Thursday December 16, 2004 News
Hartmann's judgment reviewed
[Comment]
by Alan Kong
The argument for granting the leave for appeal, prima facie,
is weak, given that the law vests the Housing Authority with the power to provide
housing and amenities (including the subject matters, the car parks and commercial
shops) through third parties, in the phrase "to secure the provision"
in section 4(1) of Housing Ordinance.
However, given the inherent nature of privatization which embodies the stance of profit maximisation as if other commercial business, unless there is a valid agreement entered into between the Housing Department and the Link Real Estate Investment Trust to govern the terms of the provision of the latter's services, it may be in doubt whether Housing Authority continues to secure the provision within the contexts of the Ordinance.
Saturday November 27, 2004 News
e-learning of IFRS
[Comment]
by Alan Kong
Deloitte has launched the web
page with free resources for those strive to learning international financial
reporting standard (IFRS) on their PC. Please download each set of FRS as indicated
and unzip into the harddisk for viewing of the contents.
Please note that HKAS and HKFRS will be effective for the financial period starting on 1 January 2005 which is closely compatible with IFRS.
Friday November 19, 2004 News
Long time no update
[Comment]
by Alan Kong
I have been busy in my current position as internal auditor
which requires me to travel oversea in order to review and audit the operation
of business units located in different countries. Also, I am the incumbent to
review the tax planning and compliance of taxation affairs. The indecent performance
of our tax representatives has caused me a lot of extra workload.
HKICPA (formerly known as "HKSA") has recently released or revised a bundle of HKAS and HKFRS, not to mention other standards like HKSA, SAS. Most of the revisions are resulted from the change of Institute's name.
In Hong Kong taxation perspective, no major update of case law and ordinance. KWONG MILE SERVICES LTD v. COMMISSIONER OF INLAND REVENUE ( FACV20/2003), held that the activities and operation carried out in order take the opportunity to each the income is irrelevant, may have implication for our tax planning scheme. It is more sensible to break down the operation into different segments being conducted by individual entities. On the other hand, for certain taxpayers wish to take the benefit of 50:50 apportionment outlined in DIPN 21"Locality of Profits", the picture is still unclear as to inconsistent treatment by the assessors in respect of the mode of entities concerned and substantial emphasis on form by the IRD (i.e. the processing arrangement and agreement, customs reporting documents such as declaration form and registration manual...), HKICPA has stated in its letter that this matter shall be discussed in the agenda with the IRD in Jan 2005. However, the minute of 2004 still unavailable for our information.
The quota restriction will be set aside in early 2005 for WTO members except China to which specific cautious measure may be applied. This is a good time for us to review the global transfer pricing scheme. Please also note that the state of taxation in the PRC has recently promulgated the regulation or notice regarding the transfer pricing.
As working as internal auditor, we have a good commercial and technical exposure. The concept underlines our scope and methodology is the enterprises-wide risk management which focuses on the measure (risk oriented) built in the strategy and planning for the achievement of the objectives.
I also changed my internet service provider (ISP) from i-cable to hgcbroadband. However, no web space is offered in my existing plan. So I use "GeoCities of Yahoo" for the hosting of my homepage. Thanks for their free services. However, in any circumstance, my DNS, http://cpa.no-ip.biz, will never been changed.
Sunday July 11, 2004 News
Current status of HKSA strategic change
[Comment]
by Alan Kong
Upon a lapse of four months since submission of member's
bill to Legislative Council in March 2004, Professional Accountants (Amendment)
Bill 2004 was eventually passed on 9 July 2004. The main change of the bill
is the change of society's name and members' designation from Hong Kong Society
Accountants and AHKSA to Hong Kong Institute of Certified Public Accountants
(HKICPA) and CPA respectively. The designation of practising members is CPA
(Practising). Apart of this surface change, the bill incorporated the expansion
of Council membership including addition of lay (non Society) members, reformation
of investigation and disciplinary panels and committee in the light of corporate
governance and other miscellaneous protection and technical changes. Our representatives
for introduction of this bill, Mr Eric Cheung, also announced his retirement
of being the legislative members upon the expiration of this term.
As an integral part of the strategic change, HKSA has announced that it will discontinue their existing recognition arrangements with the six professional bodies (ACCA, CPA Australia, AIA, AICPA, CIMA and CIPFA) with effect from 30 June 2005 and adopt the alliance to maintain reciprocal relationship with the institutes of Chartered Accountant (CAGE). However, the requirement of recognition of ICAEW's membership should be correctly stated as:
"Under the terms of the proposed co-operation agreement all members of the Hong Kong Society of Accountants (HKSA) who have gained entry to the Society through the CAGE approved QP programme will be offered, on application, full membership of the Institute of Chartered Accountants in England & Wales (ICAEW), which would run in parallel to their membership of the HKSA.
Those members of the HKSA who qualified before 1986 will also be able to apply for parallel membership of the ICAEW provided that they have at least five years practical experience, three of which should be gained within a practising environment or with an HKSA recognised employer."
For full text, please refer to here.
It apparently contravenes the announcement from HKSA on 22 June 2004 which allowed the existing members who gained its membership under joint examination scheme shall become eligible for ICAEW's full membership.
This move has a substantial impact to the existing students of ACCA which will not eligible for HKSA membership if they are unable to complete the exam on or before 30 June 2005. ACCA has already announced their disappointment on HKSA's move on 2 July 2004:
"As you are probably aware, HKSA has recently announced an agreement with the Institute of Chartered Accountants in England and Wales (ICAEW) which will grant ICAEW membership to HKSA members with appropriate public practice work experience who qualified under the ACCA/HKSA Joint Examination Scheme. Additionally, HKSA has informed ACCA of its intention to terminate the mutual recognition agreement with ACCA on 30 June 2005 .
ACCA is very disappointed by the action taken by HKSA and intends to work with HKSA to achieve a more satisfactory outcome. We will do this within the spirit of cooperation between the two bodies which has existed over the last 20 years and has materially contributed to HKSA's development."
I think the most challenging change adopted by HKSA is its intention of full convergence of Hong Kong Accounting Standards to International Accounting Standards (IAS) which to be completed at the end of this year. The dramatic and hurdle change of standards may make pressures (but may be opportunities) upon us, as practising members, to keep abreast of this in practical manner.
Saturday July 3, 2004 News
The underlying intent of territorial concept in Hong
Kong taxation
[Comment]
by Alan Kong
Upon visited IRD web site and knew that the Inland Revenue
(Amendment) 2000 Bill had been passed by Legislative Council on 16 june 2004.
Read through the contents of which and also reviewed the comment from Bills
Committee at here,
the territorial concept of Hong Kong Taxation, prima facie, begins to be unsustainable
under the evolution from case law and multinational activities of businesses,
although Section 14 still remained robust. The underlying intent of territorial
concept, in my opinion, is for the sake of simplicity and gaining the competitiveness
of Hong Kong investment. Territorial concept, is a mean, rather than an objective.
Despite the divergence of views from the professional bodies and Inland Revenue
Department (IRD), I believe that, this move is acceptable on the grounds that
it does not prejudice the right of licensors to have a tax credit, if it indeed
arises despite appears rare, to offset the tax paid to other tax jurisdiction;
this approach is still consistent with underlying intent of territorial concept,
similar with the sources of income in salary tax section which 100% of salary
is assessable to tax if it is under Hong Kong employment, no matter whether
certain part of income is derived from other jurisdiction (i.e. Mainland), a
tax credit is so deployed to relief the burden of taxpayer.
However, section 108 of our basic law in Hong Kong clearly states that HKSAR shall take into account of the low tax policy previously pursued in Hong Kong as reference whilst enacting taxation law, section 15(1)(ba) may in fact contravenue this provision; the tax to non-resident person shall be confined to Hong Kong source only.
Under the impact of globalization and recent case laws for testing of sources of income, the hard practical approach in respect of weighing test and apportionment concept, may lead to the expansion of profits excluded from sources of income net in certain business schemes (i.e. Magna case) falling into extreme limit of spectrum; questioning the territorial concept under Section 14 can be sustainable in long run.
Tuesday June 22, 2004 News
HKSA granted support from ICAEW
[Comment]
by Alan Kong
HKSA has officially announced that the Councils of the Hong
Kong Society of Accountants (HKSA) and the Institute of Chartered Accountants
in England & Wales (ICAEW) have agreed the principles of a membership agreement
between the two bodies. Subject to agreeing the fine details, the agreement
will give all HKSA members who qualified under the QP programme access to full
membership of ICAEW without being required to sit an aptitude test. In addition,
existing appropriately qualified members of the HKSA will have the right to
be admitted to and take up full membership of the ICAEW as chartered accountants.
Members who are appropriately qualified are those who:
Those who became a member of the HKSA after 1986 only by virtue of their membership of another body will not be eligible for ICAEW membership.The ability of appropriately qualified HKSA members to apply for membership of the ICAEW will exist until 31 December 2007. The agreement will provide for membership rights only and does not confer practicing rights, or the right to conduct audits in UK/Europe. ICAEW members in Hong Kong will, similarly, have access to full membership of the HKSA without being required to sit our aptitude test. There will be a continuing requirement, however, to pass appropriate practising certificate examinations for those wishing to practise in Hong Kong.
In my opinion, the move of ICAEW indicated that it's comtemplating to enter the global arena to keep abreast the changing environment. The professional designation of Chartered Accountant, one of the hardest qualification to obtain among others, is eventually open to us. However, will it be the key to fortune is still remained uncertain.
Sunday June 6, 2004 News
ERM sharpen the role of internal audit
[Comment]
by Alan Kong
Before introduction of Enterprise Risk Management (ERM) concept,
the role of internal audit is not totally value added to the entity as a whole.
For instance, there is no audit programme to assess the market risk which may
be one of the important factor influencing the achievement of entity's objective.
Bring the ERM into action, I look forward that the methodology of internal audit
will be re-engineered and bringing the holistic approach to uphold the shareholder
value and corporate governance. The Institute of Internal Auditors has released
a ERM position statement to outline the role of internal auditor in this respect.
The details can be found in here.
I also recommended the interested party to review the draft ERM framework formulated
by Committee of Sponsoring Organizations of the Treadway Commission (COSO),
the National Commission on Fraudulent Financial Reporting in the United States.
The copy of which can be found in here.
The web page can not been updated for more than one month because I was out of town for business trip recently. Since the culture varies between working environment in different countries, it is utmost important that no matter how effective is the internal control system, the managment of people is critical to ensure the activities undergone by them is in line with the entity.
Thursday April 21, 2004 News
Change of job and professional status
[Comment]
by Alan Kong
I have changed my full-time job from an auditor in a CPA
film to an internal auditor in a manufacturing group with around 10,000 employee
worldwide. It gives me a room to being the head of internal audit department.
However, it seems that the management does not fully understand the changing
role of internal audit service. The traditional compliance role of internal
audit has been evolving into strategic oriented approach focusing on management
of critical risk the enterprise is facing.
On the other hand, HKSA has officially passed my application for Practising Certificate (P.C) to become a Certified Public Accountant (Practising) or in short CPA (Practising), thereby I am qualified to sign an auditor's report for limited companies.
Thursday April 12, 2004 News
Review of film "Miracle Box 天作之盒"
[Comment]
by Alan Kong
During the break of Easter's holiday, apart from reading
some books borrowed from public library to increase my technical knowledge of
trademark, copyright and libel law, I have watched two films, namely, The Passion
of the Christ 受難曲 and Miracle Box 天作之盒.
The Passion of the Christ 受難曲 described the details of Jesus in his last 12 hours before crucifixion. It gave me the correct belief of our heart towards the people and the insight into the greatness of Jesus which influences our world eternally.
Miracle Box 天作之盒 described the love story of the memorable doctor, Ms Joanna Tse 謝婉雯, who sacrificed herself to save the patients suffered from SARS. The story started from her falling into love with her husband, who was also a doctor. Her husband has demonstrated his enthusiasm to spread his faith of god to save the patients alongside his treatment by introducing the boxes to them which serves as a media to communicate with god. The story underpinned the strong belief between the couple upon the marriage and the commitment in which the wedding ring embodied. Joanna has upheld her commitment in this regard until the passing away of her husband suffered from blood cancer. It gave me the correct attitude of the marriage. Despite she has been depressed because the loss of her husband, she can stand up bravely to continue her profession. During the SARS outbreak in Hong Kong, she was one of the volunteer amongst all medical practioners to fight the diseases and save the patients suffered, until her passing away.
To me, the story and belief of Joanna towards her husband and the people is the lesson everyone should learn.
Love or not love?
[Comment]
by Alan Kong
It is my recent observation. Irrespective of how successful
we are, all of us cannot preclude the effect of love. The love to which I refer
associates with both sex. The love, is it a mean or an objective? It doesn't
matter. But it is an undeniable fact that it is highly occupying, both mentally
and physically.
Love is emotional behavior, in contrast with rational behavior like day-to-day tasks. The deeper of the love fallen in, the action carried out is getting less rational. For example, you may probe the private matter of your lover if you believe there is something unusual, no matter the action carried out is ethically improper. Similarly, you may interfere the personal life of your lover, even investigating the party with whom she telephones or meets.
There is a trade-off between your anxiety arises from overwhelming love and the apathetic feeling made by the lover from your insignificant love.
However, at a critical point, if we realize that our lover is complaining the lack of our love but simultaneously commence the complicated social life with another opposite sex, should we continue or underline our love? Or leaving the leeway of us? The extension of love may appear more secure to the relationship, but in contrary, the likelihood of mental damage may be substantial if final outcome is adverse.
No matter how much we understand our lover, only the lover herself totally controllable to her own behavior.
With the love element, a cost and benefit analysis can not be performed. Even an accountant, we still cannot make a critical decision on this matter rationally. If we can, the love may be vanished.
Thursday April 1, 2004 News
A new section, "Game 遊戲", is added
[Comment]
by Alan Kong
No matter how busy you are, you still need to sit down and relax. 5 enjoyable games are added in here.
Tuesday, March 30, 2004 News
A new section, "Referee 介紹人", is added
[Comment]
by Alan Kong
"Referee" section primarily concerns with the reward
paid to qualified person by whom a successful client is referred. For details,
please visit here.
I am still working on the "Online Fee quotation system" for the reasonably accurate fee quoted to prospective client based on information inputted to the system. The entrance of this system will be located in "Services" section.
On the other hand, our designation will be changed from AHKSA to CPA. Fellow members, with designation of FHKSA, will be changed to FCPA. Practising members or CPA, will be changed to CPA (Practising) or FCPA (Practising). The english name of Hong Kong Society of Accountants (HKSA), will be changed to Hong Kong Institute of Certified Public Accountants (HKICPA). The Chinese remains unchanged. The bill is passed to Legislative Council for reading.
Wednesday, March 13, 2004 News
Electra v KPMG: auditors' duty to third parties re-examined
[Comment]
by Alan Kong
The law in relation to the duty of care for economic loss
owed to third parties has been slowly developing since the ground-breaking decision
of Hedley Byrne v Heller in 1964. The House of Lords decision in Caparo v Dickman
in 1990 appeared to be a definitive statement of the duty. In that case it was
held that for a duty of care to exist in relation to a third party for economic
loss, three essential requirements had to be satisfied; foreseeability, proximity,
and whether it would be just, fair, and reasonable to find that such a duty
existed.
This decision was welcomed, particularly since it allowed for the consideration of policy issues when reaching a conclusion. However, a string of subsequent cases, from White v Jones in 1995, through to BCCI v Price Waterhouse in 1998, have seen the Caparo test change to one based on an 'assumption of responsibility'. This development has met with much criticism, because the ambit of the test is far from certain, and also because it appeared to increase the number of situations where such a duty would arise. This is illustrated by the decision in the BCCI case, which involved an attempt by the liquidators of one company within the BCCI Group to recover damages from the auditors of another group company. The defendants succeeded in having the claim struck out at first instance, but the Court of Appeal found it was at least arguable that a duty of care arose. The Court of Appeal's judgment in the BCCI case has been criticised for broadening the assumption of responsibility test to the point where an assumption can be found in almost any situation, and therefore making what was an uncertain area of law even less clear.
Electra Private Equity v KPMG Peat Marwick
It is against this background that the Court of Appeal were asked to consider a case with similar facts to those in BCCI v Price Waterhouse. In Electra Private Equity & others v KPMG Peat Marwick & others, the claimants sought to bring a claim against the auditors of a company in which they had invested £10m, and which had later gone into liquidation. The claimant had relied on the accounts prepared by the company's auditors, which were supplied to their own advisors. The claim was struck out at first instance on the basis that in order for a duty of care to arise in relation to a third party in these circumstances, the claimant would need to show that the auditors had consciously assumed responsibility to the third party beyond their statutory duty to the company whose accounts were audited. This approach is a narrow interpretation of the 'assumption of responsibility' test, and requires positive action by the auditors before the information was relied upon. This was the version of the test which had received the most support from those critical of the move away from Caparo, both because it is the version which fits most easily with the judgment in Caparo, and also because it limits the occasions where a duty will arise, and therefore makes it less unpredictable.
However, the Court of Appeal also overturned this decision, finding that there was a triable issue on these facts. They said that to insist on a conscious assumption of responsibility was to set the threshold too high, particularly at a strike out stage. They went on to say that the triable issue was whether or not the auditors knew or foresaw the purpose for which the accounts were required, and whether they had therefore assumed responsibility for their accuracy in these circumstances. The court also stated that the fact that the claimant had its own advisors would not necessarily prevent a duty of care from arising, particularly when the auditors were aware that these advisors intended to rely on the information they had provided.
Effect of the decision
The Court of Appeal's approach in Electra is further proof that the courts have moved away from the strict test in Caparo, and are more inclined to find that a duty of care will exist in these situations. Before taking this as confirmation that all such actions will now succeed, it should be remembered that this was an interlocutory decision as to whether or not there was a triable issue. Although the claimants have made it through this initial hurdle, it remains to be seen whether a judge at a full trial will find that the auditors had foreseen the purpose for which the claimants required the accounts, and had assumed responsibility in these circumstances. There are two main lessons which can be learned from this case - it proves that this area of law is still very uncertain, a point specifically noted by the Court of Appeal. The decision also highlights the point that third-party liability may arise even when that party has also appointed its own professional advisors. Auditors can no longer feel secure in the knowledge that any third party that chooses to use their information in conjunction with their own advisors will be prevented from claiming against them.
Wednesday, March 10, 2004 News
2004/05 financial budget
[Comment]
by Alan Kong
Our Financial Secretary announced the financial budget for
2004/05 today. Despite there is an uplift of the economy, he has maintained
the tax base intact. Given the growing trend of economy, it's unwise to impose
additional tax to intervene the economic environment. However, the significant
growth of property market may be one of the major source of fund inflow to the
HKSAR Government if the bidding of land re-commence this year.
The rise of property price is really awesome. Conservative to say, the average property price grew 30-40% from end of last year. As a landlord who acquired a property in September of last year, I am really happy in light of the recent trend of property growth. However, it is uncertain as to the implication of exceptional growth of property price towards the economy as a whole.
Wednesday, February 25, 2004 News
New layout of IRD web page
[Comment]
by Alan Kong
Inland Revenue Department (IRD) has recently changed the
layout of its web page.
In addition, it has updated an Advance Ruling Case to No. 14 concerning the
tax issue for set up a liaison office in H.K.
Thursday, November 20, 2003 News
HKSAR Audit Department filled up by a non audit professional
[Comment]
by Alan Kong
The government announced that Mr Tang Kwok Bun will be appointed
as Director of Audit Department effective on 1 December 2003 after departure
of Mr Chan Yin Tat. Mr Tang pointed out that he has worked in various posts
in civil departments including the inspector of insurance industries which possessed
a certain extent of actuarial knowledge. Mr Eric Lee Kai Cheung, our representives
in legislative council, criticised that the incumbent of Audit Department should
have a professional knowledge in accounting and auditing.
I learned from SCMP that the basis requirement of the auditors in the department is qualified accountant. It may be weird that the head of the department does not possess such qualification. The morale and culture of the department may be adversely affected.
Wednesday, November 12, 2003 News
The web page will be revamped
[Comment]
by Alan Kong
Commencing from 1 January 2004, I shall be eligible to obtain
a Practising Certificate (P.C.) in order to carry out audit services to limited
companies, which has been delay for 8 months due to unexpected spin off of my
employer. In this connection, I endeavour to host a web page with interactive
features, in particular a real time fee proposal which is programmed to perform
a "without prejudice" fee quoted for incoming client, based on various
factors inputed by client himself (i.e. industry background, complexity of transactions).
This task may be highly in complex but may be justified. The web page will also
be more user friendly, including Bilingual support, definitely.
On the other hand, HKSA has issued Hong Kong Financial Reporting Standard (HKFRS) which will be effective on 1 January 2004. The new incorporated company may need to present the financial statements in accordance with this Standard. I am still reviewing the contents.
Sunday, September 12, 2002
News
New hosting of the web page
[Comment]
by Alan Kong @14:51
Please be informed that I have changed the hosting service
provider from IMS to i-cable. Please kindly bookmark this page here
for future access.
Sunday, August 12, 2002
News
New forum created
[Comment]
by Alan Kong @00:47
Due to the intense workload together with the preparation
of CICPA 2002 examinations, I have not updated the homepage for near two months.
Actually, except for various news of accounting scandals occurred in U.S. public
companies, there was no major accounting new which I consider importance to
discuss here. The economy of H.K. is still daunting and most of our citizen
is getting anxious to know when the downturn will bounce back, in particular
of the unemployed.
Actually, the traditional concept regarding the success of individual is measurement of monetary unit (i.e. money), this is one of the reason which gives rise to the downturn. The sole factor for economy is the productivity to satisfy people's need. One country's citizen is considered wealthy is caused by its productivity outweighs neighborhood countries. Making money may not be the critical factor links to productivity as it may be the internal distribution of fund, no substance of productivity at all.
Nowadays, the position of H.K. is lacking the fundamental base of productivity, which may be outcome by government measures with respect to the stimulation of industries. Certain people say that it may not be practical because of its adverse environment compared with the Mainland. It is not true. Three factors of input primarily consist of land, materials and labour, is progressively diminishing. If the government can be committed to alleviate the cost of living for general public, in particular to the lower income group, such as cost of dwelling and transportation. The labour cost can be more affordable to industries.
Besides, I would like to point out a comment regarding the civil servant. The service of civil servant is complement to main stream of productivity, however, it does not have direct productivity at all. In other words, it should be the most efficient and beneficial to overall economy with its minimum of resources involved, especially the human force. Otherwise, it may result internal distribution of fund as discussed earlier. Therefore, the direction of government should focus to attract most citizen to high value added productivity level playing field in order to revert the economy.
Thursday, June 13, 2002
News
Ten Steps To Branding Your Firm
[Comment]
by Alan Kong @12:24
After a six-week trial and 10 days of deliberations, jurors
convicted Andersen for obstructing justice when it destroyed Enron Corp. documents
while on notice of a federal investigation. Andersen had claimed that the documents
were destroyed as part of its housekeeping duties and not as a ruse to keep
Enron documents away from the regulators.
Andersen now faces up to 5 years probation plus a $500,000 fine.
The 12-member jury reconvened at the Houston court house at 10 a.m. ET and shortly thereafter declared that they had a verdict. Judge Melinda Harmon read the decision at 10:25 a.m. ET. Later, when the jurors were polled, they all individually said "guilty."
Government lawyer Andrew Weissmann said the case sends a signal. "When you expect the police, don't destroy evidence," he said. "For Andersen, the police was the [Securities and Exchange Commission]."
Leslie Caldwell, chief of the criminal division at the U.S. Attorney's office in San Francisco, led the investigation into Andersen and is also head of the Enron task force. She vowed to get to the bottom of the "Enron debacle," but declined to comment on any future indictments.
"We are not finished with Arthur Andersen," she said.
The verdict avoids a major embarrassment for the government, which had been expected to easily win the criminal prosecution of Andersen.
"From very beginning the government always had little to gain and a great deal to lose in proceeding to trial against Andersen," said Robert Mintz, former U.S. prosecutor and expert on white-collar crime and now partner with the law firm of McCarter & English. "The thrust [of their investigation] will now shift to Enron."
The "corrupt persuader"
The verdict comes a day after a crucial ruling from Harmon. Harmon, on Friday, said that the jury does not have to unanimously find that one "corrupt persuader" encouraged other Andersen employees to shred documents and keep them away from regulators.
Instead, the jurors could disagree on who actually acted as the guilty party as long as they agreed that someone acted knowingly and with corrupt intent.
Jurors, when questioned by CNNfn afterward, said that they all agreed that Nancy Temple was the "corrupt persuader." Temple is the Andersen attorney who sent the Oct. 12 e-mail that reminded executives about the firm's policy on retaining documents. But jurors in the criminal trial never got a chance to hear from Temple, since she chose not to testify and invoked her Fifth Amendment right against self-incrimination.
Since the jurors agreed on one corrupt agent, the verdict might be able to withstand Andersen's appeal, said Stephen Ryan, a former U.S. attorney now with the law firm Manatt, Phelps & Phillips.
"This last issue was a most interesting issue and will be important focal point," Ryan said. "It will be an interesting appeal."
How successful Andersen will be in their attempt to overturn the verdict is unclear. But government prosecutors will be looking to prosecute other individuals at Andersen, including Temple, Mintz said.
Prosecutors had identified four guilty agents at Andersen, including fired audit partner David Duncan, who testified as a government witness.
"They'd be hard pressed not to seriously consider prosecution against the three other individuals since their conduct was similar to Duncan and he pled guilty," Mintz said.
Andersen's fate
The verdict will likely be a fatal blow for the 89-year-old accounting firm, which is now operating as a shell of its once-powerful self. The firm has laid off 7,000 employees, sold many of its practices in the United States and has lost more than 650 of its 2,300 public audit clients this year. Thousands more employees in the United States and around the world are likely to lose their jobs as the firm shrinks.
Andersen lead defense attorney Rusty Hardin, in a conference afterward, said that the accounting firm was fighting for its legacy. "The jurors tried to do what they [thought] was right," he said. "Obviously, we are disappointed."
But Andersen is not through fighting and will file an appeal once it is sentenced on Oct. 11, Hardin said.
Andersen partner C.E. Andrews said the accounting firm will not close the doors to its offices just yet. "This was our chance to tell our story," he said. "We respect the process but the process is not over."
Now that the criminal trial is over, Andersen still has a fight on its hands. The Texas state accounting board has filed a motion to revoke Andersen's license in that state because of its role in Enron's collapse. The board is also seeking $1 million in fines.
Hardin warned Saturday that Andersen will fight every single accounting board that takes action against the firm. "Come on down," he said. "We will be there."
Andersen still faces an investigation by the Securities and Exchange Commission. Before the criminal trial in Houston started, Andersen had been on the verge of entering a settlement with the regulator, sources close the situation have said.
But more importantly, the firm is still a defendant in the class-action lawsuit filed by Enron shareholders and employees. Talks between the two sides broke off last month after Andersen offered $300 million to resolve all civil actions against it. The Enron Corp. creditors' committee has also signaled that they may go after the 1,700 partners of the accounting firm.
The bickering
During much of the trial, Hardin bickered with prosecutors and even got into squabbles with Judge Harmon, which led to one memorable shouting match.
Government lawyer Andrew Weissmann declined to comment on Hardin's conduct during the trial. "It didn't' work in this case," was all he said.
The grandstanding was part of Hardin's job, Ryan said. "Hardin has to be strong enough
to believe in what he is doing even when everyone disagrees
with him. He nearly pulled it off."
Thursday, June 13, 2002 News
Ten Steps To Branding Your Firm
[Comment]
by Alan Kong @22:50
Studies show that 75% of law firms are either in the process of a branding campaign
or are considering one. Why? Succinctly put, branding creates differentiation
and client loyalty. It is the purposeful development of a personal relationship
between the client and the product or service. A brand is not all consuming
but rather, represents a piece of the whole, one aspect of the firm. Encapsulate
that one aspect or the associated idea and you create a “brand” or identifiable
mark which enables a client or consumer to draw the emotional line between the
mark and the product or service, i.e. Hallmark means Quality.
In an increasingly competitive marketplace, it becomes important for accounting firms to know what they stand for, how clients, referral sources and the business community perceive the firm. In “Branding Your Law Firm,” GreenfieldBelser, a giant in law firm branding states, “Why do people feel so passionately about Coke or Pepsi when blind taste tests prove consumers cannot tell the difference? Because they identify with something the brand represents.”
Here are 10 steps you can take to identify your firm's existing brand and map out your firm’s differentiators to begin your branding efforts.
Branding allows you to take control of the buyer's perception of your firm. Is it worth the time and expense? Yes. How many times have you been passed over for a profitable consulting engagement because the buyer wasn't aware that your firm offered that particular service? As buyers look for increasingly specific expertise, you want to make sure the buyer is receiving the right message about your firm.
Research has shown that the average professional is bombarded with over 3000 visual and auditory messages a day. Can the right buyer find you? What will come to mind when he or she sees your firm’s name? You can trust to luck or let your firm’s brand speak for itself.
Friday, May 17, 2002 News
Xbox to be built in China
[Comment]
by Alan Kong @22:50
Microsoft Corp. plans to open an Xbox manufacturing operation in Doumen, China
with its EMS partner Flextronics International Ltd.
The move will allow Microsoft, the Redmond, Wash., maker of the Xbox gaming device, to tap China's low labor cost and continue its relationship with the Singapore-based contractor. Flextronics will set up a manufacturing and assembly operation for the Xbox game system in China later this year.
Monday, May 13, 2002 News
Intel to assemble Pentium processors in Shanghai
[Comment]
by Alan Kong @23:12
U.S. semiconductor giant Intel Corp. said Thursday (May 9) that it was setting
up facilities to assemble and test Pentium 4 microprocessors at its plant in
Shanghai, China, but has no immediate plans to set up a wafer fabrication facility
in China.
Intel said the new facility for Pentium chips built in 0.13-micron technology would be completed by the end of this year, and the microprocessors bearing "Made in China" stamps would be produced in the first half of 2003.
Intel currently makes its chips in the United States and Ireland then ships them to be assembled and tested in the Philippines, Malaysia and Costa Rica, company officials said.
Further to the trend of most Japanese giant electronic manufacturers moved their production lines to China, U.S. giant clip company eventually follows this way. In an investor's perspective, the total cost of investment is its most concern of the location it is prepared to invest which takes into account of quality supply in term of land and labour. Whilst China does have a complicated tax system, but in overall position, the relatively low production cost and increasing well developed infrastructure is indeed a critical factor that attract worldwide investors to choose her as a mass production centre among all over the world.
We may be aware that the position of Hong Kong is in the contrary. Despite the simple tax system with relatively low rate, the combination of high labour and land cost is inevitably a vital drawback for the setting up a sizable manufacturing centre in Hong Kong. A stable economy should rely on balanced industries to survive with certain portion of manufactures and services. Solely rely on service industries may be vulnerable to fluctuation as it is largely rely on the external sources for a complete economic cycle. In light of the above, Hong Kong may adopt one of the two strategies, first, set up sufficient manufacture activities situated in Hong Kong or, second, move all manufacture activities to China and convert itself into a service economy. For option one, I suggest the government to maintain a proper production environment for manufacture in term of land, labour and infrastructure, and for option two, it is advisable to reallocate more Hong Kong labour to China and convert more industrial area for other uses. Otherwise, it may result "stuck in the middle".
Tuesday, May 9, 2002 News
KPMG to acquire Andersen consulting units
[Comment]
by Alan Kong @00:34
KPMG Consulting is in advanced talks to acquire the bulk of Andersen Worldwide's
global consulting business, continuing the disintegration of the professional
service firm tainted by its role as Enron's former auditor.
KPMG Consulting, which was spun out of its parent's tax and auditing business last year, said it had signed a letter of intent to buy Andersen's consulting units in 23 countries for $284m in cash, and will also issue up to 6.5m new shares new shares to lock-in the Andersen partners.
The legal action facing Arthur Andersen, the US unit of Andersen Worldwide, over its role as Enron's former auditor has prompted the disintegration of the business as clients dropped the firm, partners left and rivals snapped up the remainder.
Rand Blazer, chairman and chief executive officer of KPMG Consulting, said the deal would be accretive to earnings in its first year, whether or not it buys Andersen's US consulting business, which accounts for almost half of the $1.4bn in annualised revenues it aims to capture.
The purchase of the US business is contingent on the "satisfactory resolution" of potential liability issues facing the consulting business. Arthur Andersen is currently facing charges of obstructing the US judicial investigation into Enron.
Mr Blazer said Andersen had managed to hold on to most ofit's consulting clients despite the scandal surrounding its audit side, and was performing better than its peer group. He said margins were lower than at KPMG Consulting, but hoped to bring them up to similar level in 12-18 months.
Mr Blazer said it could either pay cash and draw on bank leans to fund the deals, or issue new stock. He said the company is still interested in acquiring KPMG's European consulting operations.
The current talks cover Andersen's consulting operations in the US, Latin America, Asia Pacific and Europe, but not the UK. It has already closed deals with the practices in Hong Kong and China.
Analysts said the deal made sense, providing KPMG with geographical diversification and reducing its reliance on US public sector business, notably through Andersen's strength in consumer industries.
Mr Blazer said the proposed acquisition provided a good strategic fit, with little overlap, with the firms sharing only 15 of their respective top 100 clients.
KPMG Consulting said 90 per cent of the partners in each Andersen practice would have to vote in favour of the proposed deals. If all are completed, the company would add 8,000 staff to its existing workforce of 9,000 and the equivalent of $1.4bn in annualised revenues to the $2.9bn which it generated in the year to June 30, 2001.
Andersen has already agreed to transfer a "significant number" of employees in its tax practice to rival Deloitte & Touche. Almost all of its auditing businesses around the world have already agreed to transfer to what is now effectively the "Big Four" group of accountancy firms.
KPMG Consulting shares were up over 14 per cent to $17.24
in mid-morning trade.
Friday, April 12, 2002 News
For whom is interested in practising in mainland
[Comment]
by Alan Kong @16:10
I have enrolled CICPA exams in this year, namely, 稅法, 經濟法.
It is my first attempt as I considered that it is the appropriate time to so
do. The PRC authority is eventually opening the gate for non local citizen to
practice in the mainland after the completion of all given requirements such
as the attainment of CICPA non practising member and possession of sufficient
approved experiences.
It is a huge market. As a youth person in age of 25, I think it is an irresistible
lure.
My strength is being working in local CPA film and is the associate member of
HKSA and ACCA. I have completed the PC(Law) exam and shall be able to obtain
PC and become a CPA in forecoming year. My weak point is my exposure to PRC
market remains inadequate as still have no visible chance to work independently
for durable time.
Furthermore, from my understanding, the passing rate of CICPA papers were less
than 10% in respect of Hong Kong candidates as shown in recent official records
which might result daulting people who is interested to possess the relevant
qualification for practising in mainland. It should be a real threat for me.
In view of foregoing, I would like to make more friends who are also interested
in practising in PRC. Should you have any enquiries concerning the above, please
feel free to contact me.
Friday, March 22, 2002 News
Andersen's HK and China partners opt for PwC
[Comment]
by Alan Kong @01:14
The partners of Andersen in Hong Kong and China said on Thursday they had decided
to join their practices with PwC, the largest of the "Big Five" professional
servces firms.
The combined entity is expected to become the biggest international accounting and tax advisory practice in China and Hong Kong, with a total staff of 6,000.
"In combination with PwC, we will be able to develop a truly leading position," said Albert Ng, managing partner for Greater China at Andersen.
The move caused surprise in some quarters. Executives from 13 Asian units of Andersen earlier this week endorsed a proposed merger with another leading international accounting firm, KPMG, after a two-day meeting in Singapore.
That union, which was to have been negotiated on a country-by-country basis, would have created Asia's largest accounting firm with about US$2bn in revenues and more than 28,000 employees.
Andersen partners in Asia had also earlier rejected a regional merger with Ernst & Young, supposedly in preference for the global alliance with KPMG.
Officials at Andersen Hong Kong and China were not available for comment on why they opted for PwC.
Andersen was expected to contribute about 2,600 staff to the newly combined practice with PwC.
Asia accounts for 13 per cent of Andersen's global business, with big clients including China Unicom, Taiwan Semiconductor Manufacturing and News Corp.
Andersen was auditor to Asia Pulp & Paper, an Indonesian timber company that suspended payments to creditors last year. The firm has also been named as a defendant in a suit filed by APP creditors in the US, which alleges accounting misstatements by APP.
The Hong Kong Society of Accountants is also reviewing the part played by Andersen's Hong Kong operations in the aborted stock listing of JW International Holdings, a printing firm, last July.
An audit report by Andersen was published in JW International's
prospectus. But Andersen later withdrew the report after the Hong Kong stock
exchange received anonymous letters alleging the prospectus overstated revenue.
Andersen denied any wrongdoing, while JW International cancelled the offering
and returned HK$81m ($10.4m) to investors.
Tuesday, March 12, 2002 News
Andersen is said to be near sale to rival
[Comment]
by Alan Kong @00:04
Andersen, facing the defection of employees and clients as it struggles under
the weight of a potential criminal indictment, is negotiating to sell itself
to another Big Five accounting firm, Deloitte Touche Tohmatsu, and an announcement
of a deal could come as soon as this week, according to people involved in the
discussions.
The negotiations by the two big accounting firms were said to have begun in earnest last week, about the same time Andersen learned that it faced potential indictment on obstruction of justice charges in the Enron investigation as a result of the wide-scale destruction of documents last fall in its Houston offices. The firm is now talking to prosecutors to see if a resolution of the criminal case can be reached before an indictment is made public, possibly as early as this week.
Terms of the potential deal with Deloitte are still fluid, people involved in the discussions said, and no decision has yet been reached on whether Andersen would be sold whole or in pieces. Either way, these people said, the Andersen name is certain to disappear from the accounting industry once the deal is done.
The talks have been taking place in New York, led primarily by the firms' chief executives, Joseph F. Berardino from Andersen and James E. Copeland Jr. from Deloitte. They have been joined by a handful of partners from the two firms as well as legal and financial advisers.
Unlike most such negotiations, which turn primarily on price, the discussions are focusing instead on the complex issue of how Deloitte can avoid assuming the legal and financial liabilities Andersen faces for its role in the Enron debacle.
In addition to confronting potential fines from criminal charges, Andersen is also facing possible regulatory action by the Securities and Exchange Commission as well as myriad lawsuits from companies and individuals hurt by Enron's collapse. Enron, a Houston energy company, was one of Andersen's largest clients. Andersen approved financial statements that Enron ultimately said were unreliable.
Essentially, Deloitte is interested in acquiring Andersen without contracting the problems that crippled its financial health and threatened its survival. Deloitte clearly would not agree to any deal in which it assumed Andersen's legal liabilities.
"The primary issue is how do you isolate" the United States liability, one person with knowledge of the negotiations said. "There are a number of strategies that have been gamed out to deal with that."
A possible solution is to arrange the deal as a sale of assets, rather than as a merger or full acquisition, people involved said. Deloitte might acquire all but Andersen's American operations, allowing that unit to temporarily stand alone while negotiating a resolution of its Enron problems.
Regardless of how a deal might be structured, people involved in the talks said, some Andersen entity would have to continue to exist in the United States for the purpose of negotiating that resolution and paying fines and penalties. While Andersen's American operations could survive as a stand-alone subsidiary of Deloitte, a number of other approaches are also being examined.
"This is much more of a legal issue than a banking issue," one person involved in the talks said.
Patrick Dorton, an Andersen spokesman, declined to comment on any negotiations. "Andersen is considering many options to enable us to continue to successfully serve our clients and promote the career opportunities of our people," Mr. Dorton said. "We are committed to making changes to our business that will restore the public's trust, enhance the quality and independence of our audit practice and allow all of our practices to thrive."
A spokesman for Deloitte, Paul Marinaccio, also declined to comment. Deloitte "has been conducting ongoing scenario planning in response to the current and projected state of the profession," Mr. Marinaccio said. "It is not our practice to discuss the details of any such planning in public."
Accounting industry experts said that Andersen had little choice but to seek out a partner among the other Big Five firms. In recent weeks, the firm has lost a number of big-name clients, including Merck and Delta Air Lines. An approaching tide of internal defections could not be halted, experts said, if Andersen survived as an independent entity.
"They are doing the one thing they had to do," Itzhak Sharav, an accounting professor at the Graduate School of Business at Columbia, said when told of the negotiations. "Arthur Andersen's days as an independent firm are numbered. It seems to be a sinking ship, and this is a way for them to right themselves."
On some levels, industry experts and accountants said, a combination between Andersen and Deloitte makes particular sense. The two firms have similar business models, as well as comparable cultures.
"There are similarities in terms of Deloitte and Andersen," said R. Ramy Elitzur, an associate professor of accounting and head of the M.B.A. program at the Rotman School of Management at the University of Toronto. "Both firms were pretty aggressive about the consulting business. And they would pursue clients in a very similar, aggressive manner."
Deloitte, already the No. 2 accounting firm after PricewaterhouseCoopers, would almost catch up to the leader if it acquires Andersen, the smallest of the Big Five.
In recent weeks, Mr. Copeland, the Deloitte chief executive, has openly discussed his concern about Andersen's future, and has signaled his potential interest in intervening.
"I think at this stage you would have to ask questions about whether or not they can survive," he said in an interview with Reuters on Friday. "I hope they do because I think the implications for the capital markets and for the profession itself would be terrible if they fail."
Andersen's structure complicates the negotiations in some other ways. While Andersen is a worldwide firm, its overseas offices are somewhat like independent entities that contract with each other. While Andersen's overseas offices may join with Deloitte, industry experts said, some might elect to join other competitors.
"I question what will happen in a deal with Andersen worldwide," said Professor Elitzur of the University of Toronto. "Will it succeed as a worldwide merger, or will the foreign offices go elsewhere?"
Another potential hurdle for a combination is the positioning of the firms' consulting businesses. Andersen's consulting revenue for the last fiscal year was $1.7 billion, out of total revenues of $9.3 billion. Deloitte reported global revenues of $12.4 billion, with $3.5 billion from consulting.
But in the wake of Enron's collapse, which led to widespread criticism of the potential conflicts of interest between the accounting and consulting units in such firms, Deloitte reluctantly decided to separate its consulting arm from the rest of the firm. This decision would have to stand in any combination with Andersen.
The downward spiral for Andersen began last October, when Enron disclosed that dealings between the company and a series of partnerships controlled by a a former senior executive had caused huge losses.
Enron was soon forced to announce that its financial reports dating back to 1997 could no longer be relied upon. In December, the company filed for bankruptcy.
Its implosion raised questions from Washington to Wall Street about the actions of Andersen, which had served in several roles with Enron, as both external and internal accountant as well as consultant. While Mr. Berardino said in Congressional testimony that his firm had been misled by Enron managers, the close relationship between Andersen and Enron left the accounting firm exposed both to litigation and public criticism.
In January, Andersen announced that documents and e-mails relating to Enron had been destroyed by members of its Houston office. Soon after, the firm added that David B. Duncan, the partner in charge of the Enron account, had directed the shredding and destruction. Mr. Duncan, who has said through lawyers that he believed he was acting in response to instructions from an Andersen lawyer, was dismissed from the firm. He has been speaking with prosecutors under an agreement that would prevent the government from using his statements against him at trial.
A deal between Anderson and Deloitte would be the culmination of more than a century of growth and competition. Deloitte traces its beginnings back to the 19th century in England, when William Welch Deloitte founded his accounting firm. As the industrial revolution boomed, the demand for accountants increased. George A. Touche, a Scotsman, established his own accounting practice in London at the end of the 19th century.
For decades, the firms competed, establishing offices in the United States and growing into two of the most powerful accounting firms in the world. In 1989, they combined to create Deloitte & Touche.
Andersen was formed in 1913 by an accounting professor whose name the firm still bears. After Mr. Andersen's death in 1947, the firm almost collapsed for the first time. But a new leader, Leonard Spacek, was able to persuade the firm's partners to stay together despite financial uncertainty. Mr. Spacek continued to lead the firm for decades, transforming it into an accounting powerhouse.
Friday, March 1, 2002 News
Andersen Puts a New Offer on the Table
[Comment]
by Alan Kong @22:31
Trying to nail down a commitment that will cover liabilities stemming from its
involvement in Enron's financial woes, Andersen has proffered a new settlement
amount. The Big Five firm is offering $750 million to cover all Enron-related
lawsuits including a federal class action suit filed by investors, a lawsuit
on behalf of Enron 401(k) retirees, and any enforcement action stemming from
the Securities and Exchange Commission (SEC). The firm is also hoping to persuade
the Justice Department not to indict the firm.
Andersen representatives met with the SEC on Wednesday to discuss possible settlement terms. The meeting followed a Tuesday meeting between Andersen and class-action attorneys.
Under the terms of the proposed settlement, Andersen would pay $250 million from a Bermuda insurance provider, Professional Services Insurance, which is co-owned by Andersen and its global affiliates. The remaining $500 million would be paid out in $100 million increments over the next five years.
According to a report in The Washington Post, Andersen is anxious to reach a settlement on legal ramifications of the Enron collapse before its publicly held clients begin their annual spring balloting of shareholders regarding their choice of independent auditors.
Lawyers are suggesting that more time is needed to unravel
the liabilities associated with the Enron collapse. Andersen has stated that
the $750 million is the most the firm can afford to pay.
Thursday, February 21, 2002 News
Andersen Reportedly Contemplating $260M Enron Settlement
[Comment]
by Alan Kong @23:46
USA Today is reporting that attorneys for Big Five firm Andersen are discussing
a possible $260 million settlement for the firm's portion of the massive lawsuit
that is arising out of the Enron affair.
During a conference call last week, Andersen's attorneys allegedly told the plaintiffs' lawyers that "the accounting firm is worried that the Enron scandal could put it out of business," the paper reports.
Andersen attorneys also reportedly discussed Andersen executive's fears that the firm would lose additional clients throughout tax season as the Enron investigation drags on.
According to a legal source for the USA Today article, Andersen is prepared to put up $260 million in liability insurance, "plus an undisclosed amount of company assets" to settle the suit. According to the article, investment bankers for Andersen are prepared to disclose details of financial assets of the firm in order to show what they can and cannot afford to pay in a settlement.
Liability insurance coverage from Enron and Enron executives could add another $350 million to the settlement.
Over 60 separate lawsuits filed against Enron were merged into a single class action lawsuit last Friday. There is no indication that Milberg Weiss Bershad Hynes & Lerach, the lead counsel on the class action lawsuit, is prepared to settle the case.
Neither Andersen nor its attorneys would comment on the USA Today report.
Friday, January 18, 2002 News
Fees could reach $100M
[Comment]
by Alan Kong @23:26
In February, Andersen decided to keep Enron as a client, saying in the e-mail
that it had the appropriate people and processes in place. A primary consideration
was the $100 million in fees Andersen could receive by continuing services to
the energy trader, the e-mail said.
Separately, another press report detailed how Enron paid no income taxes in four out of the past five years.
Enron used almost 900 subsidiaries in tax-haven countries to avoid paying taxes, the New York Times said.
While the use of overseas tax havens by U.S. companies is not unusual, the newspaper, citing tax experts, said Enron made use of the technique far more often than other companies.
The report noted that two Enron subsidiaries have been accused by a group of insurers of engaging in fake transactions in a tax haven, according to filings with the federal bankruptcy court in New York.
Berardino told Moneyline that "abilities to do things offshore is well known and not illegal," he said.
"I don't have any knowledge what Enron did," Berardino added.
Andersen Will Exceed Liability Insurance Limits
[Comment]
by Alan Kong @23:04
It is estimated that the liability insurance coverage for Big Five firm Andersen
is probably in the $300 to $500 million range. It is also estimated that potential
lawsuits stemming from the Enron collapse may make that amount look like a drop
in the bucket.
Mark Cheffers, formerly of PricewaterhouseCoopers and now CEO of the Web site, AccountingMalpractice.com, estimates that Andersen's exposures could be in the range of 10 to 100 times the firm's outside insurance coverage.
According to an article in Forbes Magazine, all of the Big Five firms participate in self-insurance programs to supplement their outside liability insurance. The total amount of Andersen's insurance arrangements is not known publicly. Should insurance claims exceed the firm's policies, exposure would ultimately fall on the shoulders of the firm's partners, who, under the terms of the limited liability partnership agreement, would face liability up to the amount of their equity in the firm.
Wednesday, January 16, 2002 News
Arthur Andersen stands by action
[Comment]
by Alan Kong @14:40
Arthur Andersen insists it has done nothing wrong in the auditing process of
JW International Holdings, which cancelled its listing plans at the last minute
due to an accounting problem.
Last week, the Securities and Futures Commission referred a case of alleged audit failure involving Arthur Andersen to the Hong Kong Society of Accountants (HKSA). The society is reviewing the case to see if it will start a formal investigation.
The SFC asked the accounting body to look at Arthur Andersen's audited report in JW International's listing prospectus to see if any auditors had failed in their duties.
Arthur Andersen's Hong Kong office head, managing partner Allan Aw, said the accounting firm had already reviewed the case, and had confirmed its staff had acted correctly.
"If there was enough evidence to prove that we have made mistakes, we would admit that. But at the moment, our findings have showed that our staff have followed all the standard auditing procedures," Mr Aw said.
"We have done our jobs and none of our staff has done anything wrong in this case."
JW International, a printing company, had planned to list on the stock exchange in July last year.
However, it cancelled the listing after the initial public offering began, following the sending of anonymous letters to regulators alleging an inflated turnover figure in the firm's business in China.
It is understood that the SFC is asking why Arthur Andersen did not check the figure concerned during the auditing process.
Mr Aw said Arthur Andersen staff cross-checked with JW International's trading partners to confirm the figure's accuracy.
The trading partners confirmed the figure, so Arthur Andersen signed the auditor's report on the listing prospectus.
However, Arthur Andersen withdrew the audit report a week later, which led to the company cancelling its listing plan.
Mr Aw said the report was withdrawn as the anonymous letter had drawn attention to some suspicious figures.
He said Arthur Andersen had requested that JW International answer the allegations but the company did not reply for more than a week.
Arthur Andersen then withdrew its report. "As the auditors, we tried our best to check the figures. But in any case, it would be difficult for the auditors to dig out a hidden problem if there were people who tried to cover up the real picture," Mr Aw said.
"We asked people not to rely on the audit report once we found there were some problems we could not clarify with the company."
He said staff who had been involved in the auditing process were still with the firm. "We believe in the integrity of our staff, and they are still working in the company," Mr Aw said.
He said the firm would fully co-operate with the HKSA in relation to information on the case.
Since JW International's cancellation of its listing plans, investors have not been affected by Arthur Andersen's withdrawal of the auditor's report.
Mr Aw said the firm was not worried the case would affect its reputation as it was confident the HKSA would give it a reasonable time frame to explain the issue and clear its name.
I would like to comment under Statement of Audit Standards 402 "External Confirmation", it sets out in paragraph 29 and 30 that
the reliability of evidence provided by an external confirmation is affected by the respondent's competence, independence, authority to respond, knowledge of the matter being confirmed, and objectivity. For this reason, the auditors attempt to ensure, where practicable, that the external confirmation request is directed to an appropriate individual. For example, when confirming that a covenant related to an entity's long-term debt has been waived, the auditors direct the request to an official of the creditor who has knowledge about the waiver and has the authority to provide the information.
the auditors also assess whether certain parties may not provide an objective or unbiased response to an external confirmation request. Information about the respondent's competence, knowledge, motivation, ability or willingness to respond may come to the auditors' attention. The auditors consider the effect of such information on designing the external confirmation request and evaluating the results, including determining whether additional procedures are necessary. The auditors also consider whether there is sufficient basis for concluding that the external confirmation request is being sent to a respondent from whom the auditors can expect a response that will provide sufficient appropriate audit evidence. For example, the auditors may encounter significant unusual year-end transactions that have a material effect on the financial statements, the transactions being with a third party that is economically dependent upon the entity. In such circumstances, the auditors consider whether the third party may be motivated to provide an inaccurate response.
In this context, due to the fact that the abovementioned trading partners are suffered from the symptoms stated therein, Arthur Anderson have made all endeavour to consider the reliability of the evidence gathered from those respondents or simply relied on their confirmation to discharge its duties should be explicitly clarifed. If it is the latter, the role of auditors is nothing more than a robot without any sense of human judgement.
In relation to the actions after the misstatement unearthed, Arthur Anderson complied with Statement of Audit Standards 150 "Subsequent Event" in all material respect.
As an auditors, I would like to say maintaining favourable budget
cost can not compensate the costs of neglience if found.
Tuesday, January 15, 2002 News
Andersen 'seeks Big Five merger'
[Comment]
by Alan Kong @15:22
Embattled Andersen is considering a merger with one of its Big Five rivals,
according to the New York Times.
The firm is faced with a $1bn lawsuit from Enron shareholders, the collapsed energy giant that has been causing sleepless nights for all at Andersen.
And, to safeguard its future, the newspaper alleges that a shock merger is on the cards. Otherwise, the scale of any future damages could push the firm under.
The conjecture comes as Enron announced that investment banking group UBS Warburg was the preferred bidder for the firm's North American wholesale electricity and natural gas trading business.
Enron was Andersen's second largest client, and revelations that Andersen staff destroyed important documents, and the admission of Andersen CEO Joe Berardino that errors were made in the audit, have added to the firm's woes.
The situation was not helped when it emerged that Andersen was paid more for non-audit work than for the audit itself.
It seems that Anderson is likely dismiss some loose partners if any merger takes place.
Sunday, December 23, 2001 News
New forum established
[Comment]
by Alan Kong @13:35
I have cranked up a new forum in connection with our community at here.
In this forum, apart from posting any topic you like, you can view and post
any Pictures, Documents, Links and also chat with others in real time.
But remember to be good conduct.
Thursday, December 20, 2001 News
ACCA joins call over tax revision
[Comment]
by Alan Kong @21:35
The Association of Chartered Certified Accountants (ACCA) has joined those urging
the Government to overcome its budget deficit by broadening the tax base.
Among options the society will submit to Financial Secretary Antony Leung Kam-chung are the introduction of taxes on mobile phones and signboards, and a general consumption tax.
However, ACCA will not seek changes to profits tax, salaries tax, property tax, personal allowances, stamp duty or estate duty.
The Hong Kong Society of Accountants (HKSA) has called on the Government to introduce a land and sea departure tax, which travellers would pay when they leave the SAR by car or ferry. The sentiment was echoed by ACCA.
An HK$18 per trip departure tax would collect more than HK$900 million in revenue a year.
Based on government statistics, ACCA expects this year's budget deficit to be about HK$60 billion, with the figure dropping to less than HK$10 billion next year.
"The mobile phone isn't hard to implement as it is something everyone can afford, I mean - HK$10, most mobile-phone users spend more money than that on long phone conversations," said Jimmy Chung Wai-kwok, chairman of ACCA's sub-committee on budget and tax.
Mr Chung said a mobile-phone tax of HK$10 per month would generate as much as HK$460 million a year, while a signboard tax of HK$1,000 a year would add an extra HK$200 million to government coffers annually. However, Mr Chung added that existing taxes should be lowered so as to not over-burden tax-payers.
"A general consumption tax would not be welcomed by many people . . . if the Government does go ahead with the additional taxes, it should adjust its existing ones so that we do not give tax-payers too much of a burden," he said.
A 3 per cent consumption tax would yield an estimated HK$18 billion a year.
The association also outlined measures related to the three key issues - education, environmental protection, and financial services - which were addressed in the chief executive's policy address.
They include removing the ceiling for deduction of self-educational expense for salaries tax purposes, introducing a concessionary tax rate for firms engaged in the environmental protection industry, and providing tax incentives for operational headquarters based in Hong Kong.
Mr Chung said these measures were intended to stimulate investment in the economy at a reasonable cost to the Government.
I think apart from levying tax or subcharge, should the government considers the outgoing side ? Are all expenditure justified for their overall mission to serve contributory citizien ? The role of government should be set forth for our evaluation.
Taxpayer fined for filing incorrect Tax Return
[Comment]
by Alan Kong @20:45
The Inland Revenue Department (IRD) today (December 18) reminded taxpayers that
making an incorrect statement in connection with a claim for any deduction or
allowances under the Inland Revenue Ordinance is an offence.
A spokesman for the IRD said that the offender is liable to a maximum fine of $10,000 plus a further fine of treble the amount of tax which has been undercharged in connection with such incorrect statement.
A taxpayer was recently fined for filing incorrect Tax Return for the year of assessment 1999/2000 in making incorrect statements in connection with the claim of dependent parent allowance and disabled dependant allowance.
The defendant pleaded guilty to the charge in Kwun Tong Magistracy on December 12 and was fined $3,000 plus a further fine of $50,472 (equivalent to treble the amount of tax undercharged), which totalled $53,472.
The defendant, Ms Wong Kwai Ying, claimed dependent parent allowance and disabled dependant allowance in the Tax Return-Individuals filed for the year of assessment 1999/2000. She declared that in that year of assessment, she had contributed $12,000 towards the maintenance of each dependant. In fact, the two dependants had received Comprehensive Social Security Assistance from the Social Welfare Department and their maintenance fees were fully covered by the assistance.
"If the taxpayer's claim of allowances had been accepted, the amount of Salaries Tax, which had been undercharged, would have been $16,824," the spokesman said.
In a tax representative's perspective, it is quite hard to control all information from clients are 100% correct even we act as their auditors. However, we should explicit all endeavour to query any fact we felt suspicious to avoid the consequence that some unintentional mistakes submited to IRD which will be regarded by them as tax evasion.
Mortgage Corp in US$3b debt sale
[Comment]
by Alan Kong @22:59
Hong Kong Mortgage Corp (HKMC) has set up a US$3 billion mortgage-backed securitisation
programme allowing it to issue debt papers to professional investors over the
next few years.
The programme will help the corporation raise funds through debt papers, with
mortgage loans as back-up.
The products, popular in the United States have yet to be made available to Hong Kong investors.
The new programme will help provide a debt instrument for Hong Kong investors, which will help boost the SAR's debt market. The scheme follows the Government's aim of making Hong Kong a regional debt market centre.
Yesterday, the corporation signed documents with a group of investment banks including Merrill Lynch International and HSBC. The bankers will be responsible for selling the mortgage-backed securities to clients.
The programme allows the corporation to issue mortgage-backed securities in different currencies and different amounts each time, until the full amount of US$3 billion is reached.
Peter Pang, chief executive of HKMC, said it would like to issue the first batch of mortgage-backed securities worth HK$2 billion in the first quarter of next year. He expected it would issue HK$4 billion next year.
The money raised will help buy more mortgage loans. Next year, the corporation plans to buy about HK$12 billion worth of mortgage loans.
HKMC, wholly owned by the Government, was set up in 1997 to buy mortgage loans from the banks to reduce their risk exposure to the property market. It has HK$20 billion worth of assets on hand from previous acquisitions.
Under the programme, the corporation will re-package some of the mortgage loans it has bought into debt papers, called mortgage-backed securities, to sell to investors.
Investors earn interest and get the principal back at the maturity of the papers, similar to buying traditional bonds.
They could also trade the papers among themselves like other debt instruments.
Mr Pang initially said the corporation wanted to sell mortgage-backed securities to investment bankers, fund managers, insurers and pension funds. Later, it would consider making the papers available to retail investors.
In the longer term, it may list the mortgage-backed securities on the Hong Kong and overseas stock exchanges, allowing retail investors to easily trade the products.
Tony Latter, executive director of the corporation, said the programme was a milestone in developing a secondary mortgage market in Hong Kong, and would boost the debt market.
"Through standardisation of product structure and documentation, the programme provides a convenient platform for the HKMC and banks to convert their illiquid mortgage portfolios into liquid mortgage-backed securities," Mr Latter said.
"It will substantially shorten the lead time for the issue of mortgage-backed securities, from six to nine months to a few weeks."
The programme will also allow the corporation to issue mortgage-backed securities in Hong Kong dollars as well other currencies.
Mr Pang said this multi-currency function would enable the corporation to sell mortgage-backed securities in different currencies to meet foreign and domestic demand.
Other banks in the programme include Barclays Capital, Dao Hang Bank, Deutsche Bank, JPMorgan, Salomon Smith Barney and UBS Warburg.
In my opinion, it is certainly a good new for public as whilst the risk spreads out systematically, the level of return for investors to be breakeven under given risk factor will be decreased. As such, the cost of living for public will be proportionally lower since this mechanism is shifting profits from banks to general public effectively.
Wednesday, December 5, 2001 News
'Big Five' back Andersen over Enron collapse
[Comment]
by Alan Kong @23:56
The "Big Five" accountancy firms joined forces to suggest reforms
to accounting standards in the light of the collapse of Enron.
In a joint statement, the firms appeared to close ranks around Andersen, Enron's auditors, by arguing "other market participants" had to "engage in self-scrutiny" over their role in the collapse of the stricken energy trading company.
KPMG, Deloitte & Touche, PricewaterhouseCoopers and Ernst & Young, together with Andersen, said the firms were committed to learning lessons from the failure of Enron. The statement came hours after Joe Berardino, Andersen's chief executive, had defended his firm's role as Enron's auditor in the affair.
According to the joint statement issued late on Tuesday night: "When businesses fail and public confidence wanes, all involved ... have a responsibility to actively seek to understand the core problems and pursue meaningful solutions. We encourage other market participants to engage in self-scrutiny and take significant steps."
The statement added: "The process of accounting standard-setting is too cumbersome and slow in today's economy. Working with others, we will find ways to streamline and modernise the system."
Andersen has faced questions over the competence and objectivity of its work for Enron, first for not raising the alarm over the company's finances, and then after it emerged that it had earned $25m for its audit last year and $27m for other services.
The firm is now being investigated by the Securities and Exchange Commission and faces lawsuits and a probe by its rival Deloitte Touche Tohmatsu. It could be hit by fines and bans.
Mr Berardino wrote in Tuesday's Wall Street Journal that when a client failed, Andersen sought to learn important lessons.
"We are co-operating fully with investigations into Enron. If we have made mistakes, we will acknowledge them. If we need to make changes, we will."
Mr Berardino's response, thought to be unprecedented in a case of this kind, quickly moves on to discuss failings in the financial accounting system that are making it hard for investors to judge companies.
He said a rethink was needed of accounting standards, saying that the rules have grown too complex.
He added that the financial reporting model was broken.
"We can't long maintain trust in our capital markets with a financial reporting system that delivers volumes of complex information about what happened in the past, but leaves some investors with limited understanding of what's happening at the present and what is likely to occur in the future."
Mr Berardino also called for reform of the regulatory environment, saying standard-setting was too slow, responsibility for administering discipline too diffuse and punishment not sufficiently certain.
The scrutiny of Enron's accounting is the latest setback for the big professional services firms as they seek to reassure over perceived conflicts of interest.
Andersen, along with similar firms, says it has internal
controls to prohibit such conflicts between audit and consultancy.
Wednesday, November 28, 2001 News
Tung warns of 'unexpectedly large' budget deficit
[Comment]
by Alan Kong @23:56
Chief Executive Tung Chee-hwa has warned of an ''unexpectedly large'' budget
deficit this year.
In his keynote speech at the opening of the 14th General Meeting of the Pacific
Economic Cooperation Council yesterday, he also said the Government's earlier
economic forecast has to be ''significantly revised'' in the wake of the September
11 terrorist attacks.
Mr Tung painted a bleak picture of the economy on the eve of a government announcement of the third-quarter gross domestic product scheduled for Friday. Government Economist Tang Kwong-yiu is also expected to revise downward the yearly growth rate.
The Government has slashed yearly economic growth to one per cent at the end of August. Second quarter GDP recorded a 2.5 per cent growth. Mr Tung has earlier hinted the third quarter figure would be negative. Hong Kong, he said, would face negative growth for ''a few quarters.''
Speaking to a group of leading political, business leaders and academics yesterday, Mr Tung said: ''The September 11 events have brought about deepening economic uncertainties around the world.
''Our earlier forecasts have to be significantly revised. More jobs will disappear before they re-appear.
''Government revenue will fall short of its target, whereas expenditure will rise, in part becuse we will need to send more to take care of the greater number of people who need to be taken care of in this downtraught.
''We will be running an unexpectedly large budget deficit this year.''
The Government has forecast a modest deficit of 11.6 billion in the March Budget. Financial Secretary Antony Leung Kam-chung has earlier indicated the deficit would be much higher.
Mr Leung has said the collection of three revenue totalling about $78 billion has become doubtful amid the economic downturn and the September 11 tragedy.
In my opinion, I think it is the time for Hong Kong citizen
to rethink our government's corporate goverance. In view of current situation,
the expression made by our Chief Executive seems like he is not understanding
the current issues at all. What is "unexpected" ? Should he had any
strategic mind or feedforward control concept. I feel doubtful as to the government
are making the best interest to citizen or compromise it whereby protecting
a group of civil servants, especially whose are non-productive or value-added
in term of the basic needs of general public.
Tuesday, November 27, 2001 News
Cayman No Longer a Tax Haven
[Comment]
by Alan Kong @23:04
Cayman Islands Governor, Peter J. Smith, is to sign an agreement today with
Treasury Secretary, Paul O'Neill, and British Ambassador to the U.S., Christopher
Meyer, which will open the vaults of secrecy on Cayman Islands bank accounts.
Henceforth, the Cayman Islands will share information with the U.S. government,
including the IRS, in an effort to track down tax evaders.
It is estimated that $800 billion is on deposit in Cayman banks - more than twice the amount on deposit in all New York banks combined. In U.S. Senate hearings earlier this year it was determined that more than $70 billion in tax revenue is lost each year due to money being concealed in offshore locations, including the Cayman Islands.
The Bush administration is working to overhaul tax structures and negotiate treaties with countries known to be tax havens, and is expected to have treaties in place within a year with half of the 35 countries recognized as tax havens by the Paris-based Organisation for Economic Cooperation and Development (OECD).
Many tax haven countries, including Antigua, Barbuda, the British Virgin Islands, Barbados, and Panama, have already agreed to treaties to avoid being included on the OEDC list.
Monday, November 26, 2001 News
Rate Your Prospects
[Comment]
by Alan Kong @22:19
With a powerful and focused marketing and sales program that generates many
leads, the partners find themselves meeting with prospects regularly. The partners’
focus at the initial meetings with a prospect is to understand the prospect’s
business and the issues of the company. For example, if the business is not
related to a niche in which the firm has expertise, a red flag goes up. If the
business is calendar year or price driven, the partners begin to question their
capacity to handle the client.
Being a fan of John Madden, former pro football coach and current sports announcer, I like to use the MADDEN test for a new client:
M- Money
A- Accessibility
D- Desirability
D- Decision Influencers
E- Eligibility
N- Need
Money. Be alert to various factors that will answer these questions: Will this prospect have the ability and willingness to pay a premium or full fees? Who were their previous accountants? Who are their other advisers? What do their facilities look like? On what scale are their products and services?
Accessibility. In order for you to sell your services, you must sell to people who can decide to hire you. In other words, if you are selling organs, don’t waste your time talking to the monkey. You must have access to decision-makers and influencers. Untrained CPAs waste an enormous amount of time talking to low-level decision influencers. Generally, if you cannot access the key decision influencers, your message will not get through. Also, if key decision influencers will not talk with you, most times this indicates that they are not serious about changing.
Desirability. Next, ask yourself, “Does the prospect have the desire, or interest, to work with me or our firm?” If the client has the money and you can access the decision influencers, but they do not desire to work with you: Guess what? They won’t.
Decision Influencers. The next qualifier relates to the decision influencers. Not only must you be able to reach them, but you must also understand their needs, desires, and perceptions.
Eligibility. Is the prospect eligible to do business with you? This question relates to risk, industry, expertise, enjoyment, and many other factors you may set for eligibility. Rainmaker David Morgan says, “If we come into contact with a municipality, we will stop right there. We do not do government agencies. They are not eligible to work with us.”
Need. Does the prospect have a need for the services you provide? This question should not be held till last. Often, it will be the second or third qualifier.
You may want to set up a scoring template for qualifying prospective clients along the lines of the Madden test.
Keep in mind that selling is about making sales, not about walking away from opportunities because you have too quickly made an emotional decision or judgment call based on the wrong reasons. I am not advising that you give up too soon, not use creative sales appeals, or terminate the sales process because you may be in over your head. I am, however, suggesting that you have a walk-away philosophy and strategy that you can use as a template when the value of current business or potential business is in question.
Tuesday, November 20, 2001 News
E&Y Bursts Outsourcing Bubble
[Comment]
by Alan Kong @22:37
The trend of outsourcing key functions in the financial services sector has
a long-term negative impact on shareholder value, Ernst & Young has found.
Senior executives from 26 leading financial service companies said that since
they have outsourced major parts of their operations they appreciated the short-term
cost saving, but admitted that it could mean a loss of control in their relationship
with the customer.
Companies are increasingly outsourcing activities that have traditionally been regarded as core, such as check processing, loan administration, and fund management, the study said. This practice may have long-term implications for companies with regard to brand and reputation.
A key attraction of outsourcing has been that it supposedly frees up more management time. But a quarter of the individuals surveyed said that outsourcing a key function had actually led to further pressures on their workload.
Despite this, two-thirds of survey respondents expected to do further outsourcing in the future.
E&Y advised those engaged in outsourcing to bear the following points in mind:
Tuesday, October 30, 2001 News
Anti-fraud expert warns of audit weaknesses
[Comment]
by Alan Kong @02:14
A leading risk management expert has warned that auditors are not adequately
trained to be able to identify and eradicate fraud.
The recent controversy over audit standards sparked by the BBC Radio 'File on Four' programme did not come as a surprise to HLB International's director of business risk services Tom Craig. In recent months, Craig has been surveying auditors and business managers about their attitudes to fraud and fraud prevention.
Even though bogus documents are the most usual vehicle for fraud, Craig found that nearly three-quarters of the auditors he questioned generally accepted documents at face value. After the film 'Rogue Trader' depicted an episode where Coopers & Lybrand Singapore auditors failed to spot a bogus receipt faxed to them by Barings trader Nick Leeson, Craig may well be justified in his concerns audit training.
The training and development of auditors tends to produce a breed that rarely goes "outside the box", Craig commented. "Auditors all tend to follow the same prescribed route and are not good at dealing with anything that doesn't come within their terms of reference," he said.
Clients may think that auditors should act as detectives, but in reality they rarely identify fraud unless it is brought to their attention or someone points out that certain sums are not justifed, Craig suggested.
"The issue arises whether the company they're working with wants a full audit, because it could be detrimental to the way they work," he told AccountingWEB. The practicalities of the audit process also undermine the effectiveness of the audit as a check on fraud. When a firm goes in to do an audit, the senior audit manager will see the client, but the people who carry out the audit will be junior auditors. they will be easily led and told what to do. This opens up the minds of the audit clients, too. They pay senior rates for the audit, but are serviced by junior staff."
Superficial documentation checks were one of the most prevalent weaknesses of the audit process, identified by 31% of the voters in AccountingWEB's recent online poll. But that's not the only area where HLB's risk management expert identified complacency among management and auditors.
"Nobody has policies about how a temp should work - what they get access to and how they go about it. That is outside the normal auditing review - , what 6they get access to and how they go about it. Out side normal auditing reivew. But one of the main ways of getting into a company is through temporary employment. Even a secretary there for one day can get access to computers and other information in a company."
Wednesday, September 26, 2001 News
加入WTO ，企業怎樣選擇競爭戰略
[Comment]
by Alan Kong @00:19
何謂戰略導向型成本管理
所謂戰略導向型成本管理，就是企業為了獲得和保持競爭優勢而進行的成本分析和成本管理。即要根據企業所採取的戰略，建立相應的成本管理體系。它有兩個方面的含義：其一，企業進行戰略導向型成本管理的目的是要求企業在嚴峻的國內外競爭中，獲得和保持企業長期的競爭優勢；其二，企業所進行的成本管理必須以其長期發展的戰略為基礎，並隨著長期發展戰略的改變而改變。
在加入WTO的大背景下，我國企業面臨的競爭也愈加激烈，如何選擇適合自己特點的競爭發展戰略已成為企業存亡的關鍵。而對戰略問題的研究，必然導致建立一套支持戰略的成本管理體系----戰略導向型成本管理體系。
戰略導向型成本管理是由價值鏈分析、戰略地位分析、影響成本因素分析三要素構成的。
1、價值鏈分析。價值鏈，是企業在供產銷過程中，一系列有密切聯繫的能夠創造出有形和無形價值的鏈式活動。它包括下列四方面的內容：（1）在供應過程中，企業與供應商之間的供應鏈中創造價值的過程；（2）在產品生產製造過程中，各環節、各單位創造價值的過程；（3）在產品銷售過程中，企業與顧客的鏈式關係中創造價值的過程；（4）在市場的調查、研究、開發及產品的促銷與分銷等活動中創造價值的過程。
價值鏈有三個含義。其一，企業各項活動之間都有密切聯繫，如原材料供應的計劃性、及時準確性和協調一致性與企業的生產製造有著密切的關係；其二，每項活動都能給企業創造有形的或無形的價值，如"與顧客之間的關係"這個價值鏈，如果密切注意顧客所需或做好售後服務，就可以提高企業的信譽，從而帶來無形的價值；其三，它不僅包括企業內部的各鏈式活動，而且更重要的是，還包括企業的外部活動，如與供應商之間的聯繫，與顧客之間的聯繫等。
2、企業戰略地位分析。確定企業戰略地位，從長遠來講，是企業打算逐步在顧客中樹立怎樣的形象。它可以從企業或企業的產品在顧客心目中的形象反映出來。企業戰略地位的確定，無疑與企業的長期競爭戰略有著密切關係。如追求低成本先導型戰略的企業，其產品與其競爭對手的產品存在很少的差異性。因而在確定戰略地位時，以相對高質量低價格來獲得其競爭優勢是很重要的。而為了達到相對高質量低價格這個目標，所要求的成本管理體系應該是嚴格標準成本管理體系。相反，追求差異化競爭戰略的企業，其產品相對其競爭對手產品有很大差異性（外觀、設計、特性等方面的差異），因而應以高質高價來獲得其競爭優勢。而要想使其產品與競爭對手產品產生差異性，建立一套支持這種戰略的成本管理體系也是至關重要的。
確定戰略地位，從某種意義上講，實際上就是確定會計資料在戰略管理中的作用。在戰略導向型成本管理中，成本管理的作用應隨著企業所追求的競爭戰略的不同而不同。
3、影響成本因素的分析。戰略導向型成本管理認為，影響成本的因素很多，但大致分為兩大類：
第一類是與企業的"基本經濟結構"有關的因素，可概括為五個方面：（1）規模大小。它可表明企業進行生產、製造、銷售、市場和產品的研究開發等方面的投資多少。（2）產品或服務的複雜性。企業向顧客能夠提供多寬範圍的系列產品或服務，以及供應商能夠向企業提供多寬範圍的原材料或服務。（3）操作工人積累的經驗。如第二次製造某產品所需時間比第一次節約多少。（4）生產技術（工藝）水平。（5）聯繫範圍。企業與多少供應商或顧客有聯繫，關係程度如何（供應商是否對企業有忠誠關係以及顧客對其產品是否建立了忠誠關係）。
第二類是企業實施其競爭戰略時的有關因素，它包括下列內容：（1）工人參與管理和不斷使產品質量提高的責任義務感。（2）全面品質管制。（3）在一定生產規模下，工人能力、機器能力以及管理能力是否得到充分發揮，各能力之間的組合是否最優。（4）工廠佈局是否合理。（5）產品設計是否合理並容易製造。（6）各價值鏈是否使企業創值最高，尤其包括是否開發了與供應商或顧客之間的聯繫。
總之，從戰略角度而言，對影響成本諸因素的理解與分析，要比僅僅注意短期內產量變化對單位成本影響顯得更有意義。這對於理解企業戰略地位是很關鍵的。
Monday, September 24, 2001 News
Chartered accountant from the Beeb to lead ACCA
[Comment]
by Alan Kong @23:14
Andrew Hind, chartered accountant and director of finance and business development
for the BBC World Service, is to replace Anthea Rose as the chief executive
of the Association of Chartered Certified Accountants (ACCA).
He will join ACCA on 1 March 2002 and take over as Chief Executive on 13 May 2002 after ACCA's AGM, marking the end of 10 years in charge for Rose.
The incumbent chief executive noted that since her appointment to chief executive in 1992, ACCA has expanded in terms of numbers and geographical coverage.
"When I started we had around 39,000 members. Now it's almost 85,000," she said. Also, there was just one ACCA qualification. In autumn, the body plans to launch another six, on top of the three already on offer. And the association is making a major contribution to developing countries, and to the professional debate.
Also, ACCA is now seen as a global organisation. The body is represented in 180 countries across the globe - making the appointment of the World Service finance chief a logical choice.
Hind obtained an accountancy and commerce degree at Southampton University, and then qualified as a chartered accountant and worked in practice, including a spell in Nairobi. He then held positions with BICC, ActionAid and Barnardo's.
Aged 46, Andrew Hind is also Treasurer of two major UK charities, the UK Committee for UNICEF and the Diana, Princess of Wales Memorial Fund. He has chaired a working party on quality standards for the National Council for Voluntary Organisations and is author of one of the leading charity texts 'The Governance and Management of Charities'.
Hind said: "ACCA's values and global commitment are a natural for me. It will be an enormous challenge to be responsible for the organisation's continued development but I will be taking over a body with a strong sense of its core purpose - to provide opportunity for people of ability and application solely on the basis of merit.
"Also ACCA has a unique position as an international and global body. It has an important role in helping emerging economies and societies, it is innovative - for example, leading on environmental and social reporting - and its members and students around the world are increasingly undertaking community activities.
"I hope that my experience and my own values will enable me to take all this forward so that ACCA, and its members and students, will provide professional leadership in virtually every part of the world."
George Auger, ACCA president, commented: "Over the last few years, ACCA has developed very rapidly. There is not likely to be any slackening in the rate of change - if anything, ACCA will grow in size and stature at an even faster pace.
"Andrew Hind's experience has been wide-ranging. He has worked in many sectors. He has first hand knowledge of many parts of the world, especially Africa, South Asia and the Middle East. His work has involved negotiations with governments in many countries. All this will stand him in good stead at ACCA.
"The most important factor, however, is that Andrew has the energy and commitment to provide the drive and leadership required of ACCA's Chief Executive. He is well placed to give new impetus and represent ACCA's commitment to all aspects of responsibility in accounting."
Rose said that, after her time in charge, she would put a portfolio together and pursue other interests.
Tuesday, September 18, 2001 News
會計師事務所將有一半"灰飛煙滅"？
[Comment]
by Alan Kong @02:14
殘夏未盡，國內註冊會計師界已感到絲絲寒意。自從銀廣夏一案中天勤東窗事發以來，註冊會計師業界便有人驚呼：遲至年底，國內會計師事務所將有一半"灰飛煙滅"。一時間，業界各所，尤其是中小事務所，人心惶惶。個別事務所的信譽危機真能從根本上影響整個註冊會計師行業的市場前景嗎？當然不會。
但是正如證監會對股票市場所做的整飭一樣，所有的註冊會計師事務所也將面臨一場規範的考驗。面對競爭，面對入世，甚至面對一個個被曝光的湖北立華、華倫、中天勤所帶來的前所未有的信譽危機，中小事務所情急之下紛紛傍上"大款"。自去年年初開始，一場事務所合併重組的熱潮席捲業內，截至今年3月，中注協已批准411家事務所的合併申請，合併後為152家。
但據記者瞭解，中小註冊會計師事務所在中國還是大有存在理由的。
做點心裏踏實的小活兒
"會計師事務所並不是越大越好，大所攬大活兒，小所攬小活兒，大活兒高成本，小活兒小投入。"財政部科研所的李明博士對記者說。
據瞭解，截至去年年底，我國共有會計師事務所4674家，其中具備審計證券期貨相關業務的事務所78家，不及2%，而同期，我國登記在冊的企業法人535.11萬家，其中，僅有不到1%為年營業額的超過千萬元的大型企業，其餘均為中小企業。可見，無論是事務所還是需要事務所審計服務的企業法人，絕大部分都處於中小水平。不少中小企業無力聘請資深註冊會計師管理財務，中小會計師事務所如能為其提供所需財務服務，飯碗還是不成問題的。
諮詢業務安全又賺錢
據中注協綜合部副主任蔡曉峰介紹，會計師事務所的業務一般分為審計、企業諮詢、稅務諮詢三部分，後兩部分統稱"諮詢業務"，主要指為企業經營過程中的財務、稅務、投資、融資等環節提供全面諮詢服務，以保證企業獲得最佳的經濟效益。值得注意的是，由於開展諮詢業務主要依靠智力投入，所以，諮詢業務的收費並不比審計業務低，而成本和風險卻相對於審計業務有所降低。
對於事務所來說，審計是其經營的法定業務，而諮詢業務是從會計事務所服務對象的需求中產生的，如：財務諮詢、稅務規劃、投資管理等。國內各會計師事務所目前的主營業務絕大部分為審計，所謂的"大頭兒"--諮詢業務，只有少數大所經營，且所占比重很小，一般不超過10%。相比之下，以"五大"為代表的國外會計師事務所的諮詢業務一般都占到總業務的一半以上，其中，安達信更是將其諮詢業務獨立出來，成立了埃森哲(Accenture)管理諮詢公司，並已與麥肯錫、AC尼爾森等國際諮詢業巨頭平起平坐。
審計師職業素質需提高
談到加入WTO後的機遇，專家們指出，雖然會在一定程度上給中國的會計市場帶來更多的業務，使職業會計師隊伍的質量將得到較大的提高，但根據中國目前職業會計師的現狀，對於職業會計師隊伍將是一個嚴峻的挑戰。
專家認為，對於中國的職業會計師隊伍來講，當務之急是迅速提高自己自身的職業素質。審計職業道德是對職業會計師的最起碼的要求，是除能力之外一個應具備的基本條件。近年來證券市場上形形色色的舞弊案件，都與財務會計的不規範操作密切相關，同時證券市場的創新和實踐帶來許多新的財務會計問題，迫切需要廣大的職業會計師們悉心研究、認真解決，努力向國際化標準邁進。會計師事務所要想長遠立足，必須以德辦事，真正在公眾中樹立起應有的權威和信任感。
上市公司披露的財務報表需要經過註冊會計師事務所的審計，這個審計多少有些尷尬，因為請他們來挑毛病的是股東，但付賬的卻是企業。為了拿到酬勞，會計師事務所提保留意見避重就輕、睜一隻眼閉一隻眼、甚至與企業珠聯璧合矇騙股東的事就難免不出。因此，對於那些會計師事務所，特別是中小會計師事務所來說，要想既有飯碗又能吃口良心飯，確實很難。豐衣足食腰杆才能硬起來，要想從根源上解決問題，先得讓他們找到"鐵飯碗"。
Friday, August 17, 2001 News
Seven Golden Rules To M&A Success
[Comment]
by Alan Kong @02:14
Increasing shareholder value is one of the key reasons to pursue a merger or
acquisition, yet only about one third of the largest deals in the last couple
of years resulted in increased value.
A recent study by KPMG uncovered some interesting facts about successfully increasing shareholder value following a merger or acquisition.
It found that:
The more experience a company had in acquisitions did not make much difference on its ability to increase value.
35% of US companies derive value from a merger or acquisition. European counterparts only increase value 24% of the time.
Companies are most likely to succeed in increasing shareholder value by following these seven key steps:
The survey concluded that companies that succeed in increasing shareholder value in a merger or acquisition recognize the importance of advanced planning, strategic assessment, due diligence, and an agreed-upon detailed blueprint for execution.
Planning is key. Simply executing the deal used to be the main focus and emphasis of management. Implementation, integration and carrying out the true potential of the deal now has the appropriate focus of tuned-in management and Board leadership.
Five Strategic Technology Payoffs
[Comment]
by Alan Kong @02:04
Technology is impacting every aspect of our accounting practices and leading
firms have found that proper implementation and utilization of technology is
a strategic competitive advantage. The difficulty lies in knowing where to spend
your technology dollars to get the biggest return on the IT investment. Over
the past few years, we have found the five most effective strategic technology
payoffs for firms to be in the areas of: promoting stability, providing training,
effectively utilizing practice management, implementing knowledge management
capture solutions, and providing remote access capabilities.
Stability: One of the most important resources a firm has is the production capacity of its personnel, much of which is dependent on technology to work efficiently. If this technology is unstable or outdated, downtime causes a reduction in capacity usually far surpassing the cost of upgrading systems. Our most profitable firms (revenues over $150,000 per person) have incredibly reliable and resilient systems. Keys to developing a stable technology environment:
Training: In today's rapidly changing environment, the investment in technology is never utilized without proper training. Studies show the average untrained worker takes three to six times longer to get to the same or lower level of productivity as a trained employee, while at the same time consuming four to six times the amount of technical support. Firms that don’t provide proper training pay much more in the long run in their personnel’s inefficiency. The hallmark of firms with effective training programs include:
Practice Management: Most time and billing systems are minimally utilized within CPA firms. By training individuals to enter time and expenses daily and prepare billing on demand, firms can dramatically improve their receivables situation. As every firm has unique reporting needs, outsourcing the creation of customized reporting has worked more effectively than firms trying to develop reports by themselves. The most effective practice management systems are those in which:
Knowledge Management: Virtually every business is moving to a digital environment as data can be more easily accessed, transferred, and backed up more efficiently. Leading firms have effectively consolidated many of their manual and difficult to manage processes into an intranet (internal web site), which makes items such as personnel manuals, a company rolodex, internal news and forms very easy to access and update. Additionally, by capturing traditionally paper documents with scanners, and saving them to the network or moving them via email, saves time and money. Key points to consider:
Remote Access: One of the biggest demands of our personnel is the ability to access firm information from anyplace and at anytime, in a reliable and quick manner. With proper implementation of remote access and application servers, as well as adequate bandwidth, there is no reason why people cannot work from homes or client offices as effectively as they do when they are in the office. Amongst the best remote access practices:
As technology continues to integrate each part of our practice, it will be imperative that we include it within every strategic decision we make. The five previously mentioned items will help you focus on the highest priority items, especially if coordinated as part of a strategic technology plan and budget.
Friday, July 28, 2001 News
PRC listed companies to be audited by Big5
[Comment]
by Alan Kong @00:14
China Pacific Insurance and China Merchants Bank have become the first listing
candidates to hire international accountancy firms to audit their books following
new requirements.
The Shanghai-based insurer - the mainland's fourth-largest insurance company
- said it had hired PricewaterhouseCoopers to audit its accounts ahead of its
public listing, according to officials.
The Shenzhen-based China Merchants - the sixth-largest commercial lender by assets - confirmed that KPMG was its auditor for the planned flotation.
Both financial institutions have completed the required one-year coaching period ahead of listing and are expected to seek flotations by the end of this year.
The move was revealed two months after the China Securities Regulatory Commission and the Ministry of Finance authorised the Big Five international accountancy firms - KPMG, PricewaterhouseCoopers, Arthur Anderson, Deloitte Touche Tohmatsu and Ernst & Young - as the first batch of overseas auditors for listing candidates.
In January, Beijing issued new regulations requiring financial listing candidates to complete two rounds of financial audit, first by a local accounting firm using domestic standards, then by an international accounting firm employing the new classification guidelines in line with world common practice.
A spokesman for China Merchants Bank said the appointment of the auditor was made few months ago but he gave no details on the listing proposal.
In April, China Merchants' president and chief executive officer Ma Weihua had said the bank was hoping to complete paperwork by the month's end for a domestic initial public offering in the fourth quarter raising eight billion yuan (about HK$7.54 billion) to 10 billion yuan.
At the end of last year, it had assets of 241.38 billion yuan and accumulated after-tax profit of more than 19 billion yuan.
A China Pacific spokesman declined to unveil listing details.
However, in a recent interview with mainland newspaper People's Daily, the insurer's chairman Wang Guoliang said that the preparation work for its listing was progressing well and the company hoped to seek the flotation by the end of this year.
Mr Wang said premium income grew 22.06 per cent to 15.25 billion yuan last year. It made 540 million yuan profit - its third year of 30 per cent growth.
China has three listed financial institutions - all commercial banks. They are Pudong Development Bank, Shenzhen Development Bank and China Minsheng Bank.
China Minsheng had hired PricewaterhouseCoopers to audit the account when it listed in December last year, before the introduction of the auditing requirement.
The new requirement is seen as a bid to improve the transparency and accountability of the mainland's financial sector, as well as the country's hopes to bring accounting standards in line with international standards as it prepares to further open up the sector after its expected World Trade Organisation entry.
The commission had earlier said that it hoped the new requirement would protect investors of financial institutions.
However, the move raised criticism by some mainland auditing firms, which said that stock authorities were favouring international companies.
Wednesday, July 25, 2001 News
國外企業所得稅改革呈現新趨勢
[Comment]
by Alan Kong @22:35
２０世紀８０年代以來，世界性稅制改革的浪潮一直延續至今。企業所得稅作為其中的重要組成部分，呈現出稅負降低、稅收調節作用加強、企業和個人之間雙重徵稅現象減少等國際趨勢。
降低企業稅負 縮小稅率差異
近年來，許多國家都進行了以降低企業稅負為主的所得稅制改革，各國企業所得稅率均有不同程度的降低。如今年７月６日，俄羅斯國家杜馬通過法案，把企業所得稅稅率從３５％降到２４％。去年２月，德國政府批准財政部提出的大規模減稅方案，決定將公司所得稅從４０％降至２５％。去年９月，法國政府決定將公司所得稅從３６.６％降至３３.６％。愛爾蘭在１９９９年將企業所得稅率由３２％調至２８％，並決定以後逐年下降，到２００３年降至１２.５％。波蘭在１９９９年的稅制改革方案中，計畫在５年內分階段大幅削減企業所得稅，到２００４年把稅率降至２２％。
一些亞洲國家也進行了所得稅改革。印尼從改革前的２０％∼４５％降至１５％∼３５％，馬來西亞從原來的４５％降至３５％，新加坡從４０％降至３１％。
改革後，大多數國家和地區的企業所得稅稅率穩定在２５％∼３５％之間，降低了企業負擔，促進了國內經濟發展。同時也使國際間的企業稅負差異縮小，在一定程度上減少了跨國納稅人的避稅行為，有利於經濟資源在全球的正常流動。
規範稅收優惠 加強調控作用
過多過濫的稅收優惠可能對正常的經濟活動產生扭曲，從而損害經濟效率。許多國家在所得稅改革中都注意到了對於稅前扣除和減、免稅等優惠政策進行調整和規範，重新確定其範圍、標準，同時加強稅收優惠政策對經濟的調控作用。這主要表現在幾個方面。
一、支援企業科技創新，支援高新技術產業發展。如法國規定，企業研發費用可以稅前扣除；新加坡企業的研發費用也可部分或全額進行稅前扣除。
二、扶持戰略產業和特定產業的發展。如葡萄牙規定，對１９９９年∼２０１０年總投資額在１０億埃斯庫多以上，並對國內經濟有戰略意義的工業投資專案，可在最長１０年期內享受５％∼１０％的稅收抵免；馬來西亞為減少食品進口，規定這類公司的虧損可在同一企業集團其他公司的總所得中進行抵減。
三、鼓勵中小企業發展。如英國在１９９８年７月將中小企業用於廠房、機器設備等固定資產投資的稅前扣除由原先的２５％提高到４０％；荷蘭亦對年所得不超過５萬荷蘭盾的公司擴大了投資扣除。
四、幫助新辦企業。如法國規定１９９５年∼１９９９年的新辦企業，在前兩年免稅，以後３年分別減免７５％、５０％、２５％；菲律賓２０００年３月宣佈，投資達到３億美元的企業，可申請１２年內免征所得稅。
合併計算所得 避免雙重課稅
大部分國家都同時徵收公司所得稅和個人所得稅，這必然引起對公司利潤分配的雙重徵稅。把企業所得稅與個人所得稅視作一體，合併徵收，從而消除雙重徵稅，是目前所得稅制改革的新趨勢。
各國在合併徵收兩稅中做法各異，歸結起來主要有四種。
一是完全整合制，即把公司所得稅與個人所得稅完全結合起來，將已經繳納公司稅後的利潤分配排除在個人收入之外，不征個人所得稅，希臘從１９９２年起採用這種辦法；或者，只對公司保留利潤徵稅，被分配的利潤由股東繳納個人所得稅，芬蘭、挪威、瑞典等國採用這種方法。
二是最後預提稅制度。即公司利潤首先在公司層次繳納公司稅，如果公司對稅後利潤進行分配，則必須在待分利潤中預扣一定比例的預提稅，股東從剩餘利潤中分得的股息就不再繳納所得稅，奧地利和比利時採用這種制度。
三是分率制。在股東方面，對股東取得的股息按較低的稅率徵收個人所得稅，對其他所得按正常稅率徵收個人所得稅；或者，在公司方面，對公司利潤按正常稅率徵稅，同時對公司分配利潤給予公司稅退稅，使分配利潤的實際稅率低於保留利潤的實際稅率，德國首創並實行這種制度。
四是歸集制。即將公司層次徵收的公司稅全部或部分地歸集起來，減少股東個人就股息應繳納的所得稅。股東可用分得股息所應繳納的個人所得稅，全部或部分抵免公司分配給其股息的利潤所承擔的公司所得稅。這種方法比較複雜，部分歐盟國家採用這種制度。
Thursday, July 19, 2001 News
Conflict over transparency
[Comment]
by Alan Kong @22:35
The separation of ownership and control in companies and the conflict of interests
between managers and shareholders provide managers with incentives to manage
earnings and act against the interest of shareholders.
One of the primary motivations to manage earnings is to increase accounting-based compensation schemes. Lack of corporate transparency and possible earnings manipulations by corporate managers was one of the major reasons for the 1997 Asian financial crisis. Managers can conceal financial information by various methods largely because existing financial standards give them considerable latitude and discretion in financial reporting.
What should regulators do to control managers? The answer seems to lie in good and effective corporate governance mechanisms. Our paper commissioned by the OECD/World Bank/Asian Development Bank 2nd Asian Roundtable on Corporate Governance provides an explanation for some of the more popular internal and external devices.
Examples of external devices are institutional shareholdings, outside block holdings, and takeover activity. Some of the popular internal devices are insider shareholding, and the membership and characteristics of the board (size of the board, number of outside independent directors, audit committees, audit quality, chief executive officer tenure, compensation committees and so forth), and debt financing.
How do corporate governance mechanisms work? For example, insider ownership or management ownership of shares can reduce agency conflicts (the risk that managers, as agents of the shareholders, will not act in the best interests of the company). Managers who own shares in the company are very likely to act in the company's interests. Further, the inclusion of non-executive directors on the board should provide some monitoring and discourage managers from making inefficient decisions.
Our paper also includes audit quality as a corporate governance device. Directors have a choice of appointing Big Five or Non-Big Five auditors. There is a body of economic theory which suggests firms appoint Big Five auditors because the Big Five are associated with higher quality audits due to the technology and the expertise they possess. The appointment of a Big Five auditor also tells the market the firm's earnings and financial reports are more reliable.
A study by Professor Gul and Sidney Leung found firms where the chief executive was also the chairman of the board were associated with lower voluntary corporate disclosures. It also found the negative role of this "chief executive dominance" in corporate disclosures could be mitigated by the presence of quality non-executive directors (where quality is measured by the other directorships held).
These results suggest the issue of whether the chief executive should not be the chairman of the board be considered, to achieve effective monitoring over management.
Another research study, conducted by Professor Bikki Jaggi and Dr Charles Chen in the Department of Accountancy at City University showed the proportion of independent non-executive directors (Ineds) on corporate boards was associated with more corporate disclosures in Hong Kong companies' annual reports. However, this association was weaker for firms with family ownership.
Preliminary research results in another study conducted by Professor Tsui and Stephen Lynn showed there was some marginal support for the negative association between chief executive dominance and firm performance only for non-family owned firms.
The role of traditional corporate governance mechanisms in family-owned companies requires further scrutiny since the economic incentives for managers and owners of family-owned companies are expected to be different.
We provide preliminary evidence of important corporate governance developments for the Hang Seng 100 companies for the fiscal year ended in 1998. We found 38 per cent of the HS100 companies had chief executive dominance (where the chief executive was also chairman) with 15 per cent having a chief executive-chairman from the controlling family.
Out of 100 companies, 39 per cent had two or more family members within the board of directors, with 28 per cent ranging between two and three family members on the board. In addition, 26 per cent of these 100 companies disclosed the existence of audit committees as compared to 2 per cent in 1995 (as found in a survey conducted by Hong Kong Society of Accountants).
Some 19 per cent of these companies reported holding at least one audit committee meeting in 1998. The results also show that none of the companies disclosed any information relating to the constitution and quality of membership of the audit committee (such as the total number of members, the number, qualification and experience of independent non-executive directors, or Ineds), and written terms of reference. Though the Stock Exchange of Hong Kong Listing Rules stipulate companies must have at least two Ineds, 33 per cent of these 100 companies have more than two Ineds.
These results suggest that the HS100 companies are progressive in adopting corporate governance mechanisms.
Needless to say, the results of these studies have policy implications.
For example, the results suggest regulatory agencies need to consider ways and means to ensure the objectivity of the Ineds. A good way is to require additional disclosure on the clear identification of the number of executive directors, non-executive directors and Ineds. An annual statement to declare the independence status of Ineds is also suggested.
Disclosures requiring amounts of fees and any other payments to Ineds, in whatever capacity, may overcome the problem suggested in the above studies.
In addition, special attention should be paid to the quality of Ineds rather than the quantity of Ineds.
These results are particularly important since they establish two important features unique to Hong Kong. First, "traditional" corporate governance devices such as non-executive directors seem to be ineffective in family-owned companies.
Second, it seems that the quality of non-executive directors is more important in ensuring higher corporate disclosures than the number of non-executive directors.
Monday, July 17, 2001 News
恐競爭力不足而違規 400家會計師事務所合併
[Comment]
by Alan Kong @00:52
據中國註冊會計師協會最新統計，截止今年3月31日，全國已批准411家事務所的合併申請，合併後事務所為152家。其中原直管所(由中注協直接管理)87家合併成21家，江蘇省32家合併成12家，北京市31家合併成7家，重慶市27家合併成10家，四川省26家合併成12家，山東省24家合併成10家，吉林省20家合併成6家。
會計師事務所的合併浪潮從去年初即已開始。合併主要有吸收合併、新設合併和吸收專業人員三種形式。事務所通過合併增強了執業能力和抗風險能力。
中國人民大學會計系徐經長教授指出，從長遠來看，會計師事務所必然要走上合併擴大規模的道路。但在我國目前的情況下，合併不能搞成"運動"，不具備條件的不能合併，事務所不僅要有規模，還要有效益，要在效益的基礎上擴大規模，在擴大規模的基礎上實現效益，要實現規模和效益的互動。
業內人士指出，會計師事務所規模的擴大為避免不規範行為的發生築起一道屏障。無論這道屏障最終能否發揮作用，但在構建時必須要做到"規範"。不規範的合併行為不僅將受到市場監管層的查處，也會被市場無情地拋棄。
Thursday, July 12, 2001 News
財政部部長項懷誠指出貫徹新《會計法》要與整頓會計秩序相結合
[Comment]
by Alan Kong @00:40
自去年７月１日至今，貫徹落實新《會計法》已經一年了。６月２７日、２８日，財政部召開了新《會計法》實施一周年座談會，財政部部長項懷誠在會上指出，要進一步貫徹新《會計法》、落實朱鎔基總理所作的"不做假賬"的指示精神，必須與整頓和規範會計秩序結合起來進行。
他說，一年來，新《會計法》的宣傳和貫徹落實，取得了顯著成效。主要表現在以下幾方面：
一是《會計法》的精神逐步深入人心。自新《會計法》發佈以來，共有４０多萬單位負責人、８００多萬會計人員參加了《會計法》的學習和培訓。各級領導、尤其是單位負責人大大提高了對會計工作的認識，並以實際行動重視、支援會計工作；廣大會計人員找准了位置和努力方向，增強了做好新形勢下會計工作的信心和決心；社會各界加深了對會計工作的瞭解，為《會計法》的貫徹實施和會計事業的發展創造了良好的社會氛圍。
二是與《會計法》配套的法規制度逐步健全。《企業財務會計報告條例》的發佈，為提高會計資訊質量奠定了基礎；財政部發佈了《企業會計制度》、會計準則以及《會計從業資格管理辦法》、《財政部門實施會計監督辦法》等，使會計法規體系不斷健全。
三是依法監管會計工作的力度不斷加強。今年３月∼９月，正在全國開展的《會計法》執行情況的檢查，重點檢查了各單位會計資訊的合法性、合規性，這使得《會計法》維護社會經濟秩序的基礎作用日益顯現。
在複雜的社會環境中，法律的預期與實際效果難免有距離。從會計工作現狀看，有法不依、執法不嚴、違法不究的現象仍很嚴重，如會計基礎工作薄弱、假造會計資訊非法謀利、會計人員職業紀律鬆弛等，如果任其氾濫，危害十分嚴重，將會擾亂社會經濟秩序、危及經濟安全、助長消極腐敗的滋生和蔓延。
貫徹實施《會計法》，需要標本兼治，整改並舉。為了推動會計工作規範化、法制化，項部長在會上就下一步工作提出了要求：
要把貫徹《會計法》與落實朱鎔基"不做假賬"重要批示結合起來。"不做假賬"是依法治國與以德治國相結合的重要體現；"不做假賬"是造就會計人才的重要辦學思想；"不做假賬"是保證會計工作充滿生命力的重要基礎。
要把貫徹《會計法》與整頓和規範市場經濟秩序結合起來。那麼，會計工作怎樣認真貫徹國務院關於整頓和規範市場經濟秩序的精神，根本的一條，就是貫徹實施《會計法》，依法整頓和規範會計秩序，努力實現會計秩序的根本好轉。今年的主要任務，是要扎實抓好《會計法》執行情況的檢查。目前，檢查工作已由單位自查轉入重點檢查。為了使檢查工作取得實效，應該做好兩個方面的工作，一是突出重點；二是違法必究。
貫徹實施《會計法》要與進一步完善會計規則相結合。繼"兩則"、"兩制"之後，財政部對企業會計核算制度再次進行了改革，發佈了《企業會計制度》、《金融資產管理公司會計制度》和一系列具體會計準則，初步建立了適應市場經濟要求、與國際會計慣例相協調的會計核算制度體系，為規範企業會計資訊標準，保證企業依法披露會計資訊提供了重要保證。
要把貫徹《會計法》與健全會計監督制約機制結合起來。完善會計監督制約機制，既是《會計法》的要求，也是建立規範的會計秩序的客觀需要。從會計工作的實際情況看，除了要繼續加強外部監督外，也要發揮會計人員的內部監督作用。試行會計委派制和推進內部控制制度建設，是完善內部會計監督制約機制的有效途徑之一。
要把貫徹《會計法》與加強會計職業道德教育結合起來。這是會計工作貫徹依法治國與以德治國相結合思想的重要體現。會計人員是會計秩序和市場經濟秩序的重要維護者，他們的職業道德和業務素質在某種程度上決定著會計工作的質量。因此，會計人員的職業道德規範是"敬業愛崗、熟悉法規、依法辦事、客觀公正、搞好服務、保密守信"，上述內容最根本的一點，就是"不做假賬"，這是對會計職業道德的高度概括。
最後，項部長向社會各界呼籲：會計工作是財政、經濟工作的一項基礎性的工作，而貫徹實施《會計法》是發揮會計工作基礎性作用的重要保證。《會計法》的貫徹實施是一項長期而艱巨的任務，需要各級領導的重視、社會各界的支持和廣大會計工作者的共同努力。
中國加入世貿將實施內外企合併新稅制
[Comment]
by Alan Kong @00:29
中國稅制改革計畫已提交人大，香港安永華明會計師事務所稅務及企業諮詢合夥人李國雄認為，由於要經人大會議通過，新稅制的實施預料會在中國加入世貿後開始。
國家稅務總局的初步構想將國內內資、外資企業所得稅合併，所得稅率大約為25％左右，稅率減免按行業定立。
外資企業納稅項目將增加
李國雄指出，目前外資企業或個人在國內需要繳付約14種稅項，較國內企業或個人要付21種為少，正享受稅制優惠。未來中國稅制改革後，外資需繳付的稅項可能會增多，與內地企業同等待遇。"企業所得稅合併後，所得稅率可能會維持在25％至30％，有待人大通過，但稅務局偏向使用25％的機會很大。稅率減免按行業定立，國家鼓勵的行業將享有，而且不同行業實施不同優惠，還要從投產經營日起計算。"
將從投產經營日起征所得稅
他說，國家規定企業自獲利年開始繳付所得稅，外商享受二免三減半（二年免稅，三年減半徵稅）的優惠，部分企業會鑽法律空子，特意製造經營虧損，令國家稅收減少，政府決定未來稅制改革後，自投產經營日起徵收所得稅。中央政府與地方政府共用增值稅收，中央占75％，地方政府為25％。有些地方政府用減免25％的增值稅來吸引外商，如果超過25％屬違法行為。
禁"先征後退"免惡性競爭
另外，他還說，中央政府明文規定地方政府不可實施"先征後退"，例如先徵收33％的所得稅，投產後再退至15％，這些做法屬不規範的稅務減免，中央禁止該種行徑，為的是希望避免各地方政府為吸引外商投資惡性競爭。
深圳軟體、積體電路增值稅降至3％
[Comment]
by Alan Kong @00:13
"為了鼓勵軟體和積體電路產業的發展，深圳市政府出臺有關政策，把這兩方面產品的增值稅定為3％。這個稅率同樣適用于外商投資。"在昨天召開的高新技術政策研討會上，廣東省科技廳高新技術處處長熊曉雲的這句話引起了粵港工商界高科技投資深圳考察團80多名團員的注意。
粵港工商界高科技投資深圳考察團的成員對深圳的有關優惠政策普遍表示出濃厚的興趣，同時，深圳良好的城市環境和政府對高科技產業發展的支援，也讓他們感到高興。不少成員表示將在軟體、紡織、玩具等具體行業再和深圳有關單位進行細緻的商談，以確定投資意向。
Tuesday, July 10, 2001 News
More PRC statutes updated
[Comment]
by Alan Kong @11:30
I have updated 3 more PRC statutes in connection with foreign business establishment
in technical section. Please free feel to visit.
HKSA re-branding its name
[Comment]
by Alan Kong @11:08
Today, I received a consultation paper from HKSA which proposed to change its
name from "Hong Kong Society of Accountants (HKSA)" to "Hong
Kong Institute of Certified Professional Accountants (HKICPA)" to reflect
its current international status. Our member name is suggested to change from
AHKSA or FHKSA if fellow member to Certified Professional Accountant (CPA) or
FCPA. Practising member who are designated as CPA is suggested to change as
Registered Auditor (RA). At first glance, I considered that a word "Professional"
is defined as: -
adj.
n.
I am of opinion that professional this word should include
the meaning of someone qualified or certified to perform a given type of activity,
otherwise it is not competent for a person to be described as this. Hence, it
is a bit unnecessary to mention Certified Professional in order to set par with
other top-tier accounting bodies.
Saturday, July 7, 2001 News
PRC tax statutes collection
[Comment]
by Alan Kong @00:55
I have updated the technical section with couples of PRC tax statute for people
to learn more about fundamental concept of PRC tax law.
Thursday, July 5, 2001 News
Deloitte Discloses Secrets of Business Success
[Comment]
by Alan Kong @23:45
Deloitte Touche Tohmatsu (DTT) has just completed its third annual ranking of
the top 200 publicly traded Global Growth Companies. The international ranking
is made from companies selected on the basis of annual growth, job creation,
and return to shareholders.
There are 26 firms that have been a part of the top 200 for all three years, and Deloitte has identified four significant areas of achievement that are present in all 26 of thee firms.
Friday, June 29, 2001 News
加入ＷＴＯ與稅收政策調整
[Comment]
by Alan Kong @23:45
一、關稅政策的調整
加入ＷＴＯ後，在關稅方面要進行的政策調整是在逐步降低關稅水平的同時，要合理調整關稅稅率結構。我國通過加入ＷＴＯ的談判承諾，關稅的算術平均水平已逐年降低並承諾到２００５年降到１０％左右。隨著關稅水平的降低，我國應依據有效保護理論和關稅結構理論，利用ＷＴＯ規則中關於允許保護國內幼稚產業的例外條款，並與國內經濟結構的調整和產業政策的要求相結合，不斷合理調整關稅結構，形成"原材料-中間產品-最終製成品"；"比較優勢明顯產品-比較優勢不明顯產品-缺乏比較優勢產品"的從低到高的梯級關稅稅率結構，以體現對產業的不同保護，使國內產業在激烈的國際競爭中健康發展。
二、農業稅制的調整
為了避免加入ＷＴＯ後可能帶來的失業、農業收入降低等負面影響，目前應規範農村稅費徵收，減輕農民負擔，從而減輕開放農產品市場後給農民可能造成的損失。應以建立新的農業稅收為核心，通過農業稅收改革規範政府和農民之間的分配關係，合理確定農民的負擔，以保護農民的生產經營積極性；在此基礎上，農業稅制應發揮產業政策的導向功能，促進"兩高一優"農業和農村經濟的發展。
三、工商稅制的調整
（一）增值稅的轉型 加入ＷＴＯ要求我國加快幼稚產業和比較優勢產業的發展。我國的增值稅必須儘快實現由"生產型"向"消費型"的轉變。
（二）消費稅的調整 隨著經濟的發展，社會形勢和國家消費政策的變化，我國的許多消費品應退出消費稅的範圍，某些新的高檔消費品應儘快納入消費稅的徵稅範圍，而且對不同的消費品實行差別的消費稅稅率。
（三）所得稅制的完善 目前在我國並存著內外兩套企業所得稅制，這與國際慣例極不吻合，應儘快將二者合二為一，以實現公平稅負、合理競爭。個人所得稅也須與國際接軌，要進一步改進申報辦法，由分項扣除向綜合申報相結合過渡。
Thursday, June 28, 2001 News
Study: Brands Are Significant Force In B2B Purchasing
[Comment]
by Alan Kong @23:45
Brand names and fast service are significant drivers for chemical buyers' online
purchasing decisions, suggests the recent study "Was it an Illusion? Putting
more B in B2B" by global consulting firm Accenture and e-CRM technology
firm Online Insight.
Of industrial chemical buyers, 17% said they were "brand seekers"
when purchasing online. Another 22% said they were "service bargain hunters,"
valuing quick service at best prices; 31% were "time savers," seeking
improved productivity even at higher cost. Sixteen percent were "browsers;"
and 14%, "self-help shoppers" wanting ease of use.
But with the one-size-fits-all approach of most Web sites, less than half of
business-to-business customers are pleased with their online purchasing experience,
says the study.
Key findings for online success:
Compenhensive guides for leadership
[Comment]
by Alan Kong @23:34
"Leadership" can be an elusive quality. How does one become a better
leader? And what makes a great leader? Although there are no easy answers to
these questions, key elements of leadership -- including communication, delegation,
and team building -- can be studied and developed.
To help you learn more about what you can do to improve
leadership in your company (both your own and the leadership skills of those
around you), inc.com
compiled this guide to resources available on it's web page.
Wednesday, June 27, 2001 News
增值稅納稅人認定的困惑
[Comment]
by Alan Kong @23:10
根據《增值稅暫行條例》及其實施細則的規定，增值稅的納稅人分為一般納稅人和小規模納稅人，其劃分標準為年銷售額（不含增值稅，下同），即從事工業生產和應稅勞務的納稅人年銷售額達到１００萬元、從事商品流通的納稅人年銷售額達到１８０萬元為一般納稅人，未達到規定銷售額的納稅人為小規模納稅人。這一規定本來以較為明確的標準劃分了兩種納稅人的界限，實際工作中也便於掌握和操作。但是，由於以下法律條款也在同時執行，導致了管理制度之間的衝突，削弱了增值稅的嚴密性與規範性，造成了增值稅征管中的潛在隱患。
１．《增值稅暫行條例》及其實施細則規定，小規模納稅人年銷售額達不到法定標準時，如果其會計核算健全，能夠準確計算增值稅銷項稅額、進項稅額和應納稅額，也可以不視為小規模納稅人。這一規定雖有一定的合理性，體現了對小規模納稅人區別對待的原則，但卻給納稅人的具體認定帶來許多不確定的因素。一是雙重標準並行，實際上嚴重削弱了主體標準的剛性，按銷售額認定一般納稅人的基礎遭到破壞。二是對會計核算是否健全的考核缺乏統一、明確、可行、規範的法律解釋，人為因素介入過多，對增值稅的安全運行構成巨大威脅。三是對達到會計核算健全的時限沒有作出明確規定，稅務機關只能依靠一次性調查，獲得納稅人某一時點的會計核算狀況，容易產生納稅人以人為手段騙取一般納稅人資格的不良後果。
２．國家稅務總局印發的《增值稅一般納稅人申請認定辦法》規定，已開業的小規模納稅人當年實際銷售額達到法定標準的，應在次年１月３１日前申請認定增值稅一般納稅人。如果嚴格執行這項規定，就意味著小規模納稅人在達到法定銷售額的當年不能按一般納稅人申報納稅，而只能從下一年開始享受一般納稅人資格。這種做法必然會造成與增值稅基本法規的衝突，並直接影響到納稅人的正常經營，也不便於稅務機關的日常業務操作，極容易造成認定工作在年初第一個月大量積壓、其他時間因不能認定而又閒置的矛盾。
３．上文同時規定，新開業的納稅人應在辦理稅務登記之後，申請認定增值稅一般納稅人，如果預測全年銷售額能夠達到法定標準，可暫時認定為一般納稅人。這項規定不僅存在政策上不公平的問題，而且操作難度也極大。
４．《增值稅暫行條例》及其實施細則規定，一般納稅人認定後，不得再轉為小規模納稅人，但根據有關文件的規定，這一條款在實際工作中已被突破，其中，大部分屬於稅務機關強行取消原有一般納稅人資格所致，而且並沒有明確此類被取消資格的一般納稅人以後能否重新申請認定，以及在多長時間內可申請認定一般納稅人，從而造成一般納稅人與小規模納稅人之間的頻繁變換，認定難度進一步加大。
５．正式認定或暫認定的一般納稅人是否在認定以後即可領購專用發票且購票數量不受限制，確定是否供票或供票多少要不要與納稅申報相互挂鈎，也是目前一般納稅人認定工作中的一個難點，需要在政策上給予明確和規範。
一般納稅人認定程式的規範性、強制性、可控性較低，不利於法律責任的明確界定，也無法實行科學嚴格的事後考核。從近幾年處理的虛開專用發票案件來看，一般納稅人認定失控是一個極為突出的誘因，可以說，如果在納稅人的認定環節留下隱患，增值稅的後續管理將會更加被動，增值稅穩定運行所需要的基礎環境也將遭到嚴重破壞。看來，要完善增值稅的法律體系和管理體系，必須對其納稅人認定與管理的基本制度和操作流程進行規範設計。
財政部近日發出通知強調：要做好《會計法》重點檢查階段工作
[Comment]
by Alan Kong @23:01
近日，財政部發出了《關於認真做好＜會計法＞執行情況檢查重點檢查階段有關工作的通知》（財會［２００１］３７號）。該通知是為了認真貫徹落實國務院《關於整頓和規範市場經濟秩序的決定》精神，切實做好《會計法》執行情況檢查重點檢查階段的各項工作，並根據有關文件，結合各地區、各部門、各中央直屬企業前一階段開展檢查工作的情況，就重點檢查階段的有關問題發出的通知。
《通知》要求：
要提高重點檢查工作重要性的認識。會計秩序是市場經濟秩序的重要組成部分。國務院《關於整頓和規範市場經濟秩序的決定》把"打擊偽造各種票據、會計憑證、會計賬簿和提供虛假財務會計報告等違法行為"，列入了全國整頓和規範市場經濟秩序的主要內容和當前工作重點之一。各地區應採取切實措施，推動《會計法》執行情況檢查工作的深入開展。
重點檢查是此次檢查工作的關鍵環節，各地區要認真組織好重點檢查階段的各項工作，對檢查組的組成、被檢查單位的選擇、檢查內容的確定、檢查工作的實施、違法違規單位和個人的處理等各個環節，周密部署，精心組織，抓實抓好。堅決反對和防止一切圖形式、走過場、敷衍了事的形式主義做法。要通過重點檢查發現並嚴肅處理一批嚴重的會計造假和違法違規案件，維護《會計法》的嚴肅性，樹立財政部門的監督權威。在重點檢查過程中，財政部將對各地區組織開展重點檢查工作的情況進行檢查，必要時將對地方重點檢查過的單位進行復查。
重點檢查的內容，按照財會［２００１］１８號文件規定的重點檢查階段的檢查內容和財政部《關於開展２００１年會計資訊質量檢查的通知》（財監［２００１］３９號）規定的會計資訊質量檢查的內容，結合本地區的實際情況確定重點檢查的具體內容。在重點檢查中，要把股份有限公司貫徹執行財政部《關於印發＜企業會計準則--無形資產＞等８項準則的通知》（財會［２００１］７號）、財政部《關於印發＜貫徹實施企業會計制度有關政策銜接問題的規定＞的通知》（財會［２００１］１７號），作為重點檢查的內容。
重點檢查的形式和組織實施。重點檢查形式要以會計資訊質量檢查為主。在重點檢查過程中，財政部門會計管理機構與財政監督機構要加強協調配合，按照財監［２００１］３９號的有關要求，適當聘用註冊會計師及相關人員參加重點檢查，組織好檢查工作。各地要在各單位開展自查的基礎上，確定重點檢查範圍，選擇重點檢查單位，認真制定檢查計劃，下達檢查通知書。檢查組對被查單位實施檢查後，要認真填寫"《會計法》執法檢查工作記錄。
對查出的問題，財政部要依據《會計法》等法律、法規及財會［２００１］１８號文件的有關要求，對違法單位及有關責任人員依法給予行政處罰。觸犯刑律的，要及時移送司法機關追究刑事責任。
各地區在進行重點檢查中，對檢查和處理過程中形成的各類文書資料應當建立檔案，妥善保管。
重點檢查工作情況說明的主要內容有：重點檢查的範圍、被查單位數量、檢查內容、形式和時間；檢查組的組成人員構成情況；檢查組開展檢查工作的基本情況；檢查中查出的主要違法行為及金額；對違法單位和有關責任人員的行政處罰、行政處分情況；對涉嫌犯罪的有關責任人員移送司法機關情況（應分個案分別說明）；對違法單位和有關責任人未予以處理的數量、原因和有關情況；其他需要說明的內容。
各部門和各中央直屬企業應當按照財會［２００１］１８號文件的有關規定和本通知的精神，除配合財政部組織會計資訊質量檢查外，可以自行組織本部門、本系統的檢查，並將檢查的有關情況直接報送財政部。
Monday, June 25, 2001 News
我國資本市場未來五年將呈現六大趨勢
[Comment]
by Alan Kong @22:49
在日前重慶市舉辦的"西部開發與資本市場國際研討會"上，中國證監會首席顧問梁定邦說，未來五年我國資本市場發展將呈現六大趨勢。梁定邦預測，我國經濟在未來五年將以持續7%的幅度增長，因而，我國資本市場有潛力成為世界上重要的市場之一。他說，在今後五年裏，我國資本市場有六大發展趨勢值得關注：
Sunday, June 24, 2001 News
Resources on PRC tax and other business regulations
[Comment]
by Alan Kong @22:26
I have posted many news from Hong Kong and oversea countries like U.K and U.S.A..
But from now, apart from updating these, I will concentrate on producing more
news in PRC tax laws and other business regulations which affecting the foreign
investors. I hope it is of assistance and has value to public to understand
the tread in this respect.
Thursday, June 21, 2001 News
Accounting rules let tech companies exaggerate profits
[Comment]
by Alan Kong @22:26
Loose accounting rules allowed the top 36 technology companies to exaggerate
their profits by 25 percent during their last fiscal year, according a new report
from Merrill Lynch & Co.
Stock options, investments, mergers and tax benefits all disguise the real bottom line for tech companies, including many of Silicon Valley's largest firms.
The report concludes that naive investors are making a big mistake by only looking at profits or earnings per share to measure a company's health. Instead, it urges that they should look at a company's cash flow -- the difference between the actual cash going out of and coming into a firm.
If they had, investors would have noticed the first warning signs of the impending tech bust last year. That's because cash flow was deteriorating for three years from 1997 through 2000 for most tech firms as inventories and receivables built up.
The report revisits many well-known accounting debates, but it is one of the most extensive attempts to bring a sharp pencil to tech profits during the height of the tech bubble.
"On average, real tech earnings are less than they appear,'' says Steven Milunovich, technology strategist at Merrill who wrote the report with accounting specialist Gary Schieneman.
If so, that means tech stocks are still more expensive even now than previously thought. ``We've been fairly bearish on tech for some time now,'' Milunovich said.
In a few cases, the loose rules hurt company profits unnecessarily, such as:
But overall, the earnings for tech companies look better than they are, because of other rules that inflate them:
"It's highly unlikely that Yahoo would ever report profits had they been required to expense stock options,'' said Schieneman during a conference call. In fact, if Yahoo was included among the top 37 tech companies, the group's overall profits would have been 73 percent less than reported, the study calculates.
The only comment that Yahoo made came as an official statement: "Yahoo follows all standard accounting procedures including those relating to stock options.''
Other companies were not immediately able to respond to the 24-page report.
Brett Trueman, professor of accounting at UC-Berkeley's Haas School of Business, agreed that the problem is with the accounting rules themselves, not with how companies are following the rules.
"Given the rules as they are, the question is what adjustments are need to better reflect the underlying financial health of the company?'' he said. "Investors need to look beyond the published numbers themselves in the income statement to get a better understanding of what's going on in the company.''
For instance, eBay reported profits of $48 million last year, but if the cost of its options were included in its income statement, it would have shown a $48 million loss. Current accounting rules allow companies to include stock options in a footnote to their annual report instead of on the income statement.
Trueman said that the Financial Accounting Standards Board wanted the stricter method of counting options but relented after high-tech companies strenuously lobbied Congress against it.
In another example, Oracle reported $6.3 billion in profits during its 2000 fiscal year, but that included $6.9 billion of a partial sale of shares in its operations in Japan. Then again, it got $2.5 billion in tax benefits from its stock options. All told, these and other changes really translated into profits 81 percent lower than reported -- only $1.2 billon, the report concludes.
On the other hand, JDS Uniphase reported a $905 million loss in its last fiscal year, but it was forced to include $897 million in goodwill from acquisitions as an expense. If this was added back in, and other changes are included, its loss would have actually been a profit of $175 million.
Thursday, June 21, 2001 News
Arthur Andersen Fined $7 Million by SEC
[Comment]
by Alan Kong @00:52
Arthur Andersen LLP, one of the world's largest accounting
firms, agreed to pay $7 million to settle federal charges it filed false and
misleading audits of Waste Management Inc. <WMI.N>, regulators said on
Tuesday.
The fine was the largest-ever civil penalty against a Big 5 accounting firm,
said the Securities and Exchange Commission in announcing the settlement against
Arthur Andersen and four of its current or former partners.
The firm could not immediately be reached for comment. It did not admit or deny the charges.
The SEC claimed that Arthur Andersen issued "clean" opinions about Waste Management's financial statements, which overstated the Houston-based trash hauler's pre-tax income by more than $1 billion. The audit reports falsely stated that the statements had been prepared using generally accepted standards, the commission added.
"Arthur Andersen and its partners failed to stand up to company management and thereby betrayed their ultimate allegiance to Waste Management's shareholders and the investing public," said Richard Walker, the SEC's top cop.
Saturday, June 16, 2001 News
Employer convicted for omitting Employer's Returns for its
directors
[Comment]
by Alan Kong @20:06
An employer was convicted for 3 counts of offence in respect
of making incorrect Employer's Return of Remuneration and Pensions ("Employer's
Return") after pleading guilty to all the charges at the Eastern Magistracy
today (June 6).
In passing the sentence, Magistrate Henry Mierczak ordered the defendant to pay a total fine of $13,000 and a total further fine of $100,000, which is about 25% of the tax undercharged, totalling $113,000. The representative of the defendant told the Court that the defendant was unable to pay the penalty. The Magistrate then ordered the defendant to pay the penalty within one month and if it was not able to do so, to appear on June 8, 2001 to inform the Court about the evidence which the defendant intended to adduce to prove its current financial position.
The defendant, Camina Collections Limited, a carpet-trading company, was charged for making 3 incorrect Employer's Returns for the years of assessment 1994/95, 1995/96 and 1997/98, by omitting returns (I.R. Form 56B) in respect of all its 3 salaried directors for the first-mentioned 2 years and in respect of 2 salaried directors for the last-mentioned year, contrary to section 80(2)(a) of the Inland Revenue Ordinance.
Under section 52(2) and (3) of the Inland Revenue Ordinance, an employer is required to file for each year of assessment an Employer's Return including returns which contained the names, places of residence and the full amount of the remuneration in respect of all the persons employed (including directors) and received remuneration in excess of a certain limit during that year.
The Court heard that the defendant had 4 directors who were also its shareholders. Three of them drew salary from the defendant and were in charge of its management and operation. The other director was inactive and did not receive any income from the defendant.
Each of the 3 salaried directors received annual remuneration ranging from $320,000 to $600,000. For each of the relevant years of assessment, the defendant only filed I.R. Form 56B for its 15 to 16 employees but not the directors. An investigation into the Employer's Returns filed by the defendant revealed that the defendant had omitted I.R. Form 56B in respect of its 3 salaried directors who received remuneration from the defendant in excess of $3.6M in total for the 3 years of assessment 1994/95, 1995/96 and 1997/98. The amount of tax undercharged, or would have been undercharged, as a result of the defendant's incorrect Employer's Returns exceeded $400,000.
A spokesman for the Inland Revenue Department said that any person who made an incorrect return, including an Employer's Return is an offence. The maximum sentence is 3 years' imprisonment and a fine of $50,000 for each charge, plus a further fine of treble the amount of tax undercharged.
Wednesday, June 13, 2001 News
Shareholders closer to bigger say in some deals
[Comment]
by Alan Kong @23:30
The Government wants to tighten regulations on connected
transactions as part of its review of corporate governance, according to the
registrar of companies Gordon Jones.
The proposed changes include shareholder approval for transactions involving
the directors of a listed company and an associated firm - where the listed
company holds more than a 20 per cent stake.
The stock exchange listing rules require this only for subsidiaries where the listed company holds more than 50 per cent.
Another proposed change would require shareholder approval for a transaction involving directors' interests which exceeds 10 per cent of the company's net assets.
"There should be a statutory requirement that directors should not vote on transactions in which they have a material interest," Mr Jones said.
The proposals - which are expected to be released for public consultation next month - are aimed at making directors more accountable to shareholders. The proposed changes would apply to both listed and unlisted companies.
The debate over improving corporate governance had focused on listed companies, Mr Jones said. But private companies accounted for most of the half a million companies registered in Hong Kong.
"It is therefore very important that the issues affecting unlisted companies . . . are addressed in any review," he said.
As part of the review of corporate governance, three sub-committees are examining the laws relating to directors' power, shareholder rights and corporate reporting.
The Government also has commissioned studies by academics at City University of Hong Kong into the roles of audit, nomination and remuneration committees; the availability of company information to shareholders and an economic analysis correlating the performance of listed companies with their shareholder profile.
The Government also hopes to commission a fourth research project with the Chinese University of Hong Kong.
The review was a "roots and branch" examination of existing corporate governance in Hong Kong, Mr Jones said.
He would also like to see shareholders being more able to hold companies and directors to account.
"As such, [shareholders] should have the ability and powers to protect these interests. If not, they should be adequately empowered," he said.
The review was first announced by the then Financial Secretary Donald Tsang Yam-kuen in his budget speech of March last year.
Tuesday, June 5, 2001 News
Auditors 'below par' on fundamental uncertainty
[Comment]
by Alan Kong @00:30
Auditors of listed companies are falling short of requirements
in their professional guidance to report and quantify the effects of fundamental
uncertainties in their clients' accounts, Company Reporting claimed this month.
Company Reporting highlights a worrying gap between what auditors and companies are expected to report. Rather than looking for uncertainties and quantifying them, many auditors are taking the path of least resistance, the Edinburgh-based accounts monitor found.
Rather than addressing fundamental uncertainties in their reports, auditors tend to refer analysts to the notes in the accounts. The blame for this discrepancy lies with the Auditing Practices Board, Company Reporting concluded, urging revisions to SAS 600 'Auditors' report on financial statements'.
The auditing standard stipulates that the auditors' report should include an explanatory paragraph on any fundamental uncertainties that addresses their possible effect. Companies, however, have no formalised duty to do so in their accounts. As a result, auditors can include a paragraph on what is considered to be a fundamental uncertainty in its report, while the company merely includes the information in a standard note to the accounts without recognising the fundamental nature of the uncertainty.
"Almost universally", Company Reporting found that auditors did not sufficiently describe the uncertainties, nor quantify the potential financial effects.
"But more damning is the wholesale failure of auditors to qualify their opinions even though the accounts, by virtue of not recognising the fundamental nature and not disclosing the potential financial effect, cannot be said to be accounting for and disclosing them adequately," the study comments.
A particulary poor example cited in the study were the accounts of Bon Appetit direct.com. Hacker Young, auditor of Bon Appetit direct.com drew attention to the adequacy of the company's disclosures concerning the sufficiency of working capital. Company Reporting found that while presented as a fundamental uncertainty, it was expressed as if it were. However, the auditor did not describe the possible effects, nor quantify them - or state that it was not possible to do so. A going concern note in the accounts discloses that Bon Appetit experienced a year of trading loss which eroded its capital base to a potentially damaging degree. The accounts did not recognise this as a fundamental uncertainty and and did not quantify its potential financial effect.
The study concludes: "It is perhaps time that SAS 600 was redrafted, so that the requirements are stated with somewhat greater emphasis. As to what a company discloses, action is also required. It is evident that, while the auditors' report can recognise an uncertainty as fundamental, there is no pressure on the company to do so in the same terms...
"The use of the term fundamental uncertainty implies that the accounts should carry a major health warning, and that such a warning ought to be on the face of the primary financial statements. Without such prominence, we have to ask (i) in what sense are the uncertainties fundamental; and (ii) how can the auditors assume that there has been adequate disclosure when they choose not to qualify their opinion.
Activity Based Costing: how it works in practice
[Comment]
by Alan Kong @00:12
I noticed that some clients used Activity Based Costing (ABC)
to account for their manufacturing cost. Here is the simple
guide for beginner to understand how it works in some of the cases. In audit
implication, using ABC don't contradict SSAP2.122 ("Inventories")
if the allocation of fixed production overheads to the costs of conversion is
based on the normal capacity of the production facilities.
Friday, June 1, 2001 News
HKSA's new web page
[Comment]
by Alan Kong @16:21
Hong Kong
Society of Accountants (HKSA) relaunched a freshing web page from scratchs,
with tons of new features such as online members' information viewing and amendment
like ACCA official web page. I used to browse ACCA
web page while I intended to change my details or made payment. It is an advantage
if HKSA can update its web page frequently that rendered us to be fully enjoyable
our member privilege.
Monday, May 28, 2001 News
Auditors slam curbs on finance units
[Comment]
by Alan Kong @22:15
Accountancy firms have opposed a proposal that would restrict
their corporate-finance units from advising a company in a friendly takeover
if they were auditing the books of one of the firms involved.
The proposal is based on concern such situations would compromise the independence
of auditors.
The proposal is contained in a Securities and Futures Commission consultation paper on the takeover and mergers code.
Corporate financiers affiliated to accountancy firms believe they are being unfairly singled out when similar conflicts of interest in other institutions are not treated in the same way. For example, an investment bank can lend money to one side in a takeover and provide corporate finance services to the other.
"It appears that the SFC has taken a very narrow focus when looking at potential conflicts of interest and has singled out firms associated with auditors for special treatment," Ernst & Young corporate finance managing director John Maguire said in a submission to the SFC.
Investment banks are required to operate Chinese Walls that preclude either side from being influenced by the other, which accountancy firms claim they can operate too.
"We have created our Chinese Wall specifically to do more mergers and acquisitions," Deloitte Touche Corporate Finance managing director Richard Winter said.
"We are going to argue that we are able to give independent advice irrespective of whether our auditing affiliate is involved."
The corporate financiers believe the SFC should allow the sector to regulate itself in a similar manner to other sectors.
"It puts the whole profession into a question of credibility by basically stating that we are not able to police ourselves," KPMG Corporate Financial Services director Daniel Ng said.
Professor Judy Tsui Sin-lai, head of the accountancy department at the City University of Hong Kong, said the proposals were a step in the right direction as audits must be seen to be independent.
Saturday, May 12, 2001 News
CLP foray into media 'putting strategy at risk'
[Comment]
by Alan Kong @19:08
CLP Holdings' decision to enter the pay-television market
will test its diversification strategy, but the move will raise the group's
risk profile, according to analysts.
CLP's aim to branch out from its electricity-power business and move into the telecommunications and pay-TV markets would add risks to fundamentals, they said, adding the counter was already regarded as a defensive play.
The pay-TV market was uncertain, given two of the five licence holders had backed out in the past four months, they said.
Ivan Lee Ming-kwong, analyst at Indosuez WI Carr Securities, said: "We have concerns on the viability of the pay-TV operation and question CLP's multi-utilities strategy.
"We also are worried about CLP's over-aggressiveness in pursuing a target of one-third of earnings from [non-Scheme of Control] in 2005, and believe this type of thinking could lead to more unwise investments."
In his latest CLP report, "Strategy Under Siege", Mr Lee said CLP's risk profile had deteriorated and the company's rating was put under review.
On Thursday, CLP subsidiary CLP Telecommunications (CLP Telecom) and British-based Yes Television (Yes TV) announced a plan to form a 75:25 joint venture that will offer a bundle of Internet protocol-based services on TV sets.
The two parties will inject respective assets into the joint venture, with CLP contributing its telecoms retail business Oxygen, call centres, billing and customer services, and Yes TV its pay-TV licence and related technology.
The joint venture, pending Broadcasting Authority approval, is expected to spend more than HK$200 million in the next three years.
"For CLP, the investment is a drop in the bucket," Salomon Smith Barney analyst David Fung said. "The significance is the company puts its diversification strategy into a multi-utility to test."
JP Morgan said the joint venture was estimated to make a loss in the first five years, which would create a limited negative impact on CLP's balance sheet.
Competing directly with incumbent i-Cable Communications, the venture will offer Internet access, video on demand, broadcast TV, e-mail, TV commerce and games.
Yes TV chairman Thomas Kressner said: "The secret to success is the offer of a bundling of IP services that don't exist in Hong Kong."
Yes TV president Randall Cox said revenue would initially come from subscription fees, broadband access charges, TV commerce, video-on-demand charges, and later advertising and game fees.
However, the joint venture will have to buy content locally and globally and will have to rent a network from Pacific Century CyberWorks.
About 300 families will this month test the services, which will be commercially rolled out in August.
Other utilities, including Hong Kong & China Gas, through iCare, also offer Internet services on TVs and set-top boxes. But analysts said subscriptions had not met expectations.
Saturday, May 12, 2001 News
CEO Schiro unexpectedly quits PwC
[Comment]
by Alan Kong @01:15
Jim Schiro, CEO of PricewaterhouseCoopers, said on Friday
at a meeting in Paris that he was standing down from his position at the professional
services firm.
The move will mean huge upheaval for the 10,000 partners at the firm, which has just announced a large round of job cuts.
Friday, May 11, 2001 News
My photo is added
[Comment]
by Alan Kong @00:02
I have added my current photo together with my colleague
Ms Diana, a company secretary which was taken in a lucky draw episode. Please
feel free to visit Members Section for a glance.
Wednesday, May 9, 2001 News
HP, Accenture Form Alliance
[Comment]
by Alan Kong @23:08
In a move that highlights just how much hardware and software
vendors have come to rely on IT services as a dependable stream of revenue,
Hewlett-Packard and Accenture Tuesday formalized a three-year alliance. On its
surface, the deal is a way for HP to promote its services business while dealing
with sagging server sales, but both HP and Accenture insist their relationship
to provide IT consulting, integration, and ongoing operations management services
has reached a higher level of integration.
Companies that hire IT service providers for large consulting, implementation,
and outsourcing projects run into trouble at the different hand-off points during
a project's life cycle, says Juergen Rottler, HP Services' North America VP
and general manager. HP Services and Accenture have developed a matrix of roles
and responsibilities for each of their joint clients to ensure smooth transitions,
says Dave Nass, an Accenture Solutions Operations partner.
HP Services and Accenture have worked together on 15 client projects and claim to have developed repeatable best-practice methodologies for enterprise resource management outsourcing. One such project is the implementation and support of SAP for 11,000 users at Halliburton Co., a Dallas-based energy services provider. About 15% of HP's outsourcing revenue comes from working with Accenture.
HP and Accenture can work together more efficiently than IBM can work with itself, says Ann Livermore, president of HP Services, which accounted for $7.3 billion, or about 15%, of HP's $48.8 billion in revenue last year, up from $6.26 billion in 1999. Although HP Services is only a fraction of the size of IBM's $33 billion Global Services business, Livermore says HP can deliver expertise through partnerships rather than growth.
HP Services' focus on partnering rather than acquisition is a far cry from last year's strategy, which included a bid to acquire the management consulting business of PricewaterhouseCoopers for about $18 billion. Such a buyout would have added about 31,500 PricewaterhouseCoopers' management consulting, business-process outsourcing, financial advisory, and human-resource consulting professionals to HP Services. When neither side could agree to terms, the deal fell apart.
Some analysts say HP Services is moving in the right direction
through its continued relationship with Accenture because clients want software,
hardware, and services from the same provider. But Tom Rodenhauser, lead consultant
with Consulting Information Services, says that ultimately it's the technology
that leads a client to choose services from one hardware or software vendor
over another. With services, "clients are buying a long-term relationship
with a technology provider. IBM Global Services does so well because its technology
also does well," Rodenhauser says, adding that it remains to be seen whether
or not HP's products weather today's tough economic environment as well as its
competitors.
Wednesday, May 9, 2001 News
HKSA web page updated to January 2001
[Comment]
by Alan Kong @23:00
Please take a look. Although it's updated very slowly but
it's very useful for non member to study the applicable SSAPs and other statements
contained in Member Handbook.
Thursday, April 26, 2001 News
Court of Final Appeal backed HKSA reprimand action
[Comment]
by Alan Kong @23:54
Hong Kong's top court has backed the accountancy regulator
in an epic challenge to the regulator's power to investigate a member's audit
on the basis of stolen documents and an anonymous letter.
It also paves the way for the Hong Kong Society of Accountants (HKSA) to collect
one of the highest cash penalties imposed on an individual for a disciplinary
breach.
The Court of Final Appeal yesterday threw out a last-ditch attempt to quash a HK$250,000 fine slapped on accountant Peter Chan Po-fun.
Mr Chan became the focus of an HKSA probe after an anonymous informer wrote to the society in July 1999.
The letter also contained stolen documents: accounts relating to an audit of private firm Hung Hsing Holdings.
Although the society later discovered that the author of the letter was not an assessor from the Inland Revenue Department - as was claimed - it nevertheless launched an investigation into Mr Chan's audit of the company.
Mr Chan launched a legal challenge, in a attempt to halt the investigation.
However, this failed and he was found by the body to be professionally negligent.
The society decided that Mr Chan had deviated from regular accounting practices when conducting the audit.
Mr Chan claimed this was a "mere clerical error". According to the accountant, he carried out the right audit but the wrong report was printed due to an incorrect button being clicked on a computer.
He was also reprimanded and received a HK$250,000 fine - one of the highest imposed by the society against a member.
The penalty was in strong contrast to previous disciplinary cases, Mr Chan argued at a subsequent challenge to the society's findings. This also failed in June last year. Mr Chan took the case to the Court of Appeal in December, but again was rejected.
The Court of Final Appeal yesterday refused to allow a further challenge, signalling the end of the line in Mr Chan's protracted battle.
He told the judges that the matter has set him back financially HK$1 million - the penalty plus legal costs - and had resulted in a possible loss of business due to the adverse publicity.
Moreover, the accountant claims he was prevented by the stock exchange from being a member of the audit committee of a company seeking a public listing as a result of his HKSA reprimand.
Mr Chan also told the court: "No professionals - especially accountants - can practice in peace as an anonymous letter may lawfully come from their employees who need not identify themselves.
"They are hidden inside their accounting firm, unidentified . . . there is no justice for the professionals."
The society's position on anonymous letters became a hot issue in the accountancy profession in light of Mr Chan's plight.
Members had voiced fears of the society acting on information from unidentified sources. These concerns prompted the regulator to reassure members that such complaints would have to meet "fundamental requirements of validity".
Wednesday, April 25, 2001 News
Good news for minority shareholders of public listed companies
[Comment]
by Alan Kong @23:05
Hong Kong shareholders could be armed with new legal powers
to make it easier to sue delinquent businesses, according to Registrar of Companies
Gordon Jones.
Plans were also underfoot to empower Securities and Futures Commission to take civil action on behalf of shareholders in certain circumstances, Mr Jones told a corporate governance conference in Kuala Lumpur.
Under corporate governance proposals set to be unveiled this year, shareholders would be able to sue in the name of a company, by-passing an obstacle of first needing to prove the merit of a case and convincing a court they are entitled to litigate.
Such a "statutory derivative action" would at the very least reduce the costs of litigation because a court could order the company to pay the legal fees, Mr Jones said. Compensation would go to the company, not the shareholder.
A parallel proposal would give the SFC power to carry out certain civil proceedings on behalf of an individual. Mr Jones did not elaborate on what these circumstances would be.
Legal remedies for shareholders who bear the brunt of delinquent corporate behaviour are limited. Hong Kong's "loser pays" system and the high cost of going to court is a major impediment to potential litigants.
Shareholder remedies are just one part of an ongoing review of corporate governance in Hong Kong by the Standing Committee on Company Law Reform.
The review will propose a mix of internal "best practice" measures and statutory measures.
Will this proposal affects our auditors ?
Monday, April 23, 2001 News
Former radio host pleads guilty to tax evasion
[Comment]
by Alan Kong @22:25
A former radio talk-show host was (April 19) sentenced to
a three-month imprisonment and a fine of $200,000 for the four counts on signing
fraudulent Profits Tax Returns by Magistrate Paul Kelly at the Western Magistracy.
The defendant, Ms Pak Wan-kam, Pamela, pleaded guilty to all four charges on signing fraudulent Profits Tax Returns for the taxation years 1994/5 to 1997/98, contrary to section 82(1)(d) of the Inland Revenue Ordinance. Upon sentencing, she has applied for bail pending appeal.
The four charges were related to the returns the defendant signed on behalf of her service company, Platinum Promotion Limited ("Platinum"). At all material times, Platinum's majority of income came from the defendant's radio programme from 1994 to early 1997.
The investigation by the Inland Revenue Department (IRD) upon complaint into Platinum's tax affairs revealed that the defendant had falsely reported in the tax returns of Platinum that an employee had been hired by the company as public relation assistant and received remuneration in the total amount of $208,400 for the two taxation years of 1995/96 and 1996/97.
It was further found that, apart from the false salary expenses, Platinum had in its returns for the four taxation years from 1994/95 to 1997/98 falsely claimed salaries expenses of $162,950 related to another employee, inflated its entertainment and staff benefits expenses in the sum of $735,536; and omitted to include as income a lump-sum contractual bonus of $450,000 received from the radio station in September 1994.
The inflated entertainment and staff benefits expenses were related to 98 restaurant receipts for consumption of meals at 27 restaurants. Among the business records submitted by Platinum in support of its expenses, 44 restaurant receipts were found to be false, and 54 restaurant receipts were altered.
As a result, in the four years of assessment, Platinum totally understated the profits by $1,556,886, involving the tax undercharged of $210,122.
An IRD spokesman reminds the public that tax evasion is a criminal offence. Upon conviction, the maximum sentence is three years' imprisonment and a fine of $50,000 on each charge, plus a further fine equivalent to three times the amount of tax undercharged.
Tuesday, April 17, 2001 News
New section "Chats" added
[Comment]
by Alan Kong @18:29
I have added a new section "Chats" for guests to
have a place to freely express their opinion with others.
Wednesday, April 11, 2001 News
Up to 1,000 PwC staff to go
[Comment]
by Alan Kong @23:26
PricewaterhouseCoopers is to axe up to 1,000 staff from its
US consulting wing, according to the Financial Times.
The current economic downturn, which has meant clients have cancelled or put off contracts, were the reason for the move. The cuts come three months after the firm sacked 400 consultants from the US management consulting services division.
US spokesperson Dave Nestor reportedly said that the news was circulated through an email between PwC employees in a Midwest satellite office.
Nestor said that from 750 to 1,000 staff were to go from the consulting unit's 12,000 employees. A UK spokesman said there would be no impact on this country - the cutbacks were a US territory issue.
New section "Reviews" added and "Services",
"Technical" sections amended
[Comment]
by Alan Kong @01:23
In view of the comment, I revise "Technical" section
that includes a statement to clarify the link to HKSA members' handbooks. I
revise "Services" section that become more specifc. And new section
"Reviews" is added for my philosophy.
Wednesday, March 28, 2001 News
PCCW losses near $7b mark
[Comment]
by Alan Kong @23:04
According to latest public release, PCCW posted a consolidated
year 2000 net loss of US$886 million (HK$6.91 billion), worse than many analysts
had expected - as it was weighed-down by merger costs and the plunging value
of its investment holdings.
What is the implication of this ? Let me check out the annual report throughfully to understand what is going on.
Deloitte criticised for 'incomplete audit trail'
in Peregrine review
[Comment]
by Alan Kong @22:50
Big five accountancy firm Deloitte Touche Tohmatsu has come
under attack for an "incomplete audit trail" in relation to a review
of key interim results of the collapsed Peregrine group.
The firm's "level of scrutiny fell short of what I would expect in these
circumstances", financial inspector Richard Farrant said.
Deloitte has rebutted the criticisms, saying it "properly and adequately" carried out the review.
The firm had been asked to review interim results covering the 10 months to the end of October 1997. This was announced in a public statement by Peregrine in a bid to allay fears of a financial crunch at the investment bank.
Deloitte was to assess accounting policies - if they had been applied; and was to scrutinise management responsible for financial and accounting matters.
However, according to Mr Farrant: "Although I have no reason to doubt that the accounting policies were consistent with those adopted for the 1996 annual accounts, there was no questioning whether those policies remained appropriate given the developments affecting Peregrine since then."
Most importantly, rumours were rife about Peregrine's financial difficulties amid the onset of the Asian financial crisis. In particular, Deloitte knew Peregrine had a large exposure to taxi firm Steady Safe - to the tune of US$262 million - Mr Farrant noted. He was "unimpressed by the review by Deloittes of fixed income related exposures as at the end of October 1997," he wrote.
Much closer scrutiny was needed in reviewing the interim results.
Heavy reliance was placed on assurances from Peregrine's management that there was "no cause for concern". "In these circumstances, in my view, Deloittes should have at minimum sought to discuss prospects with the board, or representatives of the board."
The accountancy firm was moreover unable to demonstrate what it had done in the review.
Although citing insufficient evidence to conclude that the firm had failed to properly discharge its duties, Mr Farrant said: "I regard these concerns about the work... as serious."
Yeah, Deloitte again. It seems SEC should be given power
to review auditors' working paper for listing companies.
Friday, March 23, 2001 News
IRD Sec 16(2) loopholes will be addressed under amendment
bill
[Comment]
by Alan Kong @23:28
Today, while reading the journal ACCA Hong Kong I noted that some kind of tax
updates are interesting :
Under new proposed amendment, Section 16(2)(d), (e) and (f) halt the tax planning involved using oversea associates of the Hong Kong companies to arrange the fund transfer from/ to oversea financial institution and stock exchange to claim interest deduction. The alleged tax planning schemes are simple in fact but only accessable by multinational corporation.
Bluechips' result daulting
[Comment]
by Alan Kong @23:20
Today, while reading the funny story involving our Little Superman Richard in
SCMP, I am distracted by the current financial results of the giant property
developers. It seems that using window dressing devices formerly used by some
listed companies are not adopted by them as most users may not be confused by
merely superificial arrangements.
Wednesday, March 21, 2001 News
Deductibility of Contributions to Mandatory Provident Fund
Scheme or Recognized Occuptional Retirement Scheme -
Employees and Self-employed Persons
[Comment]
by Alan Kong @22:18
With effect from 1 December 2000, employees (full-time or
part-time) and self-employed persons, except the exempt persons under the Mandatory
Provident Fund Schemes Ordinance ("MPFSO") are required to participate
in MPFS. For employees or self-employed persons earning over $4,000 per month,
the mandatory contribution is 5% of the person's income. The maximum contribution
is $1,000 per month or $12,000 per year.
Under the provisions of the Inland Revenue Ordinance ("IRO"), mandatory contributions to MPFS are deductible in computing the assessable income/profits of an employee or a self-employed person. The maximum deduction is $12,000 for each year of assessment, not including contributions made by a self-employed person in respect of his employees. All contributions other than mandatory contributions are voluntary contributions and are not deductible for tax purposes.
Please read the details here.
A 4% Fed Funds Rate By August?
[Comment]
by Alan Kong @22:05
Even before the Federal Open Market Committee (FOMC), the
U.S. Federal Reserve panel that sets short-term interest rates, yesterday lowered
the influential federal funds rate 50 basis points to 5%, the "What's next?"
speculation had already begun. Officially, the FOMC is not slated to meet again
until May 15. But there's nothing to prevent Fed chairman Alan Greenspan from
acting before then -- if deteriorating economic conditions warrant it. Indeed,
Greenspan and his colleagues say that "the risks are weighted mainly toward
conditions that may generate economic weakness in the foreseeable future."
In short, they're concerned that both demand and production will remain soft.
"Since the Fed retained its easing bias, more rate cuts are coming,"
asserts Bruce Steinberg, chief economist at Merrill Lynch & Co., New York.
He expects the federal funds rate to be 4% by August. However, the Fed's action
yesterday is only one of the steps necessary for U.S. economic recovery, contends
Jerry J. Jasinowski, president of the National Assn. of Manufacturers, Washington.
"Congress should act to reduce individual taxes as soon as possible, lowering
marginal rates retroactively to the first of the year," he says.
Tuesday, March 13, 2001 News
Cocktail reception with president of HKSA
[Comment]
by Alan Kong @21:19
Today, I have a cocktail reception with our president of
HKSA, Mr. Andy Lee, together with other HKSA members discussing the events to
be conducted during the year and be advised to join various functions introduced
by their committee staff, which are set out as below:
All functions are highly recommended to be taken part. I probably join the third and fourth one.
One more new, our initial, AHKSA or FHKSA if fellow member, may be changed to some kind of CPA like AICPA or CPA (Aust.) style, the consultation paper is going to be released shortly.
KPMG Must Face the Music, SEC Style
[Comment]
by Alan Kong @21:06
After receiving a cease and desist order from the Securities
& Exchange Commission in January, KPMG filed a motion requesting the SEC
to reconsider the order. Once again, the SEC has ruled in this matter, and still,
KPMG is required to cease and desist.
The issue behind this ruling has to do with the circumstances under which KPMG provided services to Porta Systems, a Long Island company with which KPMG had more than an auditor/client relationship. As reported in January, KPMG was providing administrative services to the company while conducting an audit of the company. In addition, there was a $100,000 loan outstanding from KPMG to the president of Porta Systems.
KPMG contested the SEC's cease and desist order, claiming the SEC disregarded its own standards in applying the order. In addition, KPMG argued that the SEC's conclusion that a likelihood of similar future violations exists was devoid of any evidence or support. The SEC found no merit in KPMG's arguments, and denied KPMG's motion for reconsideration.
You can read the full
text of the SEC's order.
Friday, March 9, 2001 News
Intel Cutting 6% Of Jobs Amid Widening Slump
[Comment]
by Alan Kong @23:35
Saying that the slump in PC sales has spread to networking,
communications, and servers, chipmaker Intel is warning that first-quarter revenue
won't meet expectations, and it will cut 5,000 jobs during the next nine months.
Intel says revenue for the quarter should be down about 25% from the fourth quarter's $8.7 billion. It had said that revenue would drop 15%.
Intel execs weren't immediately available for comment. During an Intel conference last week, CEO Craig Barrett said the U.S. economy was experiencing a "definite slowdown," but he vowed at the time not to cut R&D or investments in manufacturing capacity. Thursday, however, the company said it would snip 2% off R&D this year, to $4.2 billion from $4.3 billion originally planned. Intel said it won't reduce capital spending, which remains at $7.5 billion for the year.
Tuesday, March 6, 2001 News
Arthur Andersen Changes Name
[Comment]
by Alan Kong @21:35
Effective immediately, Arthur Andersen is to be known simply
as Andersen. The Chicago-based firm announced the name change Monday.
"Andersen is the most recognized, best known name in professional services. This tremendous asset draws upon our heritage of professionalism, integrity, quality service and trust. Using Andersen as our global brand better aligns with our strategic commitment to continually enhance the breadth and depth of our capabilities. We want to be known for our total commitment to client service and our unique ability to provide sophisticated, integrated solutions," said Joseph F. Berardino, managing partner and chief executive officer.
"There is extraordinary power in our name because it stands for time-tested values, a unique one-firm global operating approach and recognized superior performance. Andersen stands for unity, quality, objectivity and always acting in the best interests of our clients. We intend to fully utilize the strength of our Andersen brand as a differentiating asset worldwide," continued Mr. Berardino.
Andersen's former consulting unit, Andersen Consulting, changed its name to Accenture effective January 1. With new names, it is unlikely the two firms will be confused with one another.
"We intend to fully utilize the strength of our Andersen brand as a differentiating asset worldwide," Mr. Berardino said.
The name Arthur Andersen will be phased out over the next several months.
Sunday, March 4, 2001 News
Fiscal budget for 2001-2002
[Comment]
by Alan Kong @13:15
It seems like there is no significant change of tax system
in the forecoming fiscal budget. Will our Financial Secretary adopt some measures
suggested by our Hong Kong Society of Accountants (HKSA) to relieve the hardship
of poverty and negative equity owners ? Or any favorite tax benefit introduced
for this fiscal year ? Still waiting to see.
Friday, March 2, 2001 News
Director convicted for assisting other person to evade tax
[Comment]
by Alan Kong @20:52
Judge Poon of the District Court today (February 26) sentenced
a company director for 5 counts of offences, for wilfully with intent assisting
other person to evade tax, to 9 months immediate imprisonment plus fines of
$90,000 and further fines of $2,062,048, which was equivalent to 2 times of
the total tax evaded.
In delivering the sentence, Judge Poon pointed out that deliberate defrauding the Inland Revenue Department (IRD) is a serious matter which affects the community as a whole. Non-custodial sentence is not an appropriate sentence for this case.
The defendant, CHANG Kin-man, Ivan, was prosecuted on 5 counts of wilfully with intent assisting other person to evade tax viz., 2 counts by omitting proceeds of sales from the profits tax returns of a company, contrary to Section 82(1)(a) of the Inland Revenue Ordinance, and 3 counts by making use of fraud, art or contrivance, contrary to Section 82(1)(g) of the Inland Revenue Ordinance. The defendant pleaded not guilty to all the 5 charges.
The Court heard that during the relevant years, the defendant was the director and shareholder of Kam Tong Kee Engineering Plastics Co. Ltd., a company engaged in the trading of industrial engineering products. Investigation by IRD officers revealed that the Company issued two types of cash sales invoices, one type with serial numbers bearing alphabetic prefix and another with serial numbers bearing no alphabetic prefix.
For the years of assessment 1994/95 to 1996/97, the Company omitted from the profits tax returns, which were submitted to the IRD, the proceeds from the sales in respect of all those cash sales invoices with serial numbers bearing no alphabetic prefix. The amount of omitted sales involved was about $6.25 million. The defendant signed the accounts which were accompanied with the 3 returns, and signed the returns for the years of assessment 1994/95 and 1995/96.
The Court also heard that the defendant concealed the aforementioned omitted sales by keeping two separate sets of accounting records for the Company and operating an undisclosed personal bank account. It was revealed that the proceeds from these omitted sales were deposited into a personal bank account which was opened in the names of the defendant and the Company's book-keeper. The money was then shared between the defendant and another director, who was also a shareholder, of the Company. As a result of using such fraud, art or contrivance, the assessable profits of the Company had been understated in the amounts of $796,027, $2,787,472 and $2,665,133 for the years of assessment 1994/95, 1995/96 and 1996/97 respectively. The total profits tax undercharged was over $1 million.
A spokesman for the IRD said that tax evasion and assisting other person to evade tax were criminal offences with the maximum sentence of 3 years' imprisonment and a fine of $50,000 on each charge, plus a further fine equivalent to 3 times the amount of tax undercharged.
Thursday, March 1, 2001 News
My Biggest Mistake: Analyzing the Archives
[Comment]
by Alan Kong @22:25
Since April 1998, Inc.
magazine has asked business leaders to share their biggest mistakes. We've
analyzed the 32 My Biggest Mistake articles published through February 2001
to develop an early warning system for business owners. The mistakes fall into
seven categories. Proceed directly to the category that's your weakness or read
all seven parts for a well-rounded education.
Worth a look, if you have plenty of time.
Sunday, February 25, 2001 News
Home loan interest deductions
[Comment]
by Alan Kong @11:25
Following is a question by the Hon Sin Chung-kai and a written
reply by the Secretary for the Treasury, Miss Denise Yue, in the Legislative
Council today (February 21):
Question:
At present, if owners of mortgaged dwellings which are used as their principal place of residence have assessable income in a financial year, they are entitled to claim "home loan interest deductions" in respect of the interest paid on mortgages in that year; if they have no assessable income, they may nominate their spouses who live in the same dwelling and have assessable income to make such claims. In this connection, will the Government inform this Council:
(a) of the reasons for the Administration stipulating that these persons may only nominate their spouses but not their children to lodge the claims; and
(b) whether the Administration will consider amending the relevant legislation to give the children of such persons the same right; if not, of the reasons for that?
Reply :
President,
Under the Inland Revenue Ordinance, the maximum home loan mortgage interest deduction under salaries tax in respect of a property is $100,000 in a year of assessment. Each taxpayer is entitled to a home loan interest deduction in any five years of assessment in respect of a property which is used by him/her as his/her principal place of residence in each year of assessment. Where a property is jointly owned by more than one person, the interest deductible for the property, subject to a maximum of $100,000 in a year, would have to be apportioned between the owners in the same ratio as their respective shares of the ownership of the property. No transfer of entitlement between joint owners is allowed, except under Section 26(F) of the Ordinance.
Under Section 26(F), where a taxpayer is entitled to the home loan mortgage interest deduction but has no income, property or profits chargeable to tax for that year of assessment, he or she may nominate his or her spouse who is not living apart, to claim the deduction for that year of assessment.
Allowing eligible taxpayers to nominate only their spouses (and not their children or any other persons) to claim the deduction is in line with the existing tax policy under which tax liability is assessed on an individual basis and entitlement to tax deductions is not transferable, with married couples being the only exception. It is for this reason that the Inland Revenue Ordinance allows only married couples to elect to be jointly assessed, whereby the two individuals' net chargeable income is aggregated and a single assessment is raised as if they are a single taxpayer. In a joint assessment, even if only the husband or the wife is eligible to claim the home loan mortgage interest deduction as an individual taxpayer, the deduction will be made against the aggregated income of the couple. However, if only the husband or the wife is eligible to claim the home mortgage interest deduction but he or she has no income chargeable to tax in any year of assessment, the couple will not be able to benefit from the deduction through election for joint assessment. The nomination option merely seeks to provide an alternative channel to these married couples whereby they can benefit from the deduction as if they are allowed to elect for joint assessment.
As we do not consider it appropriate to allow the income of any individual taxpayer to be jointly assessed with any other persons except his or her spouse, we see no case to extend the scope of the nomination provision relating to home loan mortgage interest deduction under Section 26(F) of the Ordinance to cover the taxpayer's children or any other persons.
Saturday, February 17, 2001 News
Audit independence 'a function of auditor size', say researchers
[Comment]
by Alan Kong @00:58
Academics have found that larger auditors are less likely
to compromise their independence than smaller ones when providing non-audit
services to their clients.
And when the provision of non-audit services - and consequently the fee - is
relatively high, these smaller firms find it hard to resist aggressive accounting
by their clients.
The Lancaster University study into non-audit services, auditor independence and earnings management found that the latter's proximity to analyst's forecasts varies according to the size of the fee for Big Five and non-Big Five firms.
Pelham Gore, Peter Pope and Ashni Singh carried out the research following the recent furore in the States over the issue. In early 2000, the Securities and Exchange Committee found over 8,000 violations of auditor independence at PricewaterhouseCoopers.
On the surface, the matter has since been settled, and auditors can still provide non-audit services to their clients. But this report - whose findings suggest a "direct causal link" between non-audit services, audit reporting and financial reporting quality - may yet trouble steady waters.
The study looked at earnings management activity in a sample of 4,779 UK listed non-financial companies between 1992 and 1998.
Dell Announces Large Layoffs
[Comment]
by Alan Kong @00:41
In the latest sign of tough times for the computer hardware
industry, Dell Computer Corp., Round Rock, Tex., says it will cut 1,700 full-time
positions, about 4% of its workforce, to bolster its competitiveness amid softening
economic conditions. Although the layoffs are the first of this magnitude in
the company's history, Wall Street had been anticipating even larger cuts. During
the last week, analysts and online news services have speculated that the company
could eliminate as many as 4,000 jobs.
Most of the job cuts will affect employees in administrative, marketing, and
product-support functions in its central Texas operations. At the end of January,
about 22,000 of Dell's 40,200 employees were located in central Texas. Before
the job cuts were announced, SG Cowen analyst Richard Chu said in a research
note that layoffs would be welcome and that he would be concerned if Dell didn't
have plans to cut jobs.
Nortel to post 1Q loss
[Comment]
by Alan Kong @00:32
Nortel Networks warned Thursday that a sector slowdown will
cause the telecommunications equipment maker to post a first-quarter loss and
cut 10,000 jobs.
A severe economic downturn in the U.S. will cause the overall market to slow by 10 percent this year. Nortel, which makes voice and data networking equipment, expects the slowdown to continue into fourth quarter.
Toronto-based Nortel (NT: Research, Estimates) now expects to report $6.3 billion in first-quarter revenue and an operational loss of 4 cents a diluted share in 2001.
News of the warning caused Nortel shares to plunge, falling by $6.70 to $23 in after-hours trading on Instinet.
"We are seeing longer than expected delays in spending by our U.S. customers as they continue to assess the impact of the economic and market conditions on their businesses," said Nortel CEO John Roth.
Growth in Europe and in Asia Pacific and Latin America offset the declines, Nortel said.
In January, Nortel announced that it would lay off about 4,000 full-time employees in the near term but expected to finish 2001 with the same number of employees it had last year. Nortel now expects to cut 10,000 employees through streamlining and realignment activities. Attrition and retirement will also impact the job cuts, the company said in a statement.
Last month, Nortel projected revenue and earnings per share to each grow by 30 percent. The telecom equipment provider now anticipates revenue in 2001 to grow by 15 percent and earnings per share to increase by 10 percent.
Earnings tracker First Call had expected the company to report income of 16 cents a share in the first quarter and 96 cents a share for all of 2001.
Friday, February 9, 2001 News
Heavy penalty for tax dodger
[Comment]
by Alan Kong @23:35
The ex-personnel manager of Sogo (Hong Kong) Company Ltd
(Sogo), who had pleaded guilty to two charges on tax evasion at the District
Court in January, was sentenced today (February 7) to 240 hrs of community service,
the maximum permitted by the law, and fined $500,000, which was about 190% of
the amount of tax evaded.
The defendant, Mr Lam Kwong-wai Anigo was the most senior local staff of Sogo. He was entrusted with the responsibilities to sign and file the Employer's Return of Remuneration and Pensions (Employer's Return) on behalf of Sogo, for the purpose of reporting to the Inland Revenue Department (IRD) the remuneration received by its employees.
In particular, the defendant was responsible for the checking and signing of that part of the Employer's Return prepared by his subordinate to report the remuneration received by him as an employee.
In respect of the Employer's Returns for the years of assessment 1994/95 and 1995/96 signed by the defendant and filed on behalf of Sogo to the IRD, the defendant, wilfully with intent to evade tax, deliberately omitted to include details of his own remuneration in the Employer's Returns filed for those years.
As a result, no salaries tax assessments were raised on the defendant as the IRD had no knowledge that he had derived employment income during the relevant period. The amount of tax evaded for the years of assessment 1994/95 and 1995/96 were $129,979 and $137,267 respectively, the total amount being $267,246.
In passing the sentence, Judge Line emphasized that the court would not take a soft stand on tax evasion cases and he would not have hesitated to impose jail term on the defendant if it had not been for his guilty plea, the relatively simple scheme of evasion and the not too substantial amount of tax involved.
Having further taken into account that the conviction had caused the defendant to resign from his job, the good reference from his former colleagues and the recommendation in the community service report, he sentenced the defendant to 240 hours of community service instead of imprisonment. The defendant was also fined $50,000 for each convicted charge and was ordered to pay a further fine of $400,000. The total fine of $500,000 represented about 190% of the amount of tax evaded.
An IRD spokesman reminds employers that the Employer's Return is an important return which enables the department to verify the income reported by an individual income earner. The filing of an incorrect Employer's Return is an offence which attracts the same penalty as the filing of other incorrect tax returns.
"Besides, tax evasion or assisting any other person in tax evasion is a criminal offence. Upon conviction, the maximum sentence is three years' imprisonment and a fine of $50,000 for each charge, and a further fine equivalent to three times of the tax evaded," he said.
Lucent Targeted by SEC in Accounting Probe
[Comment]
by Alan Kong @22:50
Lucent Technologies Inc. (LU.N) is the subject of a formal
investigation by federal regulators into possible fraudulent accounting practices
at the world's largest telecommunications equipment maker, the Wall Street Journal
reported on Friday.
Citing people familiar with the probe, the paper said the Securities and Exchange
Commission is looking into whether the company improperly booked $679 million
in revenue for fiscal 2000 ended September 30.
Lucent in December cut the $679 million from its fourth-quarter 2000 revenue statement after its own investigation.
The SEC is looking into how Lucent books sales, including how it gives customers one-time discounts, the Journal reported. The agency is also investigating revenue recognition on distributor sales, the paper said.
The paper quoted a company spokeswoman as saying Lucent is cooperating with the SEC, and that it notified the agency of its accounting problems on Nov. 21, just before it publicly announced them.
Lucent's review of its fourth-quarter revenue began when the company identified $125 million in improperly booked revenue.
The chief accounting problem was $452 million in revenue taken back after Lucent discovered equipment that was sold to distributors but never passed on to customers.
The SEC and PriceWaterhouseCoopers, which is the company's auditor, both declined to comment on the matter, the paper said.
Shares of Lucent, which was once a unit of AT&T Corp.
(T.N), closed off 12 cents at $16.89 in trading on the New York Stock Exchange,
well below their 52-week high of $75.25 and above a yearly low of $12.19.
Wednesday, February 7, 2001 News
IRD on granting of tax exemption status
[Comment]
by Alan Kong @22:05
In response to the media enquiries on the granting of tax
exemption status to charitable institutions, a spokesman for the Inland Revenue
Department (IRD) today (February 5) wishes to make the following statement:
In accordance with Section 88 of the Inland Revenue Ordinance (IRO), charitable institutions or trusts of a public character are exempt from tax provided that they are established exclusively for charitable purposes and their activities are primarily for carrying out their expressed objectives. What constitutes a charity capable to claim tax exemption, how a charity may apply for tax exemption and how the applications are processed by the IRD are clearly explained in an information pamphlet entitled "A Tax Guide for Charitable Institutions and Trusts of a Public Character" (published for general information as early as in 1980's). This tax guide can also be downloaded from the IRD website (http://www.inf.gov.hk/ird). It has been clearly stated in Appendix A of this guide that "attainment of a political object" is one example of purposes which the courts had held to be non-charitable purposes.
There have been clearly established principles and criteria for granting of tax exemption status to eligible charitable institutions for revenue protection purpose. They have been broadly established and applied consistently since 1949 when the relevant law came into operation. The tax exemption status of each approved charitable institution is also subject to review once every few (currently four) years. There has not been any change or departure from the practice ever since. A charity can only maintain the status if its activities are carried out directly to further its objects or entirely ancillary to the achievement of those objects. If an approved charitable institution is found to have engaged in other activities during the periodical review of tax exemption status conducted by the IRD, it will be requested to clarify if those activities are compatible with its charitable objects.
Upon enquiry by the IRD, an approved charitable institution has within a specified period of time (usually one month) to respond and furnish reply to clarify the situation. On receipt of the reply from the organization concerned, the IRD will go over the reasons or explanations and make a decision. Usually, the department will advise the organization concerned to take remedial measures should it wish to maintain its tax exemption status. Indeed, there are tax appeal channels and judicial means for those organizations which do not agree with IRD's decisions which are made strictly for implementing the provisions under the IRO.
If a recognized charity engaged in activities that might be described as of a "political" nature, the IRD will draw the charity's attention to the guidelines laid down in the Report of Charity Commissioners for England and Wales. Principal court decisions in the UK have established that: -
(a) the attainment of political object is not charitable;
(b) the expression "political purposes" is not confined to party politics but includes the promotion of any change in the law;
(c) to promote the maintenance of the existing law, or a particular line of political administration and policy, is also a political purpose;
(d) although an association for promoting some change in law cannot itself be a charity, an organization would not necessarily lose its rights to be considered a charity if, as a matter of construction, the promotion of legislation were one among other lawful purposes ancillary to good charitable purposes: it is a question of degree.
When seeking clarification from the charity, the IRD's concern is to ascertain whether such activities were carried out de facto in furtherance of its charitable purposes. In considering the issue, IRD will not take into account whether the activities are in support of or against the Government. The IRD accords the same treatment to all charitable organizations irrespective of the objects they promote (i.e. whether religious, educational or other charitable causes). In recent years, the IRD has sought information on activities carried out by the approved charitable institutions in the following number of review cases:-
Year of Assessment No. of cases reviewed
1992 - 1993 513
1993 - 1994 412
1994 - 1995 379
1995 - 1996 475
1996 - 1997 516
1997 - 1998 526
1998 - 1999 474
1999 - 2000 579
A charitable organization would not necessarily lose its tax exemption status if it carried out political activities which may be regarded as in furtherance of its charitable objects. As at 31 January 2001, there are altogether 3,395 approved charitable institutions and trusts granted under Section 88 of the IRO. The number of approvals withdrawn during the year 1998/99, 1999/2000 and for period from 1 April 2000 to 31 January 2001 are 100, 59 and 48 respectively. None of these approvals withdrawn are for the reason that the institutions had engaged in political activities which are not charitable. The secrecy provision prohibits the IRD from revealing details on individual cases.
Oh-Oh Canada? Economy Shows Signs Of Going Soft
[Comment]
by Alan Kong @21:52
As the U.S. economy has rapidly slowed down, Canada's economy
has remained remarkably resilient. But that may be about to change, warns Salomon
Smith Barney Inc., a unit of Citigroup Inc., New York. Indeed, Canada's Survey
of Business Conditions in Manufacturing for January "was so weak that we
can no longer rule out a negative print on quarterly GDP in the first or second
quarter," relates the securities firm. Firms appear to be cutting back
production to help control rising inventories and adjust to falling demand.
The Canadian business conditions survey, notes Salomon Smith Barney, "has
less of a track record" of signaling broad economic trends in Canada than
does the closely-watched National Assn. of Purchasing Management's manufacturing
index in the U.S. "However, historical evidence suggests that production
declines of the magnitude signaled by the [Canadian] survey [in January] eventually
spread well beyond the manufacturing sector."
Cisco Misses Expectations for the First Time
[Comment]
by Alan Kong @21:40
Computer networking giant Cisco Systems said today its fiscal
2001 second-quarter earnings rose 48 percent but missed Wall Street's earnings
expectations for the first time in several years as the company sounded a note
of caution about the economy.
"Cisco missed both on revenue and earnings," said Chuck Hill, research director at First Call/Thomson Financial. The company had repeatedly beat Wall Street estimates by a penny a share.
The San Jose, Calif.-based company said its profit before one-time items rose to $1.33 billion, or 18 cents a share, for its fiscal second quarter ended Jan. 27, from $897 million, or 12 cents a share, in the year-ago quarter. Analysts had on average expected Cisco to report pro forma earnings of 19 cents a share, according to First Call/Thomson Financial.
Sales, which had been widely watched for a slowdown, rose 55 percent to $6.75 billion from $4.36 billion in 2000, falling short of Wall Street's expectations for $7 billion to $7.2 billion.
Cisco, which makes an estimated 70 percent of the world's routers that direct traffic on the Internet, also said it is "cautious" about the market pause.
"While we remain cautious about the implications of a brief pause in the current 10-year expansion of the U.S. economy, we believe that Cisco has never been better positioned to help our customers solve their two most important business issues: increasing productivity and creating new sources of revenue," Cisco Chief Executive John Chambers said in a statement.
"We remain confident about the market opportunity ahead of us over the next three to five years," he added. "This confidence is based on the continued impact of the Internet on productivity, and just how much more work needs to be done before every company is an e-company and a majority of the world's countries are e-countries.
Chambers warned less than two weeks ago that January's business was "more challenging than we anticipated," leading many analysts to question whether Cisco's and the telecommunications industry's growth are slowing.
In after-hours trading, Cisco's stock fell to $34-3/8 on Instinet after closing at $35-3/4, up $1-3/16, or 3.44 percent, on Nasdaq. In the past year, the Internet equipment infrastructure company's stock has underperformed the Nasdaq 100 Index by almost 6 percent.
Monday, February 5, 2001 News
Deloitte ranks as the best of the Big Five
[Comment]
by Alan Kong @21:56
A culture openness and achievement have put Deloitte &
Touche as the top Big Five firm in a survey of the 50 top companies to work
for.
The Sunday Times piece, that ranks companies according to benefits, respect
and pride, found that the professional services firm boasted the top rating
for staff benefits, but respect and pride only warranted two out of a possible
four stars. Deloitte came 28th - Cisco Systems was top.
Next of the Big Five to be regarded as a pleasant place to work was Arthur Andersen - opportunities and achievement were key features in making them 31st. Also, the firm's drive to be a "membership organisation", with staff feeling like members rather than workers, was mentioned.
Ernst & Young was next at 40th, which said that "fun" was a goal for the firm. People are regarded as the main asset, one employee said.
Arthur Andersen chiefs may like to note that Accenture, formerly Andersen Consulting, came 44th on the list. Another firm of note included in the survey is Sage - ranked 43rd, staff rage about the fantastic Christmas parties and spring balls.
Unfortunately, no mention is made of the PricewaterhouseCoopers' Christmas pantomime. KPMG is also, presumably, bubbling under.
New Windows for Microsoft
[Comment]
by Alan Kong @21:16
Software maker Microsoft Corp. said Monday it will be unveiling
new versions of its core Windows and Office products later this year and will
rename them to reflect a wider range of Web services.
The products will be called Windows XP and Office XP, with the XP standing for experience, the company said in a statement.
"These breakthrough versions of Windows and Office will give people the most powerful end-to-end computing experiences ever available," said Bill Gates, the company's chairman and chief software architect.
Windows XP, which was code-named "Whistler" when being developed, will be launched in the second half of 2001. Office XP, which went by the code name of "Office 10," will come out by the end of the first half of 2001.
Windows XP, which is targeted for personal computer use,
will give customers real-time voice and video services. Office XP, which is
geared toward businesses, will allow users to collaborate on different projects
within the software's applications.
Saturday, February 3, 2001 News
KPMG to lead IPOs
[Comment]
by Alan Kong @23:46
The consulting arm of KPMG is scheduled to go public the
week of February 4, 2001. The stock is expected to trade on the Nasdaq under
the symbol "KCIN."
KPMG Consulting Inc. and its lead manager for the deal, Morgan Stanley Dean
Witter & Co., are expecting to sell 112 million shares at between $16 and
$18 apiece. KPMG Consulting will offer approximately 29 million shares in the
IPO, and its parent, KPMG LLP, will offer approximately 83 million shares.
Last year the company announced plans to raise $2.35 billion by selling 324.25 million shares at approximately $7.25 per share. The company has since changed the number of shares to be offered three times, and increased the offering price once. The company originally planned to go public in October, but postponed its float until market conditions improved.
Technical standards updated
[Comment]
by Alan Kong @16:10
I have received several technical updates from Hong Kong
Society of Accountants (HKSA) yesterday:
Statement of auditing standard (SAS)
SAS 130 "Going concern"
The purpose of this SAS to establish standards and provide guidance
on auditors' responsibilities in the audit of financial statements with respect
to the going concern assumption used in the preparaton of the financial statements,
including considering managements' assessment of the entity's ability to continue
as a going concern.
SAS 450 "Opening balances and comparatives"
The purpose of this SAS is to establish standards and provide
guidance regarding auditors' consideration of opening balances taken from the
preceding period's financial statements, and on the auditors' responsibilities
regarding comparatives.
We are required to comply with these SASs in respect of audits of financial statements for periods ending on or after 28 February 2001.
Statement of standard accounting practice (SSAP)
Statement 2.109 "Event after the balance sheet date"
This revised Statement supersedes the existing SSAP "Accounting
for post balance sheet events". Apart from the treatment of proposed dividend,
the requirements in the Statement are in principle in line with the old SSAP
9. The old SSAP 9 considers proposed dividends as post balance sheet accounting
practice, are reflected in the financial statements and so fall to be treated
as adjusting events. The revised Statement, however, explicitly states that
an enterprise should not recognise dividends, proposed or declared, after the
balance sheet date as a liability at the balance sheet date. This requirement
would change the practice from recognising proposed dividends as liabilities
to treating them as a separate component of equity.
Statement 2.131 "Impairment of assets"
This Statement requires that the recoverable amount of an asset
should be impaired. It also requires that an impairment loss should be recognised
whenever the carrying amount of an asset exceeds its recoverable amount. It
does not cover inventories, assets arising from construction contracts, deferred
tax asses, financial assets and investment properties.
Statement 2.132 "Consolidated financial statements and
accounting for investments in subsidiaries"
This Statement supersedes SSAP 7 "Group account". It
requires an enterprise to use a wider definition of subsidiary, as compared
to the definition in the Companies Ordinance ("legal definition")
in determining whether a parent-subsidiary relationship exists. However, Hong
Kong incorporated companies must still use the legal definition when it conflicts
with the wider definition but, in such cases, additional disclosures are required.
This treatment is in line wih the treatment under SSAP 30 "Business combination"
that has recently been issued by the Society.
In addition, it requires the consolidation of the entity when
the substance of the relationship between an enterprise and the entity indicates
that the entity is controlled by that enterprise. This embraces a special purpose
entity (SPE) which is created to accomplish a narrow and well-defined objective
(e.g. to effect a lease, research and development activities or a securitisation
of financial assets) and may take the form of a corporation, trust, partnership
and unincorporated entity. Examples of indications of when control may exist
in the context of the SPE involve the SPE carrying out activities on behalf
of the reporting enterprise, the reporting enterprise having decision-making
powers over SPE, and the reporting enterprise have rights to the majority of
benefits and exposures to significant risks of the SPE.
Friday, February 2, 2001 News
Corporate governance 'hampers non-executive directors'
[Comment]
by Alan Kong @00:40
The "heavy hand of corporate governance" represents
one of the greatest burdens for non-executive directors, according to research
carried out by PricewaterhouseCoopers.
And "tension" between the two aspects of the non-exec's role - strategic
and monitoring - is also causing concern, with governance providing a distraction
from strategic considerations.
The 'Non-Executive Directors: A survey of practice opinion' report examined the impact corporate governance has had on NEDs over the past five years.
The study stated: "The NED's job is widely regarded as having become more onerous and more challenging, not simply because of the increased workload but also as a result of higher levels of expectation and greater exposure to public scrutiny.
"Many of those interviewed believe that corporate governance developments from the Cadbury report onwards have tended to stifle the strategic contribution of NEDs through over-emphasis on monitoring and 'policing' ?and that NEDs have been sucked into an excessive degree of detail."
But the survey noted that there was a contrary view that NEDs in the UK may be placing insufficient emphasis on their responsibilities to monitor executive management.
Although abandonment of the present unitary board system was rejected, the increase in workload for NEDs has presented "formidable" challenges. The study noted that greater attention should be paid to the amount of time NEDs have to put into their role.
Questions over the training and appraisal are also raised
in the report, which is available to download (in pdf format) from the PwC
website.
Management most likely to commit fraud, ACCA finds
[Comment]
by Alan Kong @00:30
Company managers were responsible for 84% of fraud in Britain's
small to medium sized enterprises, an Association of Chartered Certified Accountants
(ACCA) survey has found.
And worryingly, management fraud at larger enterprises is unlikely to be detected
by auditors - but this does not detract from the use of audit as a method of
detecting the practice.
Of the frauds reported in the ACCA survey, 45% had been discovered by the auditor. In 18% of cases, the tax authorities dug up the fraud - the auditor's nearest rival in the fraud detection stakes. One ACCA member said: "Push for keeping the audit - we have detected over ?0k in fraud over the last three months."
The ACCA survey followed on from the Auditing Practices Board
discussion paper, 'Fraud and audit: choices for society'. This paper looked
into Statement of Auditing Standards 'Fraud and Error' (SAS 110), issued in
1995,
which sets out the current responsibilities of external auditors.
'Fraud and audit' argued that audit was useless in detecting fraud - one key finding noted that management fraud, particularly if it also involves collusion with third parties, is unlikely to be detected as part of the statutory audit of financial statements.
The ACCA's findings reject this view for smaller enterprises - but do note that auditors are unlikely to detect fraud in larger enterprises in view of the APB research.
ACCA surveyed 1250 UK firms, with clients totalling some 300,000 British companies. The principal cause of fraud, according to the survey, is personal gain by management. This is often carried out by the manipulation of financial records to disguise, suppress or alter transactions.
Where fraud is discovered, in two-thirds cases it is the auditor who locates it. And in almost 70% of cases, management over-rode financial controls to allow the fraud to take place.
Chief motive behind fraud was personal gain, the study found, but the act was also committed to allay cash flow problems, suppress profits, and to reduce the tax liability on sub-contractors.
Jonathan Beckerlegge, chairman of the ACCA's Audit Committee, said: "This extensive survey demonstrates that audit is the most effective deterrent to fraud. In the experience of our respondents, it was the auditor who, in the vast majority of cases, discovered fraudulent activity. At a time when Government is looking for greater corporate transparency and accountability, this survey shows the value of the audit."
Key findings include:
Fed Again Lowers Boom On Interest Rate, Future Cuts Anticipated
[Comment]
by Alan Kong @00:20
How low will the Fed go? Federal Reserve Board Chairman Alan
Greenspan and his colleagues on the interest-rate-setting Federal Open Market
Committee (FOMC) will do whatever they need to do to boost U.S. economic growth
in the months ahead, believes Bruce Steinberg, chief economist at Merrill Lynch
& Co. Inc., New York. That means they may cut the influential federal funds
rate to 5% by midyear -- although David Wyss, chief economist at Standard &
Poor's DRI in Lexington, Mass., doesn't foresee a 5% rate until the end of 2001.
Following yesterday's 50-basis-point cut, the federal funds rate is now at 5.5%,
a remarkable full percentage point lower than it was on Jan. 1, just a month
ago. Clearly the Fed and many economic analysts are counting on monetary policy
to reverse a surprisingly steep six-month drop in U.S. GDP and get the economy
growing faster.
By several accounts, including DRI's, U.S. manufacturing is already in recession.
But how about the rest of the U.S. economy? It's probably not in recession,
at least if you go by the classic definition: two consecutive calendar quarters
of actual contraction of the economy. Preliminary estimates from the Commerce
Dept.'s Bureau of Economic Analysis put fourth-quarter 2000 economic growth
at 1.4%. And there's an uneasy consensus among economists that each of this
year's first two quarters will post some growth -- though perhaps very narrowly.
A notable exception to that consensus judgment, however, is the cautious and
often-bearish Levy Institute Forecasting Center, Mt. Kisco, N.Y. Its analysts
figure that a recession in the U.S. "probably" began last November
-- and they're putting the probability of an economic recovery beginning before
2002 at only 30%.
In the meantime, one thing is certain. FOMC members will be carefully reviewing
economic data -- Including the rapidly rising number of manufacturing layoffs
-- during the next seven weeks and could again lower short-term interest rates
on Mar. 20, their next scheduled meeting.
Deutsche Bank cuts 2,600 jobs after slow quarter
[Comment]
by Alan Kong @00:10
Deutsche Bank, Germany's largest, on Thursday reported a
2 per cent fall in fourth-quarter profits and revealed details - including a
global job cull - of a reorganisation forecast to deliver E1.5bn ($1.4bn) in
annual synergies by 2003.
Some 2,600 jobs, or 3 per cent of the bank's workforce, will be cut as part of the reorganisation, around 1,400 of them in Germany, 600 in the rest of Europe, 500 in the US and Latin America, and 100 in the Asia-Pacific region.
Rolf Breuer, chairman, expressed caution for 2001 because of the economic slowdown in the US. "This will affect us," Mr Breuer said at a press conference in Frankfurt, although the bank's strong European focus meant it would be less affected than some of its competitors.
Deutsche shares were almost 7 per cent off at E97.61 by mid-afternoon, weighed down by the uncertain outlook.
The bank reported net profits of E581m in the three months to end-December, in line with analysts' forecasts and just below the E591m recorded in the third quarter.
For the full year, Deutsche reported a more than doubling in net profit to a record E4.95bn, lifted by the enlargement of its investment banking unit and cost-cutting at its retail operation.
The result was also buoyed by the E2.3bn capital gain from the sale of part of its stake in Allianz, Germany's largest insurer, a deal which also cut the effective tax rate to 26 per cent from 36 per cent in 1999.
While trading profits declined in the last quarter, the contribution of Deutsche's investment banking unit was more robust than many expected. The division saw a 79 per cent increase in pre-tax profits to E3.975bn for the year, representing almost 60 per cent of group profits in 2000.
Deutsche's results are viewed by analysts as a key bellwether of the health of the European investment banking business and follow the decline in some US commercial bank earnings in the aftermath of slowing corporate finance and capital markets activity.
Mr Breuer stressed that the main growth potential for Deutsche Bank now lies with asset management and private banking, rather than investment banking, where he said past growth levels cannot be repeated.
"We achieved top earnings levels in investment banking in 2000, and it probably won't be possible to repeat these... The next jump in growth will come from other divisions, something that the new structure is aimed at reinforcing," Mr Breuer said.
The latest management reshuffle, as expected, sees board responsibility for its two new operating divisions split between Mr Breuer, the current chairman, and Josef Ackermann, who will succeed him in May 2002.
The new structure, which cuts the bank's five operating divisions to two, is aimed at reducing overlap and encouraging cross-selling within the group.
Deutsche Bank said it would target annual earnings/share growth of more than 15 per cent over the next three years, although it will take a one-time charge of E500m over the next two years to cover the changes.
Mr Ackermann will head the corporate and institutional clients group, which will bring together investment banking with the corporate banking division and global transaction services. Mr Breuer will run the asset management division, which will integrate asset management with the bank's retail and private client operations.
"The new structure is not a revolution but a continuation of what was started three years ago," Mr Breuer said. "We continually strive to optimise our performance." The bank is proposing a dividend of E1.30, up from E1.15 in 1999.
Workers Don't Fear Losing Jobs, Survey Shows
[Comment]
by Alan Kong @00:01
There's a seeming paradox among U.S. workers. More than half
--53% -- feel that a recession is imminent, and 20% think they could lose their
job if a recession hits; but only 12% say that they feel less secure in their
job than a year ago. The survey results released by Headhunter.net
also reveals a high willingness on the part of workers to switch jobs. Almost
four out of five workers --78%-- say they would take a new job if the opportunity
came along, and nearly half of those surveyed said they are looking for a new
job. "The survey indicates that the majority of American workers feel secure
in their current job . . . during these uncertain economic times . . . but also
are keeping their eyes open for new opportunities," says John Zogby, president
and CEO of research firm Zogby International, which conducted the survey. And
although it may be a mobile society, almost two-thirds of those surveyed --
63% -- said that they would take a pay cut to stay in the current city and maintain
their current quality of life.
Monday, January 29, 2001 News
AT&T reports $1.7bn loss for fourth quarter
[Comment]
by Alan Kong @23:41
AT&T on Monday reported a loss of $1.7bn for the fourth
quarter, compared with a profit of $1.15bn in the same period the previous year.
The US telecommunications group - which included restructuring and other charges
of $2.68bn in its results - said it had been hit by the acquisition of MediaOne
and write-offs at Excite@Home, its broadband internet service arm.
The company also said it had suffered from falling long-distance revenues.
Excluding the one-off items, the company said earnings per share were $0.26 for the three months to December 31, a 51 per cent fall from the $0.53 reported in 1999. This was in line with analysts' expectations, which had been lowered after the company warned on profits and announced a break-up plan in October.
The decline in profits came on revenues that grew to $16.9bn in the fourth quarter from $16.4bn in the year-ago period.
Profit for the full-year was reported at $3.1bn, 43 per cent lower than in 1999. This came on full-year revenues which rose to $65.98bn from $62.6bn last year.
DaimlerChrysler to announce job losses and plant closures
[Comment]
by Alan Kong @23:35
DaimlerChrysler will later on Monday unveil a far-reaching
restructuring of its loss-making Chrysler division involving an estimated 20,000-25,000
job losses and the closure of three plants.
The German-US carmaker is expected to axe at least 5,000 of its white collar staff and some 15,000 assembly workers in North America.
Plans for the restructuring follow the arrival last autumn of Dieter Zetsche, the former head of DaimlerChrysler's commercial vehicle operations, as Chrysler's new president.
Mr Zetsche and Wolfgang Bernhard, Chrysler chief operating officer, are seeking talks with the United Auto Workers union and the CAW, its Canadian counterpart, over plant "idling".
According to the Wall Street Journal's interactive edition, the job cuts would be phased in over three years.
It also reported that DaimlerChrysler would try to avoid breaking its four-year union contracts, which prevent abrupt plant closures, by extending "temporary" plant closures at the factories involved.
Plants thought to be vulnerable include the ageing Toledo Jeep factory in Ohio, along with the Mount Road engine facility near Detroit, and the minivan plant at Windsor, Ontario.
Production at other plants could be cut from three to two shifts, helping to ease surplus stocks.
Chrysler is thought to have lost $1.2bn-$1.4bn in the last quarter of 2000 following costly incentives on old models, high launch costs for new ones and a decline in demand.
That prompted the removal in November of Jim Holden as Chrysler president and the appointment of Mr Zetsche.
The full financial impact of the Chrysler losses and the restructuring charges involved are expected to be disclosed on February 26, when DaimlerChrysler reports its full-year figures.
Industry analysts expect the Chrysler difficulties to leave
DaimlerChrysler with a fourth quarter operating loss of E298m ($275m), compared
with a profit of E2.67bn in the same period of 1999.
Sunday, January 28, 2001 News
All pages are completed
[Comment]
by Alan Kong @18:20
All pages are completed, please feel free to visit.
The new web page is under construction
[Comment]
by Alan Kong @01:46
Since the old web page has been created long time ago and
I felt it's pretty obsoleted, I decided to build a new home page from scratch
with substantially focus on accounting profession that I hope everyone working
as accountants or related fields will be interested.
Copyright 2001 © Community for Hong Kong Accountants. All rights reserved.