By DUNCAN MAVIN

These are difficult times for auditors in China.

Recent months have seen a series of accounting scandals at Chinese companies including several that are listed overseas, some of them audited by the Big Four global firms—Deloitte, Ernst & Young, PricewaterhouseCoopers and KPMG. Meanwhile, regulators in the U.S. are asking tough questions about oversight of auditors’ work in China. And at the same time, some Chinese officials have called for a homegrown accounting firm to take on the Big Four.

Benny Liu, who heads up the audit practice at KPMG China, says partners at the firm’s offices around the world have a better understanding of the potential—and the challenges—in China than ever before.

“You have to fight hard for business, not just with the Big Four but also local firms,” says Mr. Liu.

He spoke to The Wall Street Journal’s Duncan Mavin in Hong Kong. The following interview has been edited.

WSJ: There’s a perception at the moment that fraud and corruption and accounting scandals are rife in China. How do you deal with that?

Mr. Liu: We have rigorous risk-management procedures in terms of accepting clients. We evaluate them every year. We also classify our clients into different categories—for blue chips in Hong Kong that we’ve known for 30 years obviously the evaluation process will not be as rigorous as for a privately held business owned by a rich guy in China. In terms of the audit process, procedures will be more robust. Also, we come across new findings from not just our clients but we hear in the news about other companies gone wrong and we do a lot of training, put out case studies, make sure our staff are aware of the current environment and how to look for red flags. It’s challenging. That’s why our risk-management department is really huge now.

WSJ: Have the recent scandals and allegations against Chinese companies about accounting irregularities led to more questions from KPMG overseas about operations in China?

Mr. Liu: No, actually. Our global risk people are very interested. In terms of the other [executives], obviously they’re asking if all Chinese companies are bad. Obviously they’re concerned. From their perspective, they want to know how we’re going to manage the situation. A lot of these companies are in the U.S. market, and now all of a sudden because of some short-seller attack and allegations, a lot of companies have some problems. So our global risk people are interested in what sort of position we have to prevent something big happening to our company as a whole and our brand name.

WSJ: How do auditing standards stack up in China?

Mr. Liu: Auditing standards are very similar to international standards, however, in certain instances, there are more specific requirements to meet Chinese standards. For example, China’s standards require bank confirmations for all bank balances. While it is usually practiced, it is not a specific requirement in the case of international auditing standards. The regulator also interprets the standards differently. International firms for example, usually rely on testing controls so that your substantive testing is less. The Chinese regulator will expect a more substantive approach.

WSJ: What are the main challenges to growing the business in China?

Mr. Liu: Attracting people is key. Before the financial crisis, graduates seemed to think professional accountancy firms were a place they wanted to go, particularly the Big Four firms. The money is good, the career progression is good. But the financial crisis changed the scene—the Big Four firms and local firms tried to cut headcount and salary increases were not as good as before. Afterwards, salaries rose in China, and the professional accountancy firms didn’t seem as attractive as before. Our profession in China has long hours—a lot of young people can’t stand that. Retaining people is the same—qualified people with four or five years experience have a lot of options outside where salaries can be a lot better, in particular for those with financial services experience.

WSJ: How do you compete?

Mr. Liu: We don’t compete with banks any more. We start staff off on a reasonable salary, but as they progress it increases much higher. At banks or other big companies, the entry salary could be much higher but it’s harder to get a big increase. Some young people don’t think long-term. An offer of a few thousand renminbi difference could be big, in particular in big cities, where fewer students live with their family and the cost of living is not cheap.

Work-life balance is very important now. Before the financial crisis, they wanted money and career. Now, the same age group wants work-life balance, and career doesn’t seem to be the top priority.

WSJ: Are local Chinese firms a real challenge to the Big Four yet?

Mr. Liu: It’s a definite Chinese strategy to make local firms bigger, stronger, so they can compete with the Big Four. A few large firms are getting close, but we’re still quite ahead. There are a lot of audit tenders that these firms are participating in—they win some, because on pricing they can go lower than us. It’s a challenge because some potential clients don’t see the difference. If it’s a simple statutory audit, from some of the companies’ point of view, do they really need a Big Four firm? We’ve got an advantage on [international clients.] But it’s my understanding the Chinese audit firms have set up offices in places like Africa, or set up liaisons with local firms [in other countries]. Who knows, in 10 years there could be a lot of Chinese firms outside China.

Who leaves home without American Express? Not Ken Chenault, who carries Green, Gold and Centurion cards, as well as an AmEx credit card that helps him earn Delta SkyMiles. “It is important to eat what you cook,” says Chenault, who has been chief executive of American Express (ticker: AXP), the New York-based provider of credit- and charge-card products, since 2001.

The American Express card, like Coca-Cola and Mickey Mouse, is recognized almost everywhere. Not so Chenault, 60, although he has led the company with a sure hand through some of the most horrific episodes in recent American history, including the destruction of the World Trade Center by terrorists in 2001, right across the street from AmEx headquarters, and the credit crisis of 2008-’09, which humbled most of the country’s largest financial institutions and destroyed some of the rest.

While American Express’ success has kept its boss out of the headlines, not to mention Congress’ crosshairs, Chenault’s quiet competence, creative thinking and unwavering focus on integrity have impressed other corporate chiefs, including Warren Buffett, whose Berkshire Hathaway (BRKA) owns 13% of AmEx. Berkshire has taken the unusual step of agreeing to vote its shares with management so long as it owns 5% or more of the AmEx and Chenault is CEO. “Warren has given me his proxy,” Chenault told attendees at American Express’ annual meeting in April 2010.

LOU GERSTNER, WHO HIRED Chenault at AmEx in 1981, and later went on to run RJR Nabisco and IBM (IBM), is another fan. Chenault was assigned first to a newly formed strategic-planning unit, and charged with analyzing the company’s sluggish merchandise-services business, which sold watches, mink coats and other products to card holders via direct-mail inserts into their monthly bills. Gerstner recalls Chenault as “quite an impressive young man” who was “insightful in being able to separate important facts from less important facts.”

Chenault quickly separated himself from strategic planning and asked to work in merchandise services, where he was able to double sales to around $500 million in two years by matching product pitches with customers’ interests. Thanks in large part to his marketing instincts, American Express became one of the biggest sellers of luggage sets in the U.S.

“What I am most proud of—and it has been a theme throughout my career—is a willingness to take on the status quo and bring about change,” Chenault says. “We grew the [merchandise-services] business tremendously. I learned so much about how to change an organization, challenge the status quo and drive results. Frankly, I was also fortunate that it wasn’t a business people understood a great deal, and that allowed me a level of responsibility that was terrific.”

Chenault’s envelope-pushing as well as his consensus-building skills also have benefited other companies, including IBM, on whose board he has served for 14 years. When Big Blue was weighing whether to sell a majority stake in its personal-computer business to a Chinese company in the early 2000s as part of its shift into software and consulting, Chenault “really encouraged us to divest the business,” says Sam Palmisano, who recently retired as IBM’s CEO. “He understood it intellectually, but he also helped to get a common point of view to execute what we thought was strategically important.”

CHENAULT WASN’T BORN TO BE the consummate corporate manager, although he had ample training for the role. His father, Dr. Hortenius Chenault, was a dentist on Long Island, and his mother Anne, now 98, a dental hygienist. Both, he notes, had a passion for learning, and a focus on values, “so integrity is something I talk about a lot.”

Chenault attended Springfield College in Massachusetts and transferred after a year to Bowdoin, an elite liberal-arts school in Maine. He excelled academically, graduating magna cum laude in 1973 with honors in history. From Bowdoin he went on to Harvard Law School and Rogers & Wells, a law firm in New York, before landing at Bain & Co., the management consultant.

When Chenault arrived at American Express, conglomerates were the rage, and AmEx was on a buying spree. It acquired, among other outfits, the brokerages Shearson Loeb Rhoades and Lehman Brothers, Kuhn, Loeb, as well as Investors Diversified Services, which was renamed American Express Financial Advisors. Eventually all were unloaded, the last in 2005, when the financial advisory business was spun off to shareholders.

Today Chenault presides over a sprawling global enterprise whose customers rang up $822 billion of charges last year on 97.4 million cards. The brand’s cachet stems from its affluent customers, who spend an average of four times as much as MasterCard (MA) shoppers, and its customer service. American Express’ U.S. market share has risen steadily in the past decade, to 26.4% through mid-2011 from 19.5% in 2002, according to the Nilson Report. It is about even with MasterCard’s share, although both are well behind industry leader Visa (V), with 43% of the market.

AmEx, which was founded in 1850, earned $4.9 billion, or $4.12 a share last year, on revenue of $30 billion. About 55% of revenue came from fees charged to merchants who accept AmEx cards, and 20% was generated by lending money to customers, typically on revolving credit cards, or those whose balances aren’t paid off every month. AmEx charges merchants 2.54% of the value of each transaction, and shares a portion of fees with the banks that issue American Express cards. That’s another thing that sets AmEx apart from other card issuers, Chenault notes. “If you are reliant on the lend-centric model, it is going to be far more challenging,” he says.

Under Chenault’s leadership, American Express shares have returned 26.8%, dividends included, endowing the company with a current market value of $61 billion. Shares have narrowly beat the Standard & Poor’s 500, which has returned a total 25.9% since 2000.

ELEGANT AND POLISHED, YET down to earth, Chenault quickly puts a visitor at ease as he sips a cup of tea during an interview in a conference room adjacent to his office. Both are situated on the 51st floor of the northern tower of the World Financial Center, with a grand view of New York Harbor and the Statue of Liberty. Chenault says he is a big believer in “constructive confrontation,” which he encourages in meetings. Borrowing a famous phrase from Napoleon, he says the role of a leader is “to face reality but give hope.”

Chenault counsels other executives to “stand for something” and be clear about their values. He also encourages them to push for change. “One of the lessons I often talk about, both inside and outside the company, is that you can become very complacent with success, and success can become a rut,” he says.

After his successful stint in merchandise services, Chenault was promoted to the card business, which was losing ground to competitors. Unlike Visa and MasterCard, AmEx couldn’t have banks issue credit cards in the U.S., a restriction that the courts lifted in 2004. Within the company, he says, “there was too much of a focus on the tried and true, and not enough innovation.” Chenault says he tried to bring a sense of urgency to a unit that too often downplayed competitive threats.

Amex introduced its first revolving-credit product, the Optima Card, in 1987. It enabled customers to carry monthly balances. Still, the company’s card business was losing market share, and a group of restaurant owners in Boston revolted in 1991, refusing to use AmEx cards because they thought the fees they paid were too high. Partly because of that incident, known as the Boston Fee Party, the company eventually lowered fees in some markets and broadened its merchant base to include supermarkets, drug stores and other vendors.

Chenault continued to push for new initiatives, including the launch of the membership miles program in 1991. Four years earlier, he says, AmEx had turned down an opportunity to have a co-branded card with American Airlines, a move he calls “a total misunderstanding of how you judge customer needs.” He lobbied to broaden the credit-card portfolio because “we hadn’t focused enough on segmenting customer needs and developing different products to meet customer segments.”

Chenault was named president of Travel Related Services, Gerstner’s old job, in 1993, overseeing the card and travel business in the U.S. Four years later, still in his mid-40s, he became president and chief operating officer of American Express, and on Jan. 1, 2001, succeeded Harvey Golub as CEO. Today he is one of only four African-American CEOs in the S&P 500.

CHENAULT REGARDS both Gerstner and Golub as important mentors. In addition to helping him become a better problem solver, Gerstner taught him “not to identify with your job alone.” Chenault says he tries to be with his wife, Kathryn, and their two college-age sons, as often as he can, especially on weekends and vacations.

Golub was a mentor of another sort. “Harvey was tough-minded, but I found him straightforward,” Chenault says. “What he didn’t tolerate were people who tried to wing it. You had to know the facts. You had to articulate the issues. He had no problem with people who said, ‘Look, I don’t know.’ But if you said, ‘I know’ and you didn’t know, you had a problem.”

No amount of mentoring could have prepared Chenault for the signal event of his first year as CEO: the 9/11 attacks. On that day he was traveling for business in Salt Lake City, where he worked the phones to coordinate the company’s response. Eleven AmEx employees were killed at the Trade Center, and the company was forced to relocate its headquarters for the next eight months. “While I talked to our board and other leaders in the company, this is one where you had to lead from your instincts and experiences and values,” he says.

The financial crisis six years later posed a different challenge, although American Express managed to stay profitable through the debacle and maintained its dividend, now 72 cents a share. To shore up its funding, the company started gathering retail deposits, which now total $37 billion. At the same time, AmEx continued to invest in areas such as customer service, and acquired a portfolio of corporate credit cards from General Electric (GE) for $1.1 billion. Chenault says his biggest disappointment as CEO is that “the housing decline really impacted our business, and I wish we had seen it earlier.”

So do most CEOs, especially of consumer and finance companies. American Express, at least, faced reality, and its values-minded chief continues to give hope.

E-mail:
editors@barrons.com

By ANSGAR SICKERT

You might be forgiven for not noticing that a trade delegation from the European Union recently descended upon India’s capital to give the attempts of concluding a comprehensive free-trade agreement a much-needed boost. Perhaps because it was around the same time as the world leaders’ forum in Davos, India-EU free trade negotiations flew firmly below the radar screen of the world’s media.

The recent visit by the EU’s new trade negotiator Karel de Gucht was by comparison more high profile. He believes negotiations can be concluded by the end of the year if some of the remaining sticky issues can be resolved.

Over the last one and a half decades India has concluded over a dozen free trade agreements with countries or regional blocks such as ASEAN, Sri Lanka and South Korea. Others with Japan and New Zealand are on the anvil.

With the WTO’s Doha round still in a state of hibernation this flurry of bilateral deals is perhaps not surprising. The EU is also no sloth in strengthening its trade ties and has concluded trade agreements with the 78-member group Africa, Caribbean and Pacific countries, the Gulf Cooperation Council, South Africa, Mexico, Chile, South Korea. More with India, ASEAN and Mercosur are in the pipeline.

With many economists speculating that a double-dip recession is around the corner, trade liberalization could give a much needed fillip to the global economy. As it is India’s most important trading partner, a bilateral agreement with the EU would undoubtedly represent a beacon for both economies.

Negotiations between the two partners started in June, 2007 and looked promising at first but subsequently lost steam. Last November’s annual India-EU Business Summit in New Delhi was a turning point. Leaders on both sides seemed to rediscover their enthusiasm, declaring that a deal should be concluded by the end of this year.

This is to be strongly welcomed not just by the business communities in India and the EU but the world over. By definition bilateral agreements can be far more ambitious and far reaching than multi-lateral talks involving many countries.

The current WTO negotiations were kicked off in November, 2001 and seek to address a host of sensitive issues such as reductions in tariff and non-tariff measures, agriculture, labor, environment, transparency, services and intellectual property. It is easy to see why a conclusion of the WTO’s Doha round remains elusive.

The EU’s attempt to include politically-sensitive issues in its FTA negotiations with India has led to considerable resistance from the New Delhi which views climate change, intellectual property rights or child-labor as “extraneous” non-trade issues that should be tackled elsewhere.

Whether such issues should indeed be part of bilateral free trade negotiations is debatable, particularly since they are already discussed in many other multilateral forums. However with growing concern amongst the European electorate about loosing jobs to Indian outsourcing companies, the EU cannot but deal with its own internal political constraints. The EU has such clauses in all its bilateral FTAs and without them any agreement is likely to get rejected by the European Parliament.

India also has many areas where it needs to tread carefully due to domestic political sensitivities. With serious moral concerns in parts of India’s body politic and society, reducing import tariffs, lowering internal levies and easing restrictions on alcoholic beverage imports will take some political courage.

Clearly the newly found momentum should be seized to bring the negotiations to a successful conclusion. Both sides recognize that an awful lot of work remains to be done before the year is up. Trade organizations such as the European Business Group in India, FICCI and CII have been lobbying to push governments towards a comprehensive agreement.

The EU and India have set an ambitious goal of more than doubling their bilateral trade to $200 billion dollars in the next four years if a free trade deal is concluded. That would be an impressive increase in trade from the $82 billion achieved in the fiscal year ended March 31, 2009.

India should be less concerned about the inclusion of “extraneous” issues in the FTA as most of the provisions are in any case either covered by domestic legislation or non-binding.

But more than propping up flagging economic growth and international trade statistics in Europe and India, a successful FTA might even help reenergize the WTO talks.

—Ansgar Sickert is the New Delhi Based managing director of Fraport India and a council member of the European Business Group in India.

By ALEXANDRA ALTER

This summer, Darcie Chan’s debut novel became an unexpected hit. It has sold more than 400,000 copies and landed on the best-seller lists alongside brand-name authors like Michael Connelly, James Patterson and Kathryn Stockett.

It’s been a success by any measure, save one. Ms. Chan still hasn’t found a publisher.

Five years ago, Ms. Chan’s novel, “The Mill River Recluse,” which tells the story of a wealthy Vermont widow who bestows her fortune on town residents who barely knew her, would have languished in a drawer. A dozen publishers and more than 100 literary agents rejected it.

“Nobody was willing to take a chance,” says Ms. Chan, a 37-year-old lawyer who drafts environmental legislation for the U.S. Senate. “It was too much of a publishing risk.”

This past May, Ms. Chan decided to digitally publish it herself, hoping to gain a few readers and some feedback. She bought some ads on Web sites targeting e-book readers, paid for a review from Kirkus Reviews, and strategically priced her book at 99 cents to encourage readers to try it. She’s now attracting bids from foreign imprints, movie studios and audio-book publishers, without selling a single copy in print.

The story of how Ms. Chan joined the ranks of best sellers is as much a tale of digital marketing savvy and strategic pricing as one of artistic triumph. Her breakout signals a monumental shift in the way books are packaged, priced and sold in the digital era. Just as music executives have been sidestepped by YouTube sensations and indie iTunes hits, book publishers are losing ground to independent authors and watching their powerful status as literary gatekeepers wither.

Self-publishing has long been derided as a last resort for authors who lack the talent or savvy to hack it in the publishing business. But it has gained a patina of legitimacy as a growing number of self-published authors land on best-seller lists. Last year, 133,036 self-published titles were released, up from 51,237 in 2006, according to Bowker, a company that tracks publishing trends.

A handful of self-published authors have achieved blockbuster status, selling more than a million copies of their books on the Kindle. While they represent a tiny minority of independent authors, the ranks of the successful are growing. Thirty authors have sold more than 100,000 copies of their books through Amazon’s Kindle self-publishing program, and a dozen have sold more than 200,000 copies, according to Amazon. The program, which Amazon launched in 2007, allows authors to upload their books directly to Amazon’s Kindle store, set their own prices and publish in multiple languages. Barnes & Noble followed suit in 2010 with a similar program for its Nook e-reader.

Self-published titles have been buoyed by an explosion in digital book sales. E-book sales totaled $878 million in 2010, compared to $287 million in 2009, according to the Association of American Publishers. Some analysts project that e-book sales will pass $2 billion in 2013.

The march of self-published authors has put publishers and literary agents on guard. Publishing houses like Penguin and Perseus have recently launched their own digital self-publishing programs in an effort to capture a slice of the mushrooming market. Some agents, including Scott Waxman, have started their own digital imprints.

Digital self-publishing still has serious drawbacks. Though e-books are the fastest-growing segment of the book market, they still make up less than 10% of overall trade book sales, according to the Association of American Publishers. Book reviewers tend to ignore self-published works, and brick-and-mortar bookstores have long shunned them. And very few authors have a marketing and advertising budget equal to a publisher’s.

Several successful self-published authors have gone on to cut deals with major publishers. After selling around 1.5 million digital copies of her books on her own, 27-year-old fantasy writer Amanda Hocking signed with St. Martin’s Press. She won a $2 million advance for a new four-book fantasy series called “Watersong”; St. Martin’s will also reprint her best-selling self-published “Trylle” trilogy about attractive teenage trolls.

Self-published thriller and Western writer John Locke, whose 13 books have sold more than 1.7 million digital copies, signed an unusual contract with Simon & Schuster in August. The publishing house will print and distribute his books—the first title comes out next month—while allowing Mr. Locke to remain as the publisher. Mr. Locke is paying for the printing, shipping and marketing costs himself, according to his agent. The print editions, which will sell as mass-market paperbacks for $4.99, won’t be edited. “The opportunity to get into bookstores, Targets, Wal-Marts, Costcos, airports—I can’t do that as an independent author,” Mr. Locke says.

J.A. Konrath, a mystery writer who has sold 400,000 digital copies of his self-published books, earning some $500,000 a year, signed a contract with Amazon’s new mystery imprint to publish his novel “Stirred,” co-written with Blake Crouch, digitally and in print. It recently hit No. 1 on the Kindle top-100 list. Mr. Konrath says he was won over by Amazon’s powerful marketing machinery. “They can really blow my books up,” he says.

Ms. Chan lives in a spacious, two-story house on a quiet street in Cortlandt Manor, N.Y. She and her husband, Timothy Chan, met in high school, at a national science competition. They reunited in Maryland, where he attended medical school and she completed a law degree at the University of Baltimore.

For the past 15 years, she’s worked for the federal government on the natural-resource team for the Senate’s Office of the Legislative Counsel, where she drafts legislation concerning clean air and water, highway infrastructure and climate change. She works remotely, from her home, from 9 to 6, and then takes care of her toddler son until her husband gets home. She squeezes in a couple of hours of writing each night.

She started writing fiction in 2002, when she suddenly had a lot of time on her hands. Her husband, an oncologist and cancer researcher at Memorial Sloan-Kettering, was spending long hours at the hospital at the beginning of his residency, so she spent her nights alone writing.

She came up with the story of a wealthy, agoraphobic Vermont widow who makes anonymous gifts to the townspeople who ignore and fear her. Ms. Chan says she was inspired by the true story of a resident of Paoli, the small Indiana town where she grew up. “The Mill River Recluse” takes place in a fictional Vermont town with a quirky cast of characters—a kleptomaniac priest with a spoon fetish, a dotty woman who tries to sell her neighbors love potions, a bad cop whose off-duty hobbies include stalking and arson.

The novel took her 2½ years to write. After seeking feedback from family and friends, she sent queries to more than 100 literary agents. Most rejected it as a tough sell. “It didn’t really fit any genre,” Ms. Chan says. “It has elements of romance, suspense, mystery, but it falls into the catch-all category of literary fiction, and of course that’s the most difficult to sell.”

She finally landed an agent, Laurie Liss at Sterling Lord Literistic in New York, who represents cable-news host Rachel Maddow. Ms. Liss submitted the manuscript to a dozen publishers, all of whom turned it down. Ms. Chan stashed the manuscript in a drawer, and buried herself in her legislative work.

Five years passed. Then, this past spring, she started reading about the rise of e-book sales and authors who had successfully self published, and decided to give it a shot. She fashioned a cover image out of a photograph her sister took of a mansion in Paoli, and she and her husband used Photoshop to add some gloomy ambience. Then she nervously uploaded her manuscript to Amazon’s Kindle self-publishing program. She sold a trickle of copies. A few weeks later, she started selling it on Barnes & Noble’s Nook and through SmashWords, a self-publishing program that distributes to major e-book retailers including Apple’s iBookstore, Sony and Kobo. Her first royalty check from Amazon was for $39.

She noticed that a lot of popular e-books were priced at 99 cents, and immediately dropped her price from $2.99 to 99 cents. The cut would slash potential royalties—Amazon pays 35% royalties for books that cost less than $2.99, compared with 70% for books that cost $2.99 to $9.99. But sales picked up immediately. “I did that to encourage people to give it a chance,” she says. “I saw it as an investment in my future as a writer.” The strategy worked. Several reviewers on Amazon said they bought the book because it was 99 cents, then ended up liking it.

She checked her sales several times a day, obsessively refreshing her Amazon page. In the first month, it sold 100 copies. When Ms. Chan saw the sales figure, she danced in her kitchen with her husband and toddler.

“We were saying, ‘Wow, this is really cool. What if you sell 1,000? That would be awesome,’ ” her husband recalls.

Then, at the end of June, “The Mill River Recluse” got a mention on a site called Ereader News Today, which posts tips for Kindle readers. Over the next two days, it sold another 600 copies. Ms. Chan realized she might be able to drive sales herself. She spent about $1,000 on marketing, buying banner ads on websites and blogs devoted to Kindle readers and a promotional spot on goodreads.com, a book-recommendation site with more than six million members.

After learning that self-published authors can pay to have their books reviewed by some sites, she paid $35 for a review from IndieReader.com (IndieReader no longer offers paid reviews). She paid $575 for an expedited review from Kirkus Reviews, a respected book-review journal and website. The review service, which Kirkus launched in 2005, gives self-published authors the option to keep the review private if it’s negative. Ms. Chan decided to have hers posted on their website. Kirkus called the novel “a comforting book about the random acts of kindness that hold communities together.” She used blurbs from the reviews on her Amazon and Barnes & Noble pages. “I hoped it would lend some credibility,” she says. “Most other reviewers won’t touch it.”

Sales kept climbing. In July, it sold more than 14,000 copies. That month, it was featured on two of the biggest sites for e-book readers, generating a surge of new sales. In August, it sold more than 77,000 copies and hit the New York Times and USA Today e-book best-seller lists; it later landed on the Wall Street Journal list. In September, it sold more than 159,000 copies. To date, she has sold around 413,000 copies.

Ms. Chan and her agent decided to resubmit the novel to all the major imprints, citing robust sales figures and rave online reviews. Some publishers have responded warily. A representative of one publishing house feared the book had “run its course,” Ms. Liss recalls. Others worried about the novel’s bargain basement price, arguing that an e-book that sells for 99 cents likely won’t command a typical hardcover price of around $26.

A few major publishers made offers, but none matched the digital royalty rates of 35% to 40% that Ms. Chan makes on her own through Amazon and Barnes & Noble. Typically, most publishers offer print royalties of 10% to 15% and digital royalties of 25%. Simon & Schuster offered to act as a distributor, but Ms. Chan wants the book to be professionally edited and marketed.

Ms. Liss says that the offers from U.S. publishers so far don’t improve much on what Ms. Chan is making on her own. She’s made around $130,000 before taxes—substantially more than a standard advance for the average debut novelist—and she’s getting a steady stream of royalties every month. “I told Darcie, at this point you’re printing money. They’re not. Go with God, we’ll sell the second book,” Ms. Liss says.

In the meantime, there’s interest from other corners of the industry. Multiple audio-book publishers have made offers. Six film studios have inquired about movie rights. Two foreign publishers bid on the book. Ms. Chan is holding off on such deals, for fear they might sabotage a potential contract with a domestic publisher.

Ms. Chan still wants to see her book in print. Several librarians have contacted her seeking print copies after patrons requested her book. “I have people writing me begging me for a hard copy, book clubs and libraries calling me, and I don’t have a hard copy to provide for them,” she says.

Ms. Liss advised her to work on a sequel set in the same town, with some of the same characters. Ms. Chan has written two chapters. While she would love to write full time, for now, she still sees writing as more of a hobby. When people ask her what she does for a living, she says she’s a lawyer. But she’s still holding out hope that a publisher will buy “The Mill River Recluse,” edit it and sell it in brick-and-mortar stores.

“The hardest part for me is uncertainty,” she says. “I deal better with rejection than uncertainty.”

Write to Alexandra Alter at alexandra.alter@wsj.com