CHINA'S new accounting regulations are an important step towards a decentralised economy, according to Hong Kong University of Science and Technology accounting lecturer Howard Gensler. In a centralised economy, accounting often was neglected as the economy was one large firm, Mr Gensler said. However, the lack of financial control and information was one reason why centralised economies performed poorly. In a decentralised economy, accounting could not be ignored because owners and managers had to exert financial control, or go out of business. In China, there are only about 10,000 certified accountants. Of these, some 8,000 are over the age of 65. China suffers from an enormous shortage of qualified accountants. Estimates for the demand for properly trained accountants range from 300,000 to one million. It was important that the accounting profession be established properly and well-regulated from the beginning, Mr Gensler said. The new regulation had all of the necessary features of a well-structured regulatory framework. The new law has seven chapters and 46 articles. It provides for entrance to the profession by examination, professional standards of conduct, ethical considerations, appellate procedures, liability, insurance, self-governance and admission of foreign accountants. The law consistently provides for appellate procedures to contest any action taken. It provides that accountants practise through firms and join the professional association of accountants. The Finance Department has jurisdiction over the industry. Applicants must meet minimum educational requirements in order to sit for the national examination, which is administered by the professional association. An applicant may be admitted upon passing the examination and completing two years of practice. Only registered certified accountants may practice accounting in China. Accountants face professional liability and must carry insurance or establish a reserve fund. Liability may be limited where a firm has five or more accountants or 300,000 yuan (about HK$265,500) in capital. Accountants must observe professional and ethical standards. Information received must be treated confidentially, no insider trading is allowed, and conflicts of interest must be disclosed. It is illegal to attempt to pressure an accountant in the performance of accounting duties. Accountants are liable for intentional misstatements, misleading statements, or material omissions. Finally, Article 44 of Chapter 7 provides for the treatment of foreign accounting firms. The Finance Department of the State Council may grant the admission of foreign accounting firms alone or in partnership with mainland firms. Also, a foreign firm may be admitted on a temporary basis. Foreigners may sit for the national examination under the principle of reciprocity.