Chen Yugui, head of the CICPA, believes the Chinese accountancy profession is moving in the right direction. Feng Yongbin / China Daily

Industry body chief wants more non-audit income

Chen Yugui, the head of China's top accountancy body, insists a Chinese accountancy firm will soon match the scale of one of the international Big Four.

The 50-year-old secretary general and vice-president of the Chinese Institute of Certified Public Accountants (CICPA) believes Chinese firms have the skills to step on the global stage.

"If you have confidence in the Chinese economy, you have to be confident of having a Chinese firm as big as the Big Four," he says.

Chen, who was speaking in the boardroom at the CICPA headquarters in Haidian district in the west of Beijing, says the accountancy profession is key to the development of the world's second-largest economy.

The government's own target - in a policy statement of the State Council - is to have 10 very large domestic firms and 200 medium-sized ones by 2015.

It is hoped the largest among these will be able to take on the likes of PricewaterhouseCoopers, Deloitte, Ernst & Young and KPMG.

"A big economy needs a bigger accountancy profession as does a (functioning) market; that is the lesson we take from the market economies around the world," he says.

The accountancy profession in China has already changed beyond recognition in China over the past 20 years.

In 1993, accountancy practitioners generated a revenue of just 18 million yuan ($2.85 million, 2.16 million euros) but by 2011 that had grown to 40 billion yuan - a more than 2,000-fold increase.

The change reflects the changing nature of the China economy and according to CICPA forecasts, revenues will hit 100 billion yuan by 2017.

The number of CICPA members is also set to grow from the current 250,000 to 300,000 in five years.

"That number of accountants was the target set by our national leader (Jiang Zemin, the former Chinese president) 15 years ago," Chen says.

One of the challenges facing Chen is to make accountancy attractive and exciting to young Chinese graduates and to shed the "boring" image that gets attached to the profession not just in China but across the world.

"People tend to join the profession because they just think it will be easier for them to find employment and that they will get higher pay for their work. We want to attract them in many other ways, however, such as how the work is also enjoyable and exciting," he says.

"Traditionally, accountancy has been seen as boring but in reality it is much more interesting. The work reflects the development and progress of society. It is becoming much more fun."

The CICPA has been working with Chinese universities to provide not necessarily more accountancy courses but more vocational ones that will provide a foundation to those entering the profession.

One of the challenges has been improving the pass rate of the CICPA professional examinations.

When a new curriculum was brought in based on UK and Hong Kong standards, only 1,000 out of 20,000 applicants passed.

"The pass rate used to be high but when we introduced new examinations it was low, less than 10 percent, but since 2007 it has become higher. It is difficult to assess the pass rate because students have to pass seven papers," he says.

But Chen is intent on raising the standards of the accountancy profession and driving out previous bad practices.

He is particularly keen in tackling accountancy fraud, which has dogged the profession in China in the past.

"Accountancy fraud was an issue in the past but instances of it are much rarer than they used to be. The biggest step was in 2006 when we completed a whole new set of auditing standards that converged with international standards," he says.

One of the major issues has been clients putting pressure on their auditors to sign off accounts and threatening to sack them if they don't.

Chen says the CICPA is determined to crack down on such abuses and it will in some cases call in any successor accountancy firm to scrutinize such decisions.

Chen, who is from Jiangsu province and who has a master's degree in accounting from Zhongnan University of Economics and Law in Wuhan, began his career in the Ministry of Finance.

His first experience of accountancy practices overseas was when he was seconded to the Institute of Chartered Accountants in England in Wales (ICAEW) in the UK for six months in 1987.

"I was eager to know more about the accountancy profession in the UK. What impressed me greatly was its concepts of a 'true and fair' view in audit procedures, the self regulation and self discipline of the profession and also its professionalism itself," he says. "When we went to the UK, the Chinese accountancy profession was still very young and was being rebuilt."

After Chen returned to China, he became involved in the formation of the CICPA, which came into being in 1988, while working in the accounting regulatory department of the Ministry of Finance. He became secretary general of the CICPA in 2002 and vice-president eight years later.

He is keen for Chinese accountancy firms to have more of an international presence so they can be in a position to help Chinese businesses wanting to expand overseas.

"In the years to come we want to have Chinese accountancy firms have offices in other countries and regions so they can serve Chinese companies wanting to invest in these countries," he says.

"They could also act for local businesses in these countries wanting to do business in China."

Chen is keen also for Chinese firms to become part of European and US accountancy networks and for foreign firms to practice in China.

"We want to encourage internationalization. We also want foreign firms to come to China and become members of the CICPA and their partners take our exams and practice here."

One of the most pressing current issues is the renewal of the mostly 20-year licenses of the Big Four firms operating in China.

When they originally came to China they formed joint ventures with Chinese companies but the Chinese government would like to see them move to the limited liability partnership (LLP) model, which is now standard in other parts of the world.

Under such a model, individual partners in China would ultimately be responsible for their actions unlike with a joint venture where the liability is just the assets of the legal entity.

"With a joint venture, accountants do not hold responsibility for the practice but in a partnership, the individual will hold unlimited responsibility for their behavior," he says.

Chen also wants to widen the range of services provided by Chinese accounting practices in areas such as management consultancy and strategy advice so they can compete more effectively with the bigger international firms.

At present, 80 percent of Chinese accounting firms' revenue comes from straightforward auditing but Chen would like non-auditing service to make up 50 percent of revenues within five to eight years.

"This is very important. We have launched quite a few training courses to help them provide non-auditing services," he says.

But Chen believes the Chinese accountancy profession is moving in the right direction.

He points out that five years ago the Big Four accounted for 40 to 50 percent of total revenue but now their dominance has been reduced to just 30 percent.

"The Big Four still dominate the accounting profession not just here but internationally. But the gap between the big accountancy firms and Chinese firms is closing," he says.

Contact the writers at andrewmoody@chinadaily.com.cn and liaoxue@chinadaily.com.cn