Total accountability

ACCA and China Institute of Certified Public Accountants (CICPA) organised the third Training for Trainers program to promote international accounting standards in China this year.

Many people may say an accountant works simply by adding and subtracting figures. But is it really as simple as it looks?

For those with at least some knowledge of China's past three decades of economic reforms, the answer is definitely "No".

China's successful transition from a rigid, centrally planned economy to a market-oriented one has been accurately summed up as a process of "reform and opening up". But such a generalization may ignore some basic and crucial, but less obvious elements of the economy, such as accounting.

An inherent part of opening up is more engagement with international investors and traders and the parties involved need to find a common language that is known to them all. English is the obvious choice and that's why China has become the country with the largest number of English learners. But foreign investors and traders may need more than a common language.

"International investors were unable to understand Chinese companies' financial sheets in the planned economy period," says Liu Yuting, head of the accounting section of the Ministry of Finance.

China had adopted accounting standards that originated in the former Soviet Union but were tailored to China's economic realities. They were different from general principles Western accountants abided by. Cross-border communication and doing business, therefore, became difficult not only because of political barriers, but because enterprises across the border spoke different "corporate languages".

From the early 1980s, right after China started its reform and opening-up drive, Chinese accounting researchers had begun to introduce Western accounting standards and China established formal corporate accounting standards in 1992. The establishment of the country's stock market in early 1990s made it more necessary for the accounting standards to be updated and accepted by all enterprises.

In October 1993, the National People's Congress passed the "CPA Law", which came into effect in 1994. It mandated that China adopt a completely new accounting system and ended the old planned economy accounting practice.

Standard accounting rules promote the long-term sustainable growth of enterprises, help standardize capital market rules and facilitate auditing, thus becoming part of the financial infrastructure that "underpins and drives China's extraordinary economic success", says Richard Aitken Davies, president of UK-based Association of Chartered Certified Accountants (ACCA).

More recently, Liu and his team at the ministry of Finance have been endeavoring since 2002 to further update China's accountancy standards to get them in line with international ones.

On the other front, international accounting bodies have entered China to help it get line with globally accepted accounting principles and to train professionals, with the ACCA playing a leading role.

ACCA, the largest and fastest-growing global professional accountancy body in the world, with over 320,000 members and students in 170 countries, entered the mainland in 1988, ten years after China started its opening-up drive.

Allen Blewitt, former chief executive of ACCA, who passed the mantle to Helen Brand in September, had come to China even earlier and his impressions were fresh and unique.

Blewitt first visited China in 1977 when the country had just emerged from the "cultural revolution" (1966-76) and was looking for a path that could bring the nation out of chaos and towards economic prosperity.

To his surprise, he says ordinary Chinese had shown an unbending spirit, which later proved to be the underpinning for China's rise as a global economic powerhouse.

"It was (in a people's commune) in Hunan that I met a number of young Chinese students at a sports stadium, where primary school children were being assessed for their athletic abilities," says Blewitt, who was then on a study tour of young Australians. At that time, athletics were not as common as today as the country was still bogged down in the political uncertainties even though the "cultural revolution" had come to an end.

He asked their teacher why they could be so concentrated on athletics and the teacher said: "One day, China will be readmitted to the Olympic movement".

The philosophical sports teacher was right. Thirty-one years later, Beijing successfully hosted the Olympic Games.

Hungry for accountants

"The one indelible memory of the 1977 visit remains; everywhere we went Chinese citizens were working steadily and unceasingly in factories, schools and on the communes," he says. "There was a great faith that China was emerging."

In the coming years, late leader Deng Xiaoping led the country to liberalize the rural economy by allowing farmers to work on their own instead of on the communes, and generally unleashing the "entrepreneurial Chinese spirit". "It was a small step, but it was followed by big liberalizing economic steps shortly afterwards," Blewitt says.

It is not clear whether Blewitt's unique China experience motivated him in his ACCA years to ultimately influence the ACCA management to enter China. But certainly the association, as foresighted as the Chinese teacher Blewitt had met, had foreseen China's economic potential and entered the country to gain an early advantage.

"We were aware from our experience elsewhere in the world how important professional accountants are to success of economies," says Davies. "So we felt it's an opportune time for us to come and see what we can contribute to the Chinese market."

Its contribution is huge.

"The rapidly growing economy in China needs armies of high-quality accountants, and we at ACCA have done a great job in this regard and are cooperating with many local partners to meet such needs to fuel economic growth by training and nurturing more high-caliber professionals," says Kelly Chan, financial controller of Moet Hennessy Diageo Hong Kong Ltd and ACCA Hong Kong President.

ACCA has gone from a first batch of 30 students in Beijing to 20,000 members and 32,000 students, with 27 exam centers, 600 approved employers and four offices in Beijing, Shanghai, Guangzhou and Hong Kong. Many of its students have become backbones of industry and their employers.

"In the past two decades, ACCA has helped China train a good number of professionals versed in international accounting standards and practices, who have played a conducive role in China's transformation to a market economy," says Tang Yunwei, Partner of Ernst & Young and the first ACCA honorary member from China.

"I hope ACCA will continue to contribute to China's economic growth by doing the same good job it has done in the past two decades."

For many who attend ACCA tests, the exams are in a sense as important as the national college entrance exams, because they may both change the fate of the youth.

"ACCA was the biggest turning point in my life," says Dai Xibao, deputy general manager of Internal Audit Department of Aluminum Corporation of China.

Dai was not a financial or accounting major during his university years. "ACCA provided me with a high-level platform to embark on my financial career," says Dai, who initially graduated from the Department of Philosophy at Peking University and used to be a college teacher.

The organization has attributed its success in China to the country's rising economic prowess, which creates increasing demand for high-caliber accounting professionals. China "has contributed so much to ACCA's reputation and influence over such a short period of time," says Helen Brand, ACCA chief executive.

For China, however, the benefits are mutual and the organization's vision is behind its success.

"By entering China, you've chosen the right place (to expand your business) and that's because you have thorough knowledge of China," says Wang Jun, vice-minister of finance.

(China Daily 10/13/2008 page6)