Tuesday, May 31, 2016

Guidance on Professional Judgment for CPAs in China




At a China Press Conference in Beijing on February 15, 2006, Graham Ward, President, International Federation of Accountants remarked that: “The decision by China to converge towards international auditing standards sends a clear message to the world that both the Chinese people and the Chinese accountancy profession are committed to transparency, quality and high professional standards. Support of these standards will benefit not only the accountancy profession, but also, and even more importantly, all Chinese citizens and the Chinese economy as a whole. Why? Because following high, internationally accepted standards builds trust in the audit process; it builds credibility in the information provided by auditors; it builds investor confidence – all of which are vital to the development of your capital markets. As your economy continues to expand, you are far better positioned to improve the quality of life of your citizens.”

He concluded that: “I am proud that IFAC and the CICPA are working together. Through adherence to high professional standards we can, together, bring about social stability and good governance in business. Through convergence to international standards we can, together, deliver our promise of quality. And through acting in the public interest, we can, together, build public trust and sound economies that support a better quality of life for all. I firmly believe that China’s move toward convergence will go a long way towards improving the life and livelihoods of the people of the People’s Republic of China.”

In line with the convergence towards international auditing standards,  Guidance on Professional Judgment for CPAs (released by the Chinese Institute of Certified Public Accountants on March 26, 2015) states that: “the term professional judgment refers to the application of relevant training, knowledge and experience, within the context provided by auditing, accounting and ethical standards, in making informed decisions about the courses of action that are appropriate in the circumstances of the audit engagement.” Accordingly, the guidance makes recommendations related to improvement of the quality of CPA’s professional judgment, recommendations for accounting firms, recommendations for CPAs, recommendations for regulators and recommendations for standard setters.

Learn more about the Chinese Institute of Certified Public Accountants – CICPA and the current situation in China by reading the Overview of the Accountancy Profession in China (released by the CICPA on January 21, 2016). The Overview explains that: “The accountancy profession was introduced to China in the early 20th century, mainly serving the booming national industry and commerce. After the founding of the PRC, the profession had played a vital role in the national economic recovery. It was suspended in the Mid-20th century when China adopted a planned economic system; along with China’s historical economic reform and opening up policies, the accountancy profession was revitalized and reconstructed and grew steadily. With over 30 years of development and growth, the accountancy profession in China is now a widely recognized and respectable profession. Accountants are an important link of integrity chain of the market economy and they are entrusted to safeguard the public interest.