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SCMP Reporter

Mainland regulators will soon revoke certification of accountants who fail to pass an annual inspection, according to a senior Ministry of Finance official.

All certified public accountants and accounting firms holding securities licences are subject to the inspection, according to regulations jointly issued by the Ministry of Finance and China Securities Regulatory Commission (CSRC).

A mechanism would be set up to de-certify any accountant who failed the inspection, Assistant Finance Minister Li Yong revealed at a conference in Beijing.

Mr Li did not say when the de-certification mechanism would be set up, or give any other details.

The de-certification mechanism will weed out unqualified accountants from the country's already thin accounting ranks. Of China's 54,000 accountants, 48 per cent are above the age of 50, meaning they were trained under the state-planned economic system, according to Mr Li.

To compensate for the dearth of qualified accountants, the sector has welcomed foreign accounting firms.

The foreign firms are able to set up representative offices, establish joint-venture accounting firms and obtain temporary business licences. Foreign accountants can even sit for the certified public accountant examination.

However, there was no timetable for foreigners to set up wholly owned accounting firms after China joined the World Trade Organisation, said Mr Li, adding that some issues had yet to be resolved.

He expressed concern that foreign accounting firms would attract China's best and brightest talent, draining quality away from the domestic firms which already lagged far behind foreign rivals.

Regulatory bodies are stepping up efforts to intensify supervision over China's accountants after some listed companies and brokers were found to have falsified their account books.

'Many of our accountants are good at creating wealth on the books,' said Wang Jianxi, of the CSRC.

The shoddy accounting was highlighted several months ago when the mainland media exposed how A-share firm Guangxia (Yinchuan) Industry falsified more than 700 million yuan (about HK$656 million) in profits. The Ministry of Finance later revoked the operating licence of Guangxia's accounting firm, Zhongtianqin.

Premier Zhu Rongji, in a recent speech to China's National Accounting Institute, called false accounting a cancer capable of bringing down the mainland economy.



Regulators could revoke certificates of shoddy operators