| The accounting services sector has grown by leaps and bounds in the period since economic liberalization began in earnest. As China moved toward a market economy, it had to reinvent this key sector after long neglect. In fact, under the command economy, accounting and auditing was mainly limited to working on SOEs or public sector budgeting. There is a need now to change the mentality to fit the rapidly-growing new economy, and to train new staff to fill the gaps as privatization takes place and private sector companies move to the forefront as employers and centers of growth
and change.
Accounting was one of the first service sectors to open up. Even in the 1980s, foreign accounting firms were permitted to set up representative offices and to provide audit, tax and consulting services to both local and foreign clients. Compared to highly monopolized and closed industries like telecommunications, the accounting sector is in a better position to adapt and develop in the WTO period.
With investors’ rising expectations for publicly-listed companies, demand for high-quality auditing is increasing.
The CPA industry has undergone rapid development since 1980. It established a regulations system, implemented an examination system, developed training and follow-up education, opened up the accounting market, and increased international cooperation. Overall, the new development of CPA firms has played an active and important role in economic reforms, the development of security markets, reforms of state-owned enterprises, and national development.
As well-known foreign CPA firms enter the country, the standards of local firms are expected to rise to approach international standards. Rules and regulations concerning foreign-invested CPA firms are expected to be improved and perfected.
The development trend is encouraging. With the increase of accounting service enterprises and people in practice, the sector has already achieved a much larger scale. To increase professionalization and standardization, industry groups in major cities founded the Institute of Certified Public Accountants. By end-2001, China had a total of 4287 CPA firms, of which 72 had a license to audit securities firms. There were 55,897 practicing CPAs and 75,000 non-practicing CPAs. Among 347 non-practicing foreign members, 217 were from Taiwan, 109 from Hong Kong, and 21 from other countries. The total revenue in 2001 was about RMB 8.1 billion.
This report concentrates on the recent development of this very large market, and contains chapters on the institutional and legal framework, new rules and regulations, and the changes and outlook following China’s accession to WTO. The report concludes by discussing reforms and considerations on the future of the accounting services market. Appendices contain copious supplementary material including definitions, updated laws and rules, a business directory, and lists of CPA firms.
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