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Luxe International Hotels Group Limited (Luxe or the Group), a company incorporated in Hong Kong, is principally engaged in hotel operations and management. The Group

Luxe International Hotels Group Limited (Luxe or the Group), a company incorporated in Hong Kong, is principally engaged in hotel operations and management. The Group owns and operates 41 hotels in Hong Kong and the PRC.

Human Capital is the most significant asset of the Group. In fact, payroll expenses account for more than 50% of the Groups operating expense. All the directors and senior management are considered crucial to the Group due to their significant experience in the hotel industry. The continuous success of the Group also depends on its ability to attract and retain a group of trained employees who are experience in the provision of various hotel-related services. In order to retain these employees, the Group offers attractive remuneration including housing allowances, performance bonuses, defined benefit pension schemes, share options and various other incentive schemes. Salaries are paid on a semi-monthly basis on the 5th of each month for the pay-period from the 16th to the 30th and on the 20th of each month for the pay-period from the 1st to 15th. The Group uses PeopleSmart, a specialized payroll system, for the processing of its payroll. Approval of the semi-monthly payroll is done electronically by PeopleSmart.

The Groups performance bonus scheme for its senior management is quite complicated. In order to motivate its senior management, each individuals bonus scheme is tailor-made and measurement of performance is based on a matrix of controllable variables for each individuals role, position and responsibilities.

The Group is subject to numerous government, employment regulations in the PRC including minimum wage requirements, overtime, working conditions and work permit requirements. The Group has a strong Human Resources team to ensure that all employment regulations are complied with.

The group uses an external independent actuary to prepare the actuarial report for its defined benefit pension scheme. The Group has also engaged an external independent valuer to perform the fair value calculation of the Groups share options granted during the year.

Question:

As the audit team will rely on actuarial and valuation reports prepared by the independent external actuary and valuer for audit purposes, described the factors which you will consider as well as any procedures to be performed in this case.

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