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Carrie Lam consults Institute members on retirement protection reformCarrie Lam, Chief Secretary for Administration, spoke to about 400 members last month on the topic of retirement protection, in the latest seminar of the current affairs series that aims to promote members’ awareness of important social and economic issues.

She highlighted the urgent challenge of Hong Kong’s ageing demographics, with the elderly population forecast to grow from 1 million to 2 million in the next 15 years, and said some tough decisions would need to be made.

Poverty alleviation and care for the elderly are key policy priorities of the government, Lam said, adding that retirement protection and elderly poverty are closely linked. Mandatory

Provident Fund Schemes launched in 2000 cannot fully address retirement protection for the elderly, the secretary cautioned, acknowledging that there have been repeated calls from the community over the years for a universal retirement protection system. The government has set aside HK$50 billion for improvement measures, Lam added.

Members are invited to submit their views to the consultation to views@rp.gov.hk by 21 June.

Institute launches soft skills seriesIn recognition of the ever-increasing importance of soft skills to the

repertoire of CPAs, the Institute has launched a series of seminars and workshops. The soft skills series will focus on a range of areas that world-renowned business leaders and organizations say are essential for business and individual success. The series kicks off at the end of May, with interpersonal and communication skills, and then continues throughout the year, covering people management skills, presentation skills, creative thinking and problem solving skills, and leadership and management skills.

ObituariesThe Institute notes with regret the passing of Chu Wai-kok and Wong Kwok-fung.

Carrie Lam, Chief Secretary for Administration, speaks to members on how demographic changes prompt urgent need for a rethink on retirement protection

4 May 2016

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Disciplinary findingChan Ying Kit, CPA (practising)

Complaint: Failure or neglect to observe, maintain or other-wise apply Hong Kong Standard of Auditing 500 Audit Evidence and HKSA 700 Forming an Opinion and Reporting on Financial Statements.

Chan audited the financial statements of two Hong Kong private companies for the period ended 31 December 2010. In one of the audits, Chan failed to obtain sufficient evidence for a material expenditure. In the other audit, he failed to assess the adequacy of financial statement disclosure and obtain sufficient evidence to conclude the financial statements were

free of material misstatements, regarding investments in two subsidiaries. The complaint was made under section 34 (1AAA) of the Professional Accountants Ordinance.

Decision and reasons: Chan was reprimanded. In addition, he was ordered to pay a penalty of HK$50,000 and costs of the disciplinary proceedings of HK$96,158.60. In making its decision on sanctions, the Disciplinary Committee took into consideration, among other things, Chan’s decision to contest the complaint and the absence of dishonesty on his part in committing the breaches.

Details of the disciplinary findings are available at the Insti-tute’s website: www.hkicpa.org.hk.

A Plus wins awardThe magazine you are currently reading has been recognized with an honours award by the Astrid Awards, an international pro-gramme that celebrates and rewards the most successful and influential creators of design communications in the world.

Membership survey lucky draw winnersCongratulations to Choy Kwok-wai, Chung Chin-hung, Lam Wai-sze, Law Chi-ho, Wong Miu-ling and Kent Wong Sze-king for winning prizes in the membership survey lucky draw. The survey results will be available soon.

Institute in numbers

15 Sports and Recreational Interest Groups with

To help members strike a better work-life balance and connect with fellow members, the Institute runs

11,736 members (one Institute member can join up to five interest groups)

The three most popular interest groups are:

1,745members

Badminton

1,298members

Golf

1,222members

Athletics

May 2016 5

NewsAccounting

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The Vatican suspended an audit of its 2015 finances by PwC last month, but said that the suspension is not due to issues with the Big Four firm’s work but pending an analysis of certain aspects of the auditing arrangement.

Unnamed sources told the media the decision was taken to determine whether proper procedures were followed when the contract was signed December last year by the Secretariat for the Economy, which is headed by Australian Cardinal George Pell.

The move is said to mark a setback for Pope Francis’ drive to reform the city-state’s scandal-ridden economy and align it with globally accepted accounting

standards. According to the Guardian, the surprise decision also exposes an internal rift between the church’s old guard and supporters of financial reform.

The suspension of the audit was announced in a letter to the Holy See departments on 12 April by Archbishop Giovanni Angelo Becciu, a senior official in the Secretariat of State, the body that handles the Vatican’s political and diplomatic affairs and is seen as sceptical of the financial reform efforts, reported the Financial Times.

Cardinal Pell said in a statement that he was “a bit surprised” by the suspension and anticipated the audit would “resume shortly.”

In 2014, Pope Francis endorsed a plan for the Vatican to adopt international standards, better internal controls, transparency and governance of the church’s finances. The Vatican bank’s senior officials have recently been hit by accusations of corruption, financial mismanagement and money laundering.

“Issues have emerged regarding the meaning and scope of certain clauses of the contract and their methods of implementation. Such elements will undergo the necessary examination,” said a statement released by the Holy See. “The commitment to adequate economic and financial auditing remains a priority for the Holy See and for Vatican City State.”

Vatican suspends PwC audit of state finances

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Australia cracks down on multinational tax avoidanceThe Australian government announced the planned introduction of a diverted profits tax during its annual budget on 3 May, in a bid to further stamp down on multinational tax avoidance. The tax rate of 40 percent, rather the usual 30 percent, is similar to the so-called “Google tax” introduced in the United Kingdom last year and is expected to raise A$3.9 billion over the next four years. The government is also creating a new tax avoidance task force of 1,000 specialist officers who would pursue cases of deliberate tax avoidance and evasion under the new regime with harsher penalties.

China signs pact to close tax loopholeChina signed an agreement this month on the exchange of country-by-country reports by multina-tionals. The move reflects China’s contribution to a global effort to clamp down on multinationals alter-ing the price put on labour, services or intangible asset transfers within global operations, allowing them to minimize tax bills. Wang Jun, Commis-sioner of the State Administration of Taxation, signed the agreement during the 10th meeting of the Organisation for Economic Co-operation and Devel-opment Forum on Tax Administration in Beijing.

PwC opens global drone divisionPwC Poland launched commercial surveyor drones earlier this month after testing drone-powered technologies from April last year. The firm also set up its global drone headquarters in Poland, named Drone Powered Solutions, to focus on the use of drone technology and data analytics in business. Accord-ing to a report by the firm, commercializing drone usage could replace US$127 billion worth of existing business services and labour. In 2013, Poland became the first country in the world to introduce a full legal framework and institutions regulating the commercial use of drones.

EY calls for new rules for debt-equity swapChina’s banking regulators should bring in new poli-cies for the planned debt-equity swap programme, such as relaxing regulations on risk-weighted assets, to save banks from capital strains, said EY this month. Under the current rules of the China Banking Regu-latory Commission, if a loan is converted into equity, the amount of risk-weighted asset is enlarged four times for equities held for two years by the bank and 12.5 times if held longer, Jack Chan, EY’s Managing Partner of Financial Services, Greater China, told the South China Morning Post. In March, Premier Li Keqiang said that the government may use “mar-ket forces” to implement the swaps to ease the debt burden of banks and enterprises.

May 2016 7

Or US$4.4 billion, the net loss Toshiba reported for the recently

ended fiscal year. The figure is more than 10 times its loss from a year earlier, and partly a result

of a complete overhaul of its management after the company admitted to having overstated its

profits for several years.

A world of numbers

The value of mergers and acquisitions deals that have fallen

apart in the United States since the start of the year, according to data provider Dealogic. Reasons for failure include intervention by regulators, unwilling targets and

unsteady markets. The figure will be a record even if no further deals

fall through in 2016.

The amount that has been siphoned out of emerging economies such as China and Russia into offshore tax

havens, according to research by Tax Justice Network, an organization that advocates against tax avoidance. The

group is calling for an international commission to fight capital flight.

US$345million

¥483.2 billion

US$12trillion

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AI transforming face of Big Four hiringGiven the rate at which artificial intelligence is speeding up the au-dit process, the number of graduates hired by Big Four firms could drop by 50 percent by 2020, Steve Varley, Chairman and Manag-ing Partner of the EY’s United Kingdom and Ireland operation told the Financial Times. The onset of digital disruption means that graduates with skills in areas such as data analytics and computer science will be increasingly in demand in the future, noted the FT.

Brazil’s president accused of being creativeImpeachment proceedings have begun against Brazil’s president, Dilma Rousseff, based on allegations that she broke fiscal laws last year to hide problems with the country’s balance sheet. Her accusers say she used creative accounting techniques to delay moving treasury funds to state-owned banks to pay for govern-ment initiatives, making Brazil’s public finances look better than they actually were. Rousseff has denied wrongdoing saying her predecessors did exactly the same thing.

FASB proposes updates to revenue standardThe Financial Accounting Standards Board in the United States has issued a proposed update to improve guidance for the new revenue recognition standard, in relation to collectibility, non-cash consideration and completed contracts at transition. The FASB and the International Accounting Standards Board released the long-anticipated converged revenue recognition standard last year. However, many companies said they were not ready for implemen-tation, so the boards delayed the effective date until 2018.

Internal appointment for new Toshiba CEO Toshiba has named company veteran, Satoshi Tsunakawa, as its new CEO, pending investor approval. He will replace Masashi Muro-machi, who was appointed acting chief executive officer in the af-termath of an independent investigation revealing that the company had over-stated profits by around US$1.22 billion between 2008 and 2014. Prior to his appointment, Tsunakawa was head of Toshiba’s medical equipment division before it was sold to Canon.

Dilma Rousseff

AFP

Satoshi Tsunakawa

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