Adventurous voyage

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These worries soon faded because the profession realized the change brought new business opportunities, largely due to initiatives taken by the Hong Kong Society of Accountants (the predecessor of the Hong Kong Institute of CPAs) to foster closer ties with the Chinese Institute of CPAs and the Chinese Ministry of Finance. Tim Lui, the society’s former president and a partner at PricewaterhouseCoopers, says the handover was a catalyst for closer cooperation and paved the way for Chinese companies to enter the global stage. “I think 1997 marked the beginning of perhaps a new era both for Hong Kong’s and the mainland’s accounting professions,” Lui says. Under his leadership, the society held more meetings and seminars with its Chinese counterparts in Beijing and cooperation between the two sides strengthened rapidly to a level he had not imagined possible. But the fledgling relationship was soon put to test with the unexpected arrival of the Asian financial crisis, which sent stock and property markets tumbling. The Hang Seng Index plunged about 30 percent in October 1997, despite the government pumping HK$120 billion into the stock market in an attempt to provide support. Cheung remembers how Hong Kong sank into a recession almost overnight, followed by a prolonged period of gloom for the accounting profession. “It affected everyone, with the biggest firms laying off people and downsizing. Accountants were saying, ‘we can’t find jobs,’ and the firms were saying, ‘we are losing business.’ Even the Institute froze salaries and fees for seven years,” she says. Hong Kong barely got back on its feet when the Internet bubble burst in 2000 and terrorists attacked the United States in September 2001. Then SARS came. Eric Li, former lawmaker representing the accounting functional constituency, says the SARS crisis was “the toughest time ever” for the profession. “The big firms competed with smaller firms to get their businesses, threatening their existence,” Li says. Since 2001, the global accounting profession itself has also undergone a sea change because of the Enron scandal. The energy giant inflated its earnings through accounting irregularities and finally filed for the largest bankruptcy in history in December 2001. Enron became synonymous with wilful corporate fraud and corruption, bringing down its auditor Arthur Andersen, a Big Five firm at the time. Lui of PwC remembered how the collapse of the accounting firm sparked a confidence crisis and led to tighter regulations worldwide, including the introduction of the Sarbanes-Oxley Act in the U.S. “Clients’ confidence in auditors was not affected as much in Hong Kong as in the U.S., but of course building trust in the profession is one of the key themes all over the world,” Lui says. ©ISTOCKPHOTO.COM/ANGUS BEARE July 2007 + A Plus [ 27 ]
Evolving profession He says the workload of Hong Kong’s Big Four increased not only because of new compliance requirements, but the need to ensure their practices on the mainland are aligned with the ever-changing regulatory environment. “The China-Hong Kong practice is becoming very sophisticated... the sheer size and complexity of the clients make resource allocation, quality control and risk management important and challenging tasks for us,” Lui says. Professional recognition Stricter regulations and improved governance have helped the profession regain public trust in recent years. An influx of initial stock offerings from the mainland also allowed the profession to bring mainland companies into the international fold with world class corporate governance. The lack of sufficient qualified accounting professionals to cope with the everincreasing demand of firms and businesses has become a new challenge. Even before the handover and the boom in financial services, the Institute foresaw the need to train its own accountants to cope with rapid developments. “China’s economy is expanding significantly, we need to have a workforce which can handle and assist in that development,” says Cheung, the Institute’s chief executive. Before the Institute introduced its qualification programme in 1999, Hong Kong used the Association of Chartered Certified Accountants (ACCA)’s programme and did not have a locally developed curriculum. “Hong Kong’s education policy and direction was all determined in England,” where ACCA is based, Cheung explains. “We couldn’t continue to have another body outside of Hong Kong holding our destiny as to how the profession would be shaped in the future... We needed to have our own people trained, and with the policy in our own hands.” The Institute eventually ended its joint scheme with ACCA and went through an uphill struggle to gain worldwide recognition for its QP, which started out with only 99 students. “We didn’t realize that it would be such a difficult battle,” Cheung says. “We had a qualification programme we realized would be among the best in the world, but nobody knew about it. We were little Hong Kong and little Institute... At the time we recognized 14 institutes and nobody recognized us.” It was not until the 16th World Congress of Accountants in 2002, which was officiated by former Chinese Premier Zhu Rongji in his first trip to Hong ©ISTOCKPHOTO.COM/GIOVANNI RINALDI [ 28 ] A Plus + July 2007
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Adventurous voyage

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