China Pushing to Compete Against ‘Big Four’
Top Chinese officials are hoping homegrown accounting firms will one day topple the dominance of the Big Four in auditing Chinese companies listed overseas.
KPMG, PricewaterhouseCoopers (PwC), Deloitte Touche Tohmatsu and Ernst & Young all have plans for big expansion in mainland China and Hong Kong. The firms each hope to increase employees by 20 percent this year alone, the Financial Times reported.
“As Chinese companies list abroad, we also hope the audit firms can go global too,” said Liu Yuting, director general of the Ministry of Finance’s accounting regulatory department. “After all, the entry of foreign companies into China happened alongside the introduction of foreign audit firms here,” Liu told the Financial Times.
The booming Chinese economy has led many Chinese companies to seek overseas listings, and they are turning to foreign accounting firms instead of local companies.
Some observers, however, think it will take years for China to compete against the Big Four’s extensive experience in the international arena. Domestic firms audit most companies listed on the Shanghai and Shenzhen stock exchanges, but they provide services to just a small number of the 348 mainland companies listed in Hong Kong.
Liu Zhongli, director of the Chinese Institute of Certified Public Accountants (CIPA), told China Daily that Chinese accounting firms are still limited in the kinds of services they provide. Only about 100 firms had an annual income of more than 20 million yuan, or $2.5 million. Liu said Chinese firms should explore more services and products, while also focusing on strong internal controls and good governance practices.
Wang Jun, vice minister of finance, called for consolidation among China’s 5,000-plus accounting firms as a way to make them more competitive. His comments came at a May 29 CICA forum.
"I think the reshuffle should be driven by market demand instead of administrative orders," Wang said. "It will go slowly, but that will create better works."
Wang also announced that China has taken a major step forward by applying 39 new corporate accounting standards to listed firms as of Jan. 1, 2007. The 2007 national accounting qualification examinations will reflect the new standards, Xinhua reported. A tougher qualification system will raise standards to meet the demand for top accounting talent, he said.