My first stop in China, even before visiting the Great Wall and the Forbidden City, was the offices of the Chinese Institute of Certified Public Accountants, whose headquarters are in a beautiful, modern building in the heart of Beijing.
I hadn't made an appointment and my visit hadn't been cleared through the Minister of Finance, but through my guide (and interpreter) I explained that I was a CPA visiting from the United States interested in the profession as practiced in China.
After some pleading, cajoling, and wheedling, Liu Aiu, director of the international department, agreed to a telephone interview.
Evolution of Accounting in China
The Chinese Institute of Certified Public Accountants, established in 1988 as an extension of the government of the People's Republic of China (PRC), licenses CPAs. Between 1995 and 2002, the State Council required the organization to join with the China Association of Certified Public Auditors, the Asset Evaluation Profession, and the Certified Public Tax Agent Profession, to place the entire accounting profession under the same leadership.
Receiving the CPA certificate requires earning a college degree, passing a uniform examination, completing at least two years experience of independent auditing in China, and becoming a member of the CICPA. CPAs are required to complete 120 hours of CPE every three years.
The Ministry of Finance oversees the activities of the profession. The CICPA enforces the rules and regulations, sets and implements accounting and auditing standards, administers the uniform CPA examination, and enforces ethics and discipline as set forth in its bylaws. The CPA examination covers accounting, auditing, finance, taxation, and law.
In many ways, the CPA profession in China mirrors that of the United States under the Sarbanes-Oxley Act. In the area of enforcement of rules, regulations, standards, and ethics, China appears to exert more control than the United States. In the opinion of the CPAs that I interviewed, an Enron-type disaster would not happen in China, and if it did, those involved would be punished severely and very quickly.
The Chinese Institute of CPAs is responsible for areas that include the following:
* Organizing national unified CPA exams;
* Preparing professional standards and rules for CPAs;
* Safeguarding the legitimate rights and interests of CPAs;
* Monitoring and reviewing the implementation of CPA professional standards and rules; and
* Conducting annual reviews of CPA qualifications and practices.
The mission of the CICPA is serving, supervising, regulating, and coordinating the activities of the CPA profession. It stresses professional ethics, adhering to professional standards, not making false accounts, and creating a professional image of independence and impartiality.
Similar to CPAs in the United States CPAs in China conduct audits, prepare tax returns, do management consuiting, and represent clients in disputes with the government in tax matters. Large CPA firms work with clients on IPOs, doing the required auditing and preparation necessary to take a company public. In addition, they do special auditing, such as verification of paid-in capital, net asset verification, internal audits, and working with legal counsel on judicial matters. All businesses require the services of a CPA in order to complete their year-end tax reports as required by the government.
China embarked on development of the CPA profession only about 25 years ago, and the profession has a promising future. The country currently has about 170,000 state-owned enterprises and more than 2.2 million private businesses, and it is growing by leaps and bounds. Not many CPA firms are capable of satisfying the needs of these organizations.
Accountancy is an appealing occupation to many young people in China. More than 500,000 candidates sit for the uniform CPA exam each year, many of them women. …