Professional Documents
Culture Documents
Introduction .................................................................................................................................................. 2 Population ................................................................................................................................................. 2 Economic Structure and Major Industries ................................................................................................ 2 Major Firms ............................................................................................................................................... 4 Chinas Stock Market .................................................................................................................................... 6 China Securities Regulatory Commission...................................................................................................... 7 Legal Enforcement of IFRS ............................................................................................................................ 8 Summary of contents of financial statements .............................................................................................. 9 Transition Process of Accounting Standards............................................................................................... 10 Auditing Standards ...................................................................................................................................... 11 Full convergence with International Standards ...................................................................................... 11 Verification of Capital Contribution ........................................................................................................ 13 Comparison of Chinas old GAAP and IFRS ................................................................................................. 14 Accounting Education in China ................................................................................................................... 15 The Chinese Institute of Certified Public Accountants ............................................................................... 16 The CICPA Overview ................................................................................................................................ 16 The CICPA Examination ........................................................................................................................... 16 Accounting Student..................................................................................................................................... 19 Chinas Cultural Influences on Accounting ................................................................................................. 20 Appendix 1. Comparison of CASs and ISAs (As of 2006) ............................................................................. 23 Appendix 2. Accounting Firms in China ...................................................................................................... 25
Introduction
Population
In 2012, China's population amounts to 1.3 billion an increase of 365 million since 1980. Yet, population is growing at a decelerating pace and should reach its peak in less than two decades. Current methods of population control will be relaxed as the growth of population slows. The fertility rate is presently 1.6 births per female (below replacement level) and is expected to remain at that level in the medium term. The median age is steadily rising and by 2011 it was 35.5years 16.9 years greater than the figure for 1980. In fact, population aging is occurring more quickly in China than in most other countries. The country's working age population will begin to fall by 2017. By 2040, there could well be 100 million Chinese over 80 years old more than the current worldwide total. This demographic imbalance will have dramatic and fundamental consequences for the country's economic and social character. Improvements in social security and healthcare are essential. In recognition of the extent of China's population ageing, Beijing plans to spend RMB890 billion in 2009-2012 to improve healthcare.
employment in China. The state-owned sector still accounts for about 40% of GDP (2010 est.). In recent years, authorities have been giving greater attention to the management of state assets-both in the financial market as well as among state-owned enterprises--and progress has been noteworthy. (http://www.state.gov/r/pa/ei/bgn/18902.htm) Agriculture employs 33.8% of the workforce. Farm output grew by 4.6% in 2011. Rice is the main food crop, but tea, sugar and fibre crops are also important cash earners. In addition, China is the world's biggest producer and consumer of cotton. Farm output is expected to rise (in real terms) by more than 25% during the decade but looming water shortages could prove to be a serious bottleneck. Nationally, the agriculture sector consumes about 70% of China's surface water but more than one-fifth of water resources are unfit even for farming. The area sown for grain should increase in 2011 and output will rise by 2.5 billion kg. Manufacturing accounts for 30.0% of GDP and employs 14.2% of the workforce. In 2009, China became the world's largest car market but annual sales are expected to grow by 810% in 2012. Car penetration in China is still modest, even when compared with countries such as Brazil or Russia. Beijing announced that in 2012 it will withdraw support for foreign capital in auto manufacturing in an effort to support the development of domestic auto makers. Many other manufacturers are trying to move up the value added chain but China's shady reputation on intellectual property makes foreigners hesitant to transfer technology to Chinese partners. Domestically, state-owned firms continue to dominate the economy, accounting for an estimated 40% of non-agricultural output. Services make up 38.6% of GDP. Banks are now more commercially oriented and nonperforming loans remain at modest levels. The regulatory infrastructure of the banking system
has been significantly improved. The real value of tourist receipts is expected to have risen by 7.4% in 2011
Major Firms
PetroChina- PetroChina Company Limited (PetroChina) is the largest oil and gas producer and distributor, playing a dominant role in the oil and gas industry in China. It is not only one of the companies with the biggest sales revenue in China, but also one of the largest oil companies in the world. PetroChina was established as a joint stock company with limited liabilities by China National Petroleum Corporation under the Company Law and the Special Regulations on the Overseas Offering and Listing of Shares by Joint Stock Limited Companies on November 5th, 1999. The American Depositary Shares (ADS) and H shares of PetroChina were listed on the New York Stock Exchange on April 6, 2000 (stock code: PTR) and the Stock Exchange of Hong Kong Limited on April 7, 2000 (stock code: 857) respectively. It was listed on Shanghai Stock Exchange on November 5, 2007 (stock code: 601857) China Construction Bank is a leading commercial bank in China providing a comprehensive range of commercial banking products and services. Their business consists of three principal business segments: corporate banking, personal banking, and treasury operations. They are among the market leaders in China in a number of products and services, including infrastructure loans, residential mortgage, and bank cards. They have an extensive customer base, with established banking relationships with many of the largest business groups and leading companies in industries which are strategically important to China's economy. They have an extensive network of approximately 13629 branch
outlets. In addition, we maintain overseas branches in Hong Kong, Singapore, Frankfurt, Johannesburg, Tokyo, Seoul, New York, Ho Chi Minh City and Sydney. China Petrochemical Corporation (Sinopec Group) is a super-large petroleum and petrochemical enterprise group established in July 1998 on the basis of the former China Petrochemical Corporation. Sinopec Group is a state-owned company solely invested by the State, functioning as a state-authorized investment organization in which the state holds the controlling share. Headquartered in Beijing, Sinopec Group has a registered capital of RMB 182 billion. China Petroleum & Chemical Company (Sinopec Corp.), controlled by Sinopec Group, issued H-shares and A-shares at overseas and home respectively in October 2000 and August 2001 and was listed on stock markets in Hong Kong, New York, London and Shanghai.
China Railway Group is a super-large integrated construction group that encompasses infrastructure construction, survey, design and consulting services, engineering equipment and component manufacturing, property development and other businesses.
China Railway Group Limited has 46 subsidiaries, including 28 wholly owned subsidiaries, 15 holding subsidiaries, 4 branch companies and 3 joint venture subsidiaries. In the year of 2005 and 2006, China Railway was the fourth and third largest construction company in the world, respectively. In 2007, it was ranked 342nd in the Fortune Global 500 companies, and listed the 417th in the Worlds 500 Most Influential Brands and the 13th in Chinas Top 500 Enterprises.
will help enhance bond, insurance and securities markets. Diversification within the interbank market has strengthened its role as a source of capital for domestic banks. Meanwhile, although the corporate bond market remains small, the National Financial Work Conference has signaled that the issue of corporate bonds would play an increasingly important role, as Chinas bond markets developed.
If the CSRC finds that a wrongdoing has been committed, it will publish the information in a report that is shown in national newspapers. The CSRC has four different categories for penalizing companies: public criticism, public condemnation, official warning, and monetary fines. The CSRC may also suspend trading and withdraw licenses from securities firms. In regards to individuals, the CSRC can take actions that result in criminal prosecutions with strict punishments that include the death penalty. In addition to its supervision and enforcement responsibilities, the CSRC is also responsible for developing rules and regulations for the securities market that are based on public law. Also, the CSRC formulates the qualification criteria and codes of conduct for securities practitioners and fund employees.
require an international auditor to review the Chinese financial statements when a company applies for new equity offerings in the domestic market. The audit opinions of international auditors are more highly regarded then those of local auditors since the independence of Chinese local auditors can be compromised due to the weak institutional environment in various areas throughout China. Evidence of this occurred in the early 2000s when the CSRC supported a significant increase in international audit support in hopes that the quality of auditing in China would improve. From 1999 to 2002, local CPA firms declined from 106 to 71 due to increased competition from international firms. However, research shows that the international auditors actually did not outperform the local CPA firms in increasing IFRS compliance. In 2001, the CSRC implemented a compulsory policy that is regarded as the most influential regulatory enforcement effort on IFRS compliance in China. The policy states that management must choose the same accounting policies for both Chinese GAAP and IFRS, where possible. Thus, the only differences between the two sets of financial statements would be the differences in Chinese GAAP and IFRS. The policy was created to increase national convergence with the international accounting standards. Research shows that the implementation of the policy led to a clear decline in line-item earning differences between financial statements based on Chinese GAAP and corresponding financial statements based on IFRS.
fourth stage (from 2006) is initiated by the issuance of the Accounting Standards for Business Enterprises (ASBEs), which consists of a revised Basic Standard and 38 specific standards. Peng et al. documents that since 1992, the MOF has moved Chinese GAAP toward convergence with IFRS through the issuance of a series of Chinese GAAP that enhanced the level of successful convergence, which refers to fully or substantially converged items, with IFRS (20% in 1992, 35% in 1998, 49% in 2001, and 77% in 2006). The convergence has been carried out both through the direct import of standards from IFRS (74 of 123 items, 60%) and through progressive changes to Chinese GAAP (49 of 123 items, 40%). According to Roadmap for Continuing and Full Convergence of the Chinese Accounting Standards for Business Enterprises (ASBE) with the IFRS, the MOF targets 2011 as the year for completion of the convergence program of the ASBE and IFRS, and all large and medium-sized enterprises are required to use the revised standards as of 2012.
Comment [b1]: This is written as though 2011 is a year in the future. I realize that is because your reference was written before 2011, but I think Chavis will want us to research and find out if they met that target last year.
Auditing Standards
Full convergence with International Standards
The development of socialist market economy, privatization, and large inflows of foreign investment requires the innovation of a Chinese accounting system in harmony with international practice. To reinforce the confidence of investors, to regulate the performance of audits, and to harmonize with international practices, China began to issue 10 independent auditing standards with the first batch being effective from January 1, 1996. The second and third batches of 17 standards, 5 practice pronouncements and 3 related general standards on professional ethics,
quality control and continuing professional education became effective from January 1, 1997, and July 1, 1999, respectively (Lin and Chan, 2000). On December 8, 2005, the Chinese Auditing Standards Board (CASB) and the International Auditing and Assurance Standards Board (IAASB) released a joint statement in which the CASB indicated that the fundamental principle of drafting Chinese auditing standards is to improve the Chinese auditing standards system and to accelerate its convergence with the IAASBs ISAs. As an outgrowth of this joint statement, the CICPA published new 48 Chinese Auditing Standards (CASs) that adopted nearly all International Standards on Auditing (ISAs) in 2006 (Deloitte, 2006). In China, the CICPA is responsible for publishing auditing guidelines, but it must seek approval from the MOF before any auditing guidelines can be published. According to a press release issued on November 10, 2010, the CASB completed the revision of CSAsCASs, and achieved full convergence with the clarified ISAs. During the international convergence process, the CASB made limited additions it considered necessary and maintained some standards dealing with matters that are not specially covered in ISAs to reflect Chinas unique circumstances and business requirements, such as standards for the verification of capital contributions and communications between predecessor and successor auditors. The IAASB admits that such additions are acceptable if only they dont conflict with ISAs. Chong (2008) expects that adopting international standards may help streamline the audit approaches and reporting between the primary and secondary auditors in China. The primary auditors, based outside China, would have little or no difficulty subcontracting their audit assignments to the secondary auditors, their Chinese counterparts based in China. The revised CSAs were officially released in early November 2010, and are effective for audits of financial statements for period beginning on after January 1, 2011.
ASBE 2 only allows the equity method to be used when accounting for jointly controlled entities. IAS 31 allows both the equity method and proportionate consolidation to account for such entities.
ASBE 3 allows the cost model or the fair value model when measuring land use rights that is held for rental property and classified as investment property. Under IAS 40, enterprises are allowed to classify such land rights as investment property only if the fair value method is adopted.
ASBE 4 and ASBE 6 require the cost model to be used to measure fixed assets (excluding investment properties) and intangible assets, respectively. However, the comparable international standards (IAS 16 and IAS 38) allow the use of both the cost model and the revaluation model.
ASBE 5 requires the cost model to be used to measure biological assets unless there is evidence that the fair value of the assets can be obtained reliably on a consistent basis. IAS 41 requires that the fair value be used to measure biological assets unless evidence shows that it cannot be obtained reliably.
ASBE 8 prohibits the reversal of all types of types of impairment losses whereas IAS 36 only prohibits the reversal of impairment loss for goodwill.
ASBE 17 requires the capitalization of all borrowing costs that meet the criteria for capitalization. IAS 23 provides an option to expense all borrowing costs.
ASBE 30 states that the expenses of the income statement must be shown by function. IAS 1 allows the same expenses to be presented by function or by nature.
ASBE 31 requires the direct method to be used when reporting cash flows from operating activities. An enterprise must also develop a note that shows the reconciliation of profit to net cash from operating activities. Under IAS 7, an enterprise is only encouraged to use either the direct method or the indirect method.
ASBE 36 exempts state-controlled entities from being regards as related parties simply because they are state-controlled. No such exemption exists under IAS 24.
For master's degree, students should take more theoretical classes including accounting history and modern accounting theory. Generally, Master of Professional Accounting (MPAcc in short) programs are more profession-oriented in terms of education objective, admission policy, course content, educational pattern and quality standard. Whereas, Master in Accountancy programs are more academic and emphasize more on research. (http://www.rbs.org.cn/templates/T_eng_new_list/index.aspx?nodeid=280)
In this level, the examination primarily assesses whether examinees possess a good command of the professional knowledge as required of a CPA in public practice, as well as the basic skills and the professional ethics. The 5 subjects under the old examination system are split, expanded, and combined. Level 1 examination consists of 6 subjects: Accounting, Auditing, Financial Management and Cost Management, Corporate Strategies and Risk Management, Economic Law, and Taxation Law 2) Level 2: Advanced stage The Level 2 examination assesses whether examinees can integrate and apply the professional knowledge in practice, and whether examinees maintain the professional values, ethics and attitudes, as well as the capability of solving problems. Level 2 exam tests an integrated subject of all disciplines. Examinees are only allowed to take up the examination of the advanced stage after he/she has passed the professional stage. As the advanced stage focuses primarily on examinees competency, it is suggested that examinees should gain adequate practical work experiences prior to sitting the second stage examination. The two levels of examinations are held once a year. The CPA examination in China is a national unified examination and unlike the AICPA examination, there are no particular requirements for each province. The examination results of each of the 6 subjects in the professional stage are valid for 5 years. After successfully passing all the required subjects of the professional stage examination, the candidate obtains the Certificate for Passing the Professional Stage Examination. The integrated subject in the advanced stage should be accomplished within 5 years after obtaining the Certificate for Passing the Professional Stage
Examination. After successfully passing the advanced stage examination, the candidate can obtain the Certificate for Passing All Subjects.
Accounting Student
cycle will itself die out. Lastly, culture values such as relationship and harmony in China point out that the country can be categorized as feminism as opposed to masculinity. Based on the preceding four cultural dimensions identified by Hofstede, there is uniformity, secrecy, low professionalism, and high regulatory control in China. As an example of large power distance, in recent years that poor have become poorer, while the rich have become richer. This gap, mainly created from Chinas transition from a planned economy to a market economy, has given opportunities to many privileged people to make a lot of money. The vast majority of accountants in China abide by the many detailed regulations set forth in accounting standards. They lack the skills of judgment and self-discipline. These rules and standards direct the accountants how to act given different situations. However, since real life scenarios can be vastly different from what is written in accounting standards, Chinese Accountants tend to become clueless as to what actions to perform. The accounting regulations and laws implemented in China is set by the government. Private bodies and individuals rarely have any say on the design of accounting standards. In regards to Uniformity, this concept is highly correlated with uncertainty avoidance and low individualism. Chinas acceptance of its enforcement regulations set for by the government also goes to show that uniformity is related to the degree of high power distance in the nation. The concept of secrecy reflected in China portrays the fact that the financial information provided need not to be transparent. Since a majority of the enterprises in China are stateowned, the financial information which are produced are mainly used by the management of the same entities. The large power distance and low individualism in China contribute to the fact that financial information is not widely dispersed with the public.
With the introduction of the new accounting standards in 2006, there is a greater likelihood that there will be greater evidence of higher professionalism. This is mainly reflected by the new standards requirement of professional judgment by accounting professionals and the need for financial information to be useful for decision making. The new standards mandate enterprises present reliable and fair information to investors. Furthermore, the increase in the number of college graduates studying accounting will also help increase the level of high professionalism. The creation of a good moral standard can promote honesty amongst accountants, resulting in the production of fair and authentic financial information.
No. 1613 Relationship between banking supervisors No. 1621 Special considerations for audit of small entities No. 1631 Consideration of environmental matters in an audit of financial statements 41 No. 1632 Auditing derivative financial instruments 42 No. 1633 Effect of electronic commerce on the audit of financial statement Standard on Review Engagements for CPAs of China 43 No. 2101 Engagements to review financial statements Standards on Other Assurance Engagements for CPAs of China 44 No. 3101 Assurance engagements other than audits or reviews of historical financial information 45 No. 3111 Examination of prospective financial information Standards on Related Service for CPAs of China 46 No. 4101 Engagements to perform agreed-upon procedures regarding financial information 47 No. 4111 Compilation of financial information Standard on Quality Control for CPA Firms 48 No. 5101 Quality control of professional work 38 39 40
IAPS 1004 IAPS 1005 IAPS 1010 IAPS 1012 IAPS 1013 ISRE 2400 ISAE 3000R ISAE 3400 ISRS 4400 ISRS 4410 ISQC 1
(Source: Earnest & Young China, 2006) ISA International Standards on Auditing IAPS International Auditing Practice Statement ISRE International Standards on Review Engagements ISAE International Standards on Assurance Engagements ISRS International Standards on Related Services
By the end of 2010, excluding firms which are organized in the form of Chinese-Foreign cooperation, firms with securities practice qualification have established 64 subsidiaries, members or associates in Hong Kong or other overseas regions, generating revenue of 0.57 billion RMB, or 1.58 percent of the profession. The Top 100 employed a total of 24,968 certified public accountants, an increase of 8 percent. Average revenue per capita (ARPC) continued growth trend, reaching 340,000 RMB in 2010, increased by 34,000 RMB, or 11.53 percent.
Bibliography