In Hong Kong, as with the rest of the world, the accounting profession is facing challenges in maintaining public trust. For Margaret Chan, this is clear just through talking to people. “During my interview with the Council, I encountered a lot of questions related to the public perception of the Institute and the accounting profession. People expressed concern on how to remain relevant and retain public respect. And when I engage with members, their concerns are around stringent regulation – do regulators understand their situations? There are a lot of misunderstandings about the role of regulators, our provision and services to members,” says Chan, Chief Executive of the Hong Kong Institute of CPAs.
To tackle these misconceptions, everything the Institute does as an organization has to contribute to rebuilding trust in the profession, and so Chan put “building trust” at the heart of the Institute’s new strategic plan. “Some of the concerns are very valid but some are perception-driven. A lot of the initiatives we put in the plan aim, on one hand, to improve the processes and outcomes of the Institute, and on the other hand, to align understanding across the board, among society and members,” she says.
Preparations for the plan began long before Chan joined the Institute in July last year, but Johnson Kong, the Institute’s President, recalls that during the discussions at Council, it became clear that the CE’s input was needed. “We not only needed the buy-in of the new CE, but for them to be involved in its development,” says Kong.
The plan was therefore one of the important tasks Chan focused on when she joined the Institute. With a fresh perspective, she decided to approach the new plan differently from previous long range plans – by getting rid of the “long” part.
“The world is developing so fast nowadays, so a five-year planning horizon is too long. I talked to different people within the first few months of me joining and I heard different views every now and then. So I thought, ‘could we really put something in writing that would remain relevant for five years?’ I doubt it. That is why I thought we should focus on keeping it short,” explains Chan.
Her idea of a more succinct three-year plan was fully supported by the president and the Council, and the Strategic Plan 2020-2022: Building Trust in Our Profession was released last month. “It’s better to set it to three years and review it every year so that all the moving parts can be updated,” adds Kong.
The plan identifies developing challenges for the profession and Institute to overcome and sets out strategic objectives based on the Institute’s roles as a statutory organization. It also consists of specific initiatives that aim to meet those objectives, as well as a list of key action items explaining how the Institute will achieve the objectives and initiatives across the three-year time frame.
To develop a truly relevant plan, current challenges of the profession, such as advances in technology, had to be considered. “Technological advances have a huge impact on us and the way we deliver our services, the way we operate our firms, the type of services we provide and the type of training that we need to give our members,” says Kong. Another major recent change in Hong Kong is the independent auditor regulatory and oversight body for public interest entity (PIE) auditors. “We’re talking about independent regulation now and indeed, last year the Financial Reporting Council (FRC) took over the regulation of PIE auditors,” says Kong. “Thirdly, in our profession, we are moving away from being a generalist to a specialist. Specialization is really the way forward.” He also highlights the changing operational mode of accounting firms, prompted by the COVID-19 pandemic. “In my view, the norm might become a hybrid of home and office working with more flexible hours. All these issues are incorporated one way or another in the plan.”
Filling the gaps
Chan, as Kong puts it, was the main driver of the strategic plan. She and her staff had put together thoughts that formed the initial framework of the plan in preparation for the Council’s strategy day in February, which was eventually cancelled because of the pandemic. Those constructive ideas and thoughts as well as the rest of the plan’s development were the result of constant engagement. “We held three members’ forums in September and we met with different regulators to understand their concerns and views on what they expect from us as an Institute. Drawing from what they provided, I identified areas and challenges that I think we need to address,” says Chan.
She adds that extensive research was also done on the challenges faced by professional accounting bodies outside of Hong Kong. “Interestingly, the challenges that Johnson mentioned are not unique to Hong Kong. Professional bodies in other countries identified similar challenges – tough regulation, the impact of technology advancements, and the changing values and interests of younger members,” she notes.
But while the responses of other accounting bodies to these challenges are insightful, Chan notes that it was crucial to ensure the plan provided solutions that were appropriate to the Hong Kong context. She points to the requirement for all registered companies to have an annual audit of their financial statements as an example of what makes the city unique from others. “We have more than one million companies registered with the Companies Registry and they are required to be audited. So you can understand the complexity of the landscape here. With many small practices conducting audits for a large number of companies, they need to understand the principle-based standards in a concise way so it is applicable to their firm or clients,” says Chan. “Now with the FRC taking over the regulation of PIE auditors, we have more space to help smaller firms understand accounting principles and assist them in serving small- and medium-sized entities better. Those are the areas and gaps that I think we need fill in Hong Kong that may not be the case in other parts of the world.”
The objectives and initiatives
Under the objective, “Safekeeping of our constitution, governance and organization,” is the initiative to seek to implement one member one vote for the election of the Institute’s president and vice-presidents. Kong sees this as one the most arduous yet important initiatives. “The action plan to achieve this will be challenging. It will probably take a long time to implement as it involves changing the Professional Accountants Ordinance (PAO),” he says. According to the strategic plan, a public consultation paper for one member one vote will be issued in the first quarter of next year.
For Chan, the initiatives related to building the profession’s brand image are particularly top of mind. “These initiatives have been around for a while, but now it’s a matter of how we make them specific enough to make sure our members understand what we are trying to do and the community at large to recognize the value of the profession. That’s why it’s great we now have a new director of corporate communications,” she says, referencing the new director who joined at the start of July. “We have to promote and articulate our contributions to society. The profession has contributed positively in a lot of different areas and that should be recognized by members and society.”
As part of the plan’s purpose of building trust, one of the objectives seeks to ensure the quality of auditors from the point of entry and throughout the licensing period. To achieve this, the aim is to implement “registered audit practice” proposals to strengthen licensing and address audit quality issues. “Currently, after becoming a CPA member and obtaining additional years of audit experience you can get a practising certificate, qualifying you to sign an audit report. Council has previously looked into a mechanism to require evidence of competency and an appropriate quality control system to be in place for one to do an audit. So we would like to propose a related amendment to the PAO and a consultation paper is planned to be released next year,” Chan explains.
“These initiatives have been around for a while, but now it’s a matter of how we make them specific enough to make sure our members understand what we are trying to do and the community at large to recognize the value of the profession.”
To continue promoting the “Accounting Plus” concept, one of the initiatives is to further develop specializations for members and issue appropriate ethics and best practice guidance. Chan says the Institute is focusing on rolling out a foundation course in forensic accounting as a starting point. A broader framework for forensic accounting training will also be created. “We could consider elevating the Forensics Interest Group to become a faculty. This was the approach taken for restructuring and insolvency, where the interest group and Insolvency Practitioners Committee were combined and became the Restructuring and Insolvency Faculty. Within a year, on top of the existing foundation course, we launched the specialist qualification, which was the diploma course, and then the specialist designation. So to build a framework for forensic accounting, we may follow the same plan,” says Kong.
Another initiative aims to strengthen thought leadership advocacy. Chan notes that while the Institute is already active in advocating its views on a global scale across different areas, there is still room to be more vocal on other topics, particularly sustainability. “Environmental, social and governance assurance could be an area we can focus on to assist the profession and other people in Hong Kong to give rise to better sustainability reporting,” she says.
The Institute is also working to elevate its policy research work. With the reality of research publications often taking years to complete, Chan would like to work on more concise pieces, such as survey reports and experience sharing. “We are trying to collate various topics and ideas, and materials that would attract sufficient interest from the community and then build on it,” says Chan. She adds that she has observed other professional bodies increasingly bringing experts together for discussions as a way of pinpointing topics that need to be examined. “Even identifying the problem is not that easy. That is why we should try to solicit different input before we can really come to a solution.” Chan and Kong suggest that future research or advocacy topics could include business valuations and how to conduct remote audits.
“This plan is receptive to members. In the past, our strategic plans were very high level and talked a lot about strategies and objectives rather than gave a detailed working plan for people to know what is going to be done.”
Kong says overall, the initiatives in the plan were designed to be straightforward for everyone. “In my view, this plan is receptive to members. In the past, our strategic plans were very high level and talked a lot about strategies and objectives rather than gave a detailed working plan for people to know what is going to be done,” he says. “This plan is easy to understand and easy to follow, and I hope members will like it.”
To ensure these initiatives can be achieved within the next three years, Chan says the Institute will review the plan and share updates on the plan with the Council. “One of the initiatives is actually related to the efficiency and effectiveness of our organization, so it’s important to focus on using sufficient or the right type of resources and allocate those to the different action items.”
Meaning for members
Both Kong and Chan are confident that the strategic objectives and related initiatives are suitable and effective for keeping members relevant and well-rewarded leaders of the profession and the wider society. “I think we have tried very hard to make sure these strategic objectives and initiatives are issues close to members’ hearts. The 27 action items are very specific. If you look into it, you can see that they cover a whole spectrum of our members. We have something for accountants in business, practitioners, small- and medium-sized practices, students, young members and we have something for the staff,” says Kong.
One issue that they acknowledge is important to members, and that is covered in the plan, is the improvement of work-life balance and members’ well-being. “Johnson has been previously advocating for more interest groups. We want to attract members to join different interest groups so that they could engage in different activities that would help them expand their social network,” says Chan. “I think another key area is finding a way to allow members to give value to society. We do have different types of volunteer work and social initiatives, and by involving members in these activities we can expand their horizon from just being accountants to being members of society.”
Kong is particularly proud to finally launch the strategic plan – finalizing the strategic plan was first on his list of priorities when he became president. “It’s important that we got it launched and that we have a plan in place that is really relevant to our members and sets targets of what to achieve over the next few years. I think the most important part of it is people know what our plans are,” he says. “It’s a mixture of feelings. I’m very glad we have got this plan launched, but on the other hand there’s a lot of things that I would like to see happen before the end of my presidency. But COVID-19 and the restrictions have made things difficult.”
While COVID-19 has prevented a lot face-to-face engagements, that doesn’t mean the engagements should stop. “It should never stop. The engagement exercise is ongoing. Last year, we conducted general members’ forums, but if the situation allows, we would like to organize forums targeting different member segments, like a PAIB members’ forum and a young members’ forum.” says Chan.
The big challenge, she adds, is reaching out to members who have so far remained silent, yet are crucial for the Institute to hear views and feedback from. “There is a lot of analysis we need to do, a lot of ways we need to explore to get in touch with them. I think it goes beyond forums, seminars or events. It’s about other interactions like those through social media. A lot of people, especially the younger generation, do not think that they need to come to see us. So it’s a matter of how we craft the message and communicate in an effective manner.”
Kong and Chan hope that when members read through the strategic plan, they will see things of value to them. “Different segments of our membership have different focuses and needs but I would like them to see the bigger picture and overall direction of the Institute,” Chan notes. “With the Institute serving so many members, we certainly need to do more than serve individual needs, so I hope members recognize that they are part of a family, and that in this family we are serving everybody.”
Strategic Plan 2020-2022: Building Trust in Our Profession sets out strategic objectives and specific initiatives based on the Institute’s vision, mission and values; trends that will affect Hong Kong and the profession; and stakeholder expectations. It can be found on the Institute’s website.