she says. “As the President of the Institute, together with the leadership team, I would like to lay a good foundation for the Institute to celebrate its 50th year of establishment. I’d like our members to be proud of being an Institute member, and attract people outside Hong Kong to be CPAs under the Institute, for it’s a recognition of their creditability and high standards of professionalism.” January 2022 13

2022 trends FUTURE OF ACCOUNTING It was only three years ago that Linkers CPA would arrange physical copies of each invoice to be painstakingly typed out, addressed and mailed to each of their clients. It was inefficient and used up time that could have been spent on other tasks, recalls Rex Leung FCPA (practising), Partner at the firm. But ever since switching to a cloud platform to manage invoices, balance sheets and income statements, Leung and his firm’s staff have never looked back. “A lot of routine, clerical work has now been digitalized. This has helped to save so much time,” he says. Of course, the changes are not unique to Leung’s practice or even just accounting firms. This report looks at how shifts to cloud services, remote working, outsourcing staff, expertise in data analytics and environmental, social and governance (ESG), and a greater focus on advisory services, have grown in importance over recent years – driven by the pandemic and ever-changing technology – and how they are expected to further shape the profession both in practice and in business this year and beyond. Working in the cloud In Hong Kong, 82 percent of businesses intend to keep long-term remote working options in place, according to a study conducted by Censuswide, an independent research agency, which surveyed 1,055 business decision-makers. The study also found that cloud solutions have made it possible for businesses to continue remote work, with 76 percent of businesses noting that they have sped up plans to move all data to a cloud-based model. The switch to cloud accounting solutions, Leung says, has not only increased productivity, but made it possible for staff to continue working remotely yet efficiently. The general ease of use and convenience of cloud platforms has also made clients more receptive towards adoption, he adds. “Since more tasks are done via cloud platforms now, our clients’ administrative staff can easily scan receipts to the cloud, for example, for us to perform bank reconciliations. This bank data is automatically synchronized to the cloud,” he says. Leung notes that the team used to visit their clients’ office and using software such as Microsoft Excel or other standalone software to finish off bookkeeping TAKING THE FUTURE INTO ACCOUNT Much has changed within the accounting profession since the start of the COVID-19 pandemic. With employees seeking work flexibility and firms having to find new ways to retain staff and offer value to clients, organizations have had to embrace change in order to stay relevant. Jeremy Chan finds out how companies and firms have continued to maintain efficiency despite difficulties, and how challenges within the last few years have driven trends that accountants must pay attention to in order to thrive Illustrations by Ester Zirilli 14 January 2022

January 2022 15

2022 trends FUTURE OF ACCOUNTING or month-end closing or vouching tasks. “Vouching, management accounts, income statements and balance sheets are now automatically updated in real-time,” he says, adding that the firm also uses DocuSign, a programme that allows organizations to manage electronic agreements and sign electronically on different devices. “Our staff have been very efficient in getting this work done for our clients, particularly for those not based in Hong Kong.” Small and medium practices (SMPs) should make use of digital solutions not just for clients but also to attract employees. “There are now fewer accounting graduates entering the market and the profession,” Leung says. “So we have to think of relatively modern approaches to performing audits, or think out of the box to work smart in terms of running our practice.” In addition to cloud accounting, companies have also increased their reliance on other cloud services to stay connected during the pandemic. Stephen Lo FCPA, Chief Financial Officer of Prenetics, a genetics and diagnostic health testing company, says shifting to cloud solutions has helped the company to continue working remotely and also expand. “The growth of the company has been quite substantial – we’ve grown from 100 employees from the start of the pandemic to around 800 people today,” he says, noting that the company uses Amazon Web Services, a subsidiary of Amazon.com, Inc, which provides cloud computing platforms and application programming interfaces. “We use the cloud for back-end solutions. It provides us with scalability, data security, comfort, and ease of access,” Lo says. “We wouldn’t have been able to scale so quickly if not for these cloud solutions.” A demand for flexible and remote work is set to continue for both companies and firms this year. In October 2021, PwC in the United States announced that 40,000 professionals would be able to work virtually outside of the office. Up until the policy shift, the firm had planned to offer a hybrid work model, in which staff would have to work in the office a few days a week. Because of the lack of personal touch that comes with remote work, companies should find ways to reinforce their corporate mission to employees and also make an effort to bond, even if this means catching up over a video call, Lo notes. “Employees also value working in a company with a great culture and with a strong team. It’s not just about the work itself or being able to work remotely, but whether there are lots of opportunities for growth within the company, and whether the company is “We have to think of relatively modern approaches to performing audits, or think out of the box to work smart in terms of running our practice.” 16 January 2022

APLUS doing something meaningful,” he says. “If the work being done at the company doesn’t echo its vision, it’s not going to work for them.” Staff who follow a hybrid work arrangement, Lo adds, should also schedule time to bond with colleagues at work or after work. “It can be hard to achieve this human touch through remote work,” he says. “I enjoy human interaction, and it’s important to have colleagues you can eat with or have drinks with after work.” Kane Wu CPA, Co-founder of ThinkCol, an artificial intelligence (AI) consultancy, agrees that technology has allowed for business continuity and that remote work will continue to be a trend long after the pandemic subsides. “Through technology, we’ve been able to continue working with each other, despite not being able to meet in person,” he says. “Because of COVID, people have realized that with technology, it’s possible to get things done, especially those who work in professional services or accounting firms. As long as people are able to check off their checklists, I don’t see why we can’t work from home.” Seeking talent from afar With companies around the world having seen that remote work really works, many are also now outsourcing staff or functions of the company or firm. Outsourcing staff, notes Sabrina Khan CPA, Chief Financial Officer of Aptorum Group Limited, a pharmaceutical company, is one way for companies to save on cost and resources. “We partially outsource functions in research and development to contract research organizations (CROs),” she says. “We outsource on a project-byproject basis. So after one project, we can hire another team or another CRO to work for us. So we don’t have to maintain this team full-time ourselves and don’t have to shoulder the costs long-term.” She notes the company also outsourced an accounting team in the United Kingdom to help with tax matters. “We needed help understanding the U.K. tax system since we weren’t too familiar with it, so we outsourced our U.K. accounting function. This helped us to meet tax deadlines and meet regulatory requirements.” Leung of Linkers CPA believes outsourcing staff will continue being a trend in the years to come. He notes that he has seen an uptick in their clients, comprised of small- and medium-sized listed companies and multinational corporations, looking to outsource their accounting, compliance and internal control functions to his firm. “Some clients have told us that it’s been difficult to hire or retain accountants,” he says, noting that reasons range from a lack of flexibility to wanting to cut costs. “This created opportunities for us to promote our outsourcing services, such as in finance and human resources. Clients view it as a good alternative when it comes to keeping the ball rolling and saving costs at the same time.” To help his clients gain as much value as possible, Leung often suggests outsourcing the entire finance function to the firm. “We would propose to clients: if they choose to outsource the finance function, we’ll pull together a full team to serve them for the same price of hiring one full-time accountant,” he explains. “The CFO would help two to four hours a month; the financial controller would put in five to 10 hours; the finance manager would do 16 to 20 hours; and the accountant would work 40 hours, for example. This enables us to provide the highest quality of service at the best price for them. This kind of finance outsourcing is gaining popularity or is sought after by the market or clients, who have been very open to this idea.” Providing insights from data Wu says accountants who have skills in AI are also in increasingly great demand. “Both AI and machine learning will play a bigger role in accounting and auditing, for example, in anti-money laundering and detecting anomalies in a system. It will allow accountants to analyse transactions to predict the cash flow of a company to see howwell or poorly they will perform in the future,” he elaborates. “We can also create models to see how certain crises will affect the company.” Skills in data analytics will also help accountants to identify fraud within a company’s transactions. “With transaction data, you can use big data to analyse the amount of money paid as well as the names of people and organizations to see if there are any patterns or anomalies,” says Wu, adding that by using text data, one can create a visualization or map to better understand how companies have been using money to verify any claims. With ESG reporting on the rise locally and globally, Wu says accountants with data analytics and AI expertise will be able to analyse ESG data. “We can use data analytics to visualize ESG data, see howwell the company is doing, and compare their data with other companies,” he says. Accountants will also be more relied on to guide companies towards meeting their sustainability goals. “A few years ago, listed companies were only meeting the minimum requirements as per the Listing Rules of the Hong Kong In Hong Kong, 82 percent of businesses intend to keep long-term remote working options in place, according to a study conducted by Censuswide, an independent research agency, which surveyed 1,055 business decision-makers. “Through technology, we’ve been able to continue working with each other, despite not being able to meet in person.” January 2022 17

2022 trends FUTURE OF ACCOUNTING Exchanges and Clearing (HKEX) for their ESG reporting,” adds Leung, who says that the firm has been receiving more enquiries on ESG reporting since 2020, when the HKEX’s ESG reporting rules required listed companies to disclose significant climate-related issues that have impacted or are likely to impact the company. Adding to advisory Demand for ESG advisory will increase, Leung says, and notes that firms should start familiarizing themselves with the latest ESG reporting requirements. “The goal of achieving net zero by 2050 and meeting some interim targets by 2030 has created some awareness in the market,” he adds. “SMPs need to be aware of this and start preparing, especially if they advise listed companies.” Lo of Prenetics agrees, pointing out that the reporting landscape for companies has transformed over the years. “In the past, a company’s worth was mainly measured by its financial statements – howmuchmoney they made, and what their expenses were. What people failed to consider was the ‘cost’ of their profit,” he explains. “And that cost was measured in monetary terms – expense items, depreciation, amortization – when there’d been a social and environmental cost all along.” Demand for advisory, in general, has seen an increase over the past two years, adds Leung of Linkers CPA, with the trend likely to continue. “Because of this economic climate, a lot of our clients have been asking us to provide themwith solutions,” he says, pointing out that the firm has been providing advisory for internal control, ESG reporting, and pre-initial public offering consulting. Getting in on the transactions An ability to advise clients on cryptocurrency and monitor transactions taking place through a blockchain will also give accountants an edge. In September 2021, El Salvador became the first country to accept Bitcoin as legal tender, prompting businesses to accept the digital coins as payment wherever possible and millions of citizens to download the government’s new digital wallet app. The move, according to El Salvador’s law: a meaningful test for Bitcoin, a report by PwC issued in October 2021, is “the first domino to fall in broader global adoption.” With global adoption of cryptocurrency increasing – over 880 percent in 2021 according to software company Chainalysis, Inc. – accountants have the opportunity to take advantage of a niche but growing market. There is currently no specific accounting standard in relation to how cryptocurrency should be accounted for, leaving auditors to refer to applying existing standards. “Things aren’t so clear right now, and some people are very worried about it,” Khan of Aptorum says. “Accountants will need to be able to understand cryptocurrency and the accounting standards surrounding them, the rules and how they are created and regulated. This will provide more assurance to investors and greatly help the development of the industry as a whole.” Expertise in cryptocurrency, blockchain and data analytics will indeed future-proof accountants, adds Wu. “More institutions are showing an interest in or getting into blockchain, so it’s important for accountants to understand how to analyse it,” he says. “A lot of people are now talking about on-chain analytics, which is data science and data analytics, but with blockchain. It’s one of the hottest fields right now.” Though on-chain analytics may seem complex at first, accountants can make use of its nature to look closely at transactions, notes Wu, who is starting a new on-chain analytics branch at his company to tap into rising demand from clients. “With blockchain, you can try to hide your money, but at the same time, there is transparency. All wallets are transparent; you can always see where money is going.” Leung concurs, adding that his firm has been serving more clients who provide blockchain advisory or conduct transactions using cryptocurrency. “I suggest practitioners to familiarize themselves and do research on the matter, especially about its impact on audit,” he says. One related area gaining interest among investors and clients, Leung adds, is non-fungible tokens (NFTs), a non-interchangeable unit of data stored on a blockchain that provides a public certificate of authenticity or proof of ownership of photos, videos, and audio recordings. “This ‘NFT wave’ is on its way,” he says. “By doing more research on new topics such “In the past, a company’s worth was mainly PHDVXUHG E\ LWV ȨQDQFLDO statements – how much money they made, and what their expenses were. What people failed to consider was the ‘cost’ RI WKHLU SURȨW ȉ “Accountants will need to be able to understand cryptocurrency and the accounting standards surrounding them, the rules and how they are created and regulated.” 18 January 2022

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