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15 percent of Hong Kong executives see pay cuts amid pandemic

A survey of 140 companies in Hong Kong found that 15 percent of them had reduced base salaries for executives since the coronavirus began affecting the city’s economy. This is according to Executive Pay and Cost Containment Measures for COVID-19 in Hong Kong, a report released on 23 April by consulting firm Comptify Analytics. Of the companies surveyed, the study noted that 70 percent of the Hong Kong-based executives received a pay cut between 20 to 30 percent. The logistics and supply chains industries were found to be affected the most, with the study noting that 83 percent of companies have implemented pay cuts or furloughed employees to control costs.

 

U.K. Big Four partners paid up to 25 percent less amid coronavirus

The accounting industry in the United Kingdom has plunged into its worst crisis in a decade, with the Big Four cutting their partners’ pay by up to a quarter and mid-tier firms furloughing junior staff to build up cash reserves and cope with the impact of the coronavirus. The roughly 74,000 partners across the U.K.’s Big Four earned an average of £720,000 (HK$6.9 million) last year and are involved in company audits, tax and restructuring advice and consulting on transactions. PwC U.K. has deferred all staff appraisals to autumn and Deloitte U.K. is offering the option of reduced working hours for its staff, while maintaining a larger proportion of their salary.

Hong Kong SMEs still not happy with coronavirus loans

Hong Kong’s small- and medium-sized enterprises (SMEs) are to receive loans of up to HK$4 million under a new scheme set up by the Hong Kong government to mitigate the economic impact of the COVID-19 pandemic. Starting from 20 April, the Hong Kong government will guarantee 100 percent of loans of up to HK$4 million made to SMEs at low interest rates, but will require company directors to provide a personal guarantee. However, more than 60 percent of SMEs are dissatisfied with the government’s support measures, with 40 percent hoping for a grant scheme instead of a loan scheme, according to a survey by the British Chamber of Commerce. The coronavirus pandemic has seen the city’s unemployment rate hit a high of 4.2 percent, while banks have approved more than 9,000 applications for loans and other relief measures worth HK$57 billion to help companies pull through the pandemic.

1 in 4 U.S. CFOs expect layoffs amid coronavirus

More than a quarter of chief financial officers in the United States foresee layoffs at their organizations because of the coronavirus pandemic, according to a survey by PwC. The firm polled 313 U.S. companies and found that twice as many CFOs anticipate redundancies at their workplace compared with two weeks before the study, with 26 percent expecting layoffs. It found that the pandemic is now the top concern for CFOs, with more than three quarters citing the pandemic’s effect on operations and liquidity. Few CFOs believe their company will return to “business as usual” within a quarter, even if the coronavirus were to disappear immediately.

FASB to delay two standards due to coronavirus

The Financial Accounting Standards Board in the United States issued the Proposed Accounting Standards Update on 21 April, indicating that it would impose a one-year delay in the implementation of the leases and revenue recognition standards due to the impact of COVID-19. The lease accounting standard would be effective for private companies and non-profits for fiscal years beginning after 15 December 2020 and interim periods within fiscal years beginning after 15 December 2021. The proposed effective date deferral for revenue recognition would be limited to private company franchisors. Those stakeholders would have the option to apply the new standard for annual reporting periods starting after 15 December 2019, and interim reporting periods within annual reporting periods starting after 15 December 2020.

France to block companies in tax havens from state aid

France will block companies registered in offshore tax havens from claiming aid from its government coronavirus bailout, following similar moves by Denmark and Poland. Denmark announced its measures only three days earlier. France’s Finance Minister Bruno Le Maire announced on 23 April that companies either registered or controlling subsidies in tax havens are not entitled to receive any share of the relief package. The rescue package increased by €45 billion to €110 billion on 15 April to support the economy hit by the coronavirus. “It goes without saying that if a company has its tax headquarters or subsidiaries in a tax haven, I want to say with great force, it will not be able to benefit from state financial aid. There are rules that must be followed,” said Le Maire.

Christie’s ordered to pay more than US$16 million for tax evasion

Christie’s, the London-based auction house, agreed to pay US$16.7 million to settle allegations that it had failed to properly collect sales taxes in New York from 2013 to 2017. The settlement, announced on 9 April by the Manhattan District Attorney’s (DA) office, follows a lengthy investigation into how Christie’s and its affiliate companies in Amsterdam, Dubai and Hong Kong failed to collect sales taxes on works sold by foreign offices but delivered to clients in New York. The DA says Christie’s attempted to consolidate its international private sales operations in a division operated out of London following flawed tax advice that it would not need to collect New York tax on sales to New York clients as a result.

PayPal Australia faces material loss following external audit

PayPal Australia has warned that the company could take a financial hit following the completion of an external audit into the company’s compliance with financial crime laws. Australian Transaction Reports and Analysis Centre (AUSTRAC), Australia’s financial intelligence and regulatory agency, was appointed in September 2019 to examine PayPal’s compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. AUSTRAC was granted an audit extension on 27 February following a request from PayPal, reflecting the size and complexity of PayPal Australia and the company’s international business operations. It is due to issue a final report at the end of August.

KPMG U.K. fined more than £450,000 for audit failings

KPMG in the United Kingdom and one of its senior partners have been reprimanded, and the firm fined £455,000 (HK$4.3 million), due to deficiencies during an audit of a U.K. company. The partner was fined £29,250 and will have three of her audits subject to a quality performance review by the firm. She is also required to undergo further training, according to a statement by the Financial Reporting Council (FRC) on 2 April. The FRC noted that the firm failed to “apply sufficient professional scepticism, or to obtain and document sufficient appropriate audit evidence in part of their checks.” The fine is the latest sanction against the firm in recent years. KPMG and the other Big Four firms in the U.K. have faced scrutiny by regulators after instances of subpar audit work have come to light, leading to parliamentary calls to end their dominance by splitting them up.

Chinese drug company’s IPO is 639 times oversubscribed

Akesobio, a Chinese cancer drug developer, saw its HK$2.58 billion initial public offering in Hong Kong oversubscribed 639 times, making it the most popular biotechnology listing among the city’s retail investors. The Zhongshan-based company’s offer of 15.95 million shares in the city, a tenth of its global shares offering, saw HK$166.5 billion in investors’ funds locked up when the offer closed on 17 April. It is also Hong Kong’s largest listing so far this year, following Beijing-based Pharmaron’s HK$5.3 billion listing last November. The company aims to complete the trials and apply for approval to market them in the second half of 2020.

EY to pay US$11 million to whistleblowing auditor

A British court has ordered EY in the United Kingdom to pay US$10.8 million to a former partner who blew the whistle on suspected money laundering at a major gold refinery in the United Arab Emirates. Amjab Rihan, a former EY partner, claimed he was let go after raising concerns about an audit of Dubai’s biggest gold refiner Kaloti in 2013. Rihan told the court that the firm tried to suppress a report that identified multiple problems at the refiner, including allegations about the importation of gold from Morocco that had been coated with silver to avoid export restrictions. EY insisted it had acted properly in reporting the actions of the auditor and that the judge created “an unprecedented legal duty.”

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