China plans to create and implement a new
internal control system for companies to boost operating standards
and cushion the effects of any future financial crisis.

The new system, to be implemented within 10
years, will have basic rules and guidelines aimed at preventing
companies from feeling the effects of the financial crisis as well
as helping to raise competency levels of companies, enhance their
ability to avoid risk and improve the level of operating

The new system will also help drive revenue
into the audit market by generating more internal control
compliance work for auditors.

The Chinese Ministry of Finance (MoF)
accounting regulatory department director general Lui Yuting
revealed the plans to The Accountant at a Chinese
accounting reform briefing held by the Institute of Chartered
Accountants of Scotland.

“To implement the system, [companies] will
need CPA’s to audit the whole process so it is the new emerging
point for the CPA industry to grow,” Yuting said.

The MoF has now completed the first phase of
the system and will start to the implement the system domestically
in public companies, and then in Chinese and public companies that
operate overseas.

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The MoF, working in co-operation with the
National Audit Office, the China Securities Regulatory Commission,
the China Banking Regulatory Commission and the China Insurance
Regulatory Commission, is currently training senior mangers on the
new system.

Yuting confirmed the MoF’s plans to challenge
the position of the Big Four in China by developing 5-10 ‘super
big’ domestic public accounting firms is on track.

“We now have about 12 firms and they have
already formed to the initial scale with the profits of the CPA
firms now reaching CYN500m ($75m) each. Our target is to reach
CYN2-3bn in five years.”

Yuting said he is confident the goal is
achievable in the next five years.

The ultimate aim of the proposals is to double
the size of the public accounting industry to CYN60bn within the
next decade.


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