Internal & external audit services in China.

Acclime’s high standards ensure reliability for investors, government agencies, and the general public that seek to rely on an external auditor to present an unbiased and independent audit report.

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Fortify and optimise your business operations.

Ensured reliability

Acclime’s accountants, overseen by our in-house financial experts, have high international practice standards adopted through years of experience that ensure reliability for investors, government agencies, and the public.

Systematic approach

Acclime’s professional auditors bring a systematic and disciplined approach. An internal audit report will evaluate and improve the effectiveness of risk management, control, and governance processes in your operations.

Custom solutions

Our audit services are tailored to your company’s needs, working in accordance with your business goals. We provide a meticulous audit report which will identify economic benefits and risks, and fortify the company operations.
Internal & external audit

Our audit services.

External audit.

  • China statutory audit

    Our team at Acclime is highly experienced and able to handle all aspects of the PRC statutory audit report compliance and filing including:

    • Conducting a statutory audit in accordance to Chinese Auditing Standards over the financial statements prepared under PRC GAAP.
    • Preparing a CIT computation, including issuing of tax report, for the purpose of an annual CIT filing.
    • Performing an online submission using audited financial figures to SAFE and SAIC.
    • Optionally, in addition to issuing of the audit report in line with Chinese regulations, Acclime can also deliver reports in accordance with other international accounting standards, such as IFRS, US GAAP or the German HGB as well as the additional management letter as required.

  • US GAAP audit

    Our qualified accountants have a broad knowledge of the GAAP and determine with confidence whether the accounting records are both accurate and complete. They will explain the similarities and variances across the US GAAP, IFRS and any other country’s GAAP that may be required. Their comprehensive knowledge of different regulations in the US GAAP Audit, inventories, deferred taxes, equity and ratios will ensure compliance and could lead to increased efficiency and profitability for the company.

  • IFRS audit

    Acclime is proficient in the most up-to-date IFRS methods and we take pride in our consistent and quality application of IFRS Audit standards and our capability to apply our knowledge to those organisations transitioning. Furthermore, our experts can explain and provide you examples of the differences between IFRS audit and any other country’s GAAP and the application of these to your business.

    In addition our experts are aware of different regulations in IFRS auditing (presentation of financial statements, consolidation statement, fixed & intangible assets (goodwill, for example), inventories, deferred taxes, equity and ratios) that could make a difference concerning your company’s revenue and profitability.

  • Hong Kong audit

    If a company is incorporated in Hong Kong, its financial statements need to be audited by a registered Hong Kong Certified Public Accountant. The Hong Kong Institute of Certified Public Accountants is the only licensed entity able to register and certify public accountants in Hong Kong. The institute consists of more than 35,000 members, which are given the ‘certified public accountants’ (CPA) title.

    The registration of a firm as a CPA is managed by sections 28A to 28C of the Professional Accountants Ordinance and Professional Accountants by-laws 28 and 29. Acclime is proud to have fulfilled all the requirements in order to be included in the list of Hong Kong certified public accountants firms.

    Acclime’s team of professionals in Hong Kong are open to you, and along with offering certified and highly skilled guidance, we can also offer a broad understanding of Mainland/Hong Kong mutual interaction thanks to our nation-wide practice.

Single time- or project-based fee

Internal audit.

  • Internal audit & assurance report

    An Internal Audit in China evaluates internal controls within a business, analysing the degree to which it reaches its core objectives. The internal audit report can provide management-independent guidance for operations control, risk and corporate governance. Internal Auditing is useful for risk committees, boards, operational managers and the chief executive of an organisation. The audit report will evaluate and improve the following processes:

    • the effectiveness of risk management
    • control systems and procedures
    • corporate governance and compliance
    Our qualified auditors can provide an unbiased Internal Audit service that complies with the standards of the IIA (Institute of Internal Auditors) and business performance assessments. Our Internal Audit report assesses the efficacy and efficiency of company activity, the reliability of financial reports, compliance with regulatory laws, and safeguarding of company assets.

    All firms listed on the Shanghai and/or Shenzhen stock exchanges must produce an annual report on the effectiveness of their internal auditing.

    At Acclime, customised internal auditing services analyse the internal processes, ambitions, management systems and risks unique to your business. The conclusive audit report highlights areas of improvement and recommends steps to help your organisation progress.

  • Fraud investigation & forensic accounting

    At Acclime our Forensic Accountants take the complex transactions and data and represent them in an unbiased report that is easy to understand in order to make a possible litigation process smoother.

    In Forensic Accounting it is important to look beyond just what the numbers say. Our professionals at Acclime are trained to look at a situation and analyze the business in order to understand the reality of the situation. This carries over into the courtroom when we are able communicate not only the important financial information, but also an elaborate explanation of the business model.

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Special purpose audit.

A special purpose audit may be required in order to bring a Chinese entity into compliance with a company’s group policies or quite simply to evaluate the overall operating efficiency of an organisation. At Acclime our approach is tailored to meet the needs of any business that requires auditing and assurance on financial performance and operations. Our team will help solve problems and clear any uncertainty that you may have with accountancy practices in China.

  • Royalty audit

    A Royalty Audit is greatly different to a financial statement audit. Financial statement audits focus on thresholds deemed relevant to the acceptable accuracy of overall financial statements. These statements are often used to compare with other companies for purposes such as stock trading. Royalty Audits, however, identify real (earned) money the company should be receiving or paying. The tasks include, but are not limited to, reviewing minimum guarantees to verify accuracy, securing and reviewing accounting records including sales data, royalties, inventory, prior audit reports, etc.

  • Capital verification audit

    For Foreign Invested Enterprises (FIEs), upon injecting capital, be it cash, intangible or tangible assets, a capital verification report needs to be delivered to the Administration of Industry and Commerce (AIC) and other official bodies. These audits verify that the amount of money a company says has been invested into it is the amount that they actually have received. We provide a diligent and honest report to lend legitimacy to the company’s claims.

  • Foreign currency audit

    Acclime’s accountants have experience dealing with foreign currency businesses and have the tools and knowledge necessary to keep up with the fluidity of the currency exchange market when evaluating a business’ assets. We prepare an audit program tailored to the specific needs of the foreign currency operations that are appropriate for the given business model.

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FAQ

Common questions.

What are the auditing requirements in China?

In Western countries limited liability companies are generally subject to an annual audit carried out by independent external auditors whose role is to express an objective opinion on the truthfulness and fairness of the financial statements.

In China, auditing is not a legal requirement but is required under the regulations. Prior to the introduction of the ASBE, the primary objective of auditing in China was to carry out inspection on the financial records of a business to ascertain their accuracy and legality (i.e. whether the transactions conducted complied with relevant state laws and regulations). Auditors in China are concerned with protecting the legal interests of the company as well as the interests of the state. Only with the implementation of the ASBE were the concepts of true and fair presentation introduced.

Prior to 2000 financial statements of state-owned enterprises were not required to be audited annually by independent auditors, but periodical or social audits conducted for the purpose of ascertaining the enterprise’s tax liabilities or other purposes might be conducted by the State Audit Bureau or Tax Bureau. Since 2002, except for a few types of specialised industries that have been explicitly exempted, all other state-owned enterprises must be audited at least annually. In addition, the regulations governing the accounting of joint stock companies and foreign investment enterprises require these companies to be subject to annual audit carried out by a registered Chinese certified public accounting firms. When reporting on whether the financial statements of foreign investment enterprises are prepared in accordance with the relevant laws and regulations, auditors may make reference to the following main laws and regulations:

  • The PRC Sino-foreign Equity Joint Venture Law (EJV Law) promulgated by the National People Congress (NPC), effective July 8, 1979 and revised March 15, 2001
  • Implementing Regulations of the EJV Law promulgated by the State Council (SC), effective September 20, 1983 and revised July 22, 2001
  • The PRC Sino-foreign Cooperative Joint Venture Law (CJV Law) promulgated by the NPC, effective April 13, 1988 and revised October 31, 2000
  • The PRC Wholly Foreign-Owned Enterprise Law (WFOE Law) promulgated by NPC, effective April 12, 1986 and revised October 31, 2000
  • Implementing Rules of the WFOE Law promulgated by SC, effective December 12, 1990 and revised April 12, 2001
  • The PRC Small and Medium Enterprises Law (SME Law) promulgated by NPC and effective June 29, 2002 and revised October 18, 2011
  • Regulation on the implementation of Enterprise Income Tax Law of the PRC promulgated by NPC and effective January 1, 2008.
What is the format and content of an audit report?

The audit report normally contains an introductory paragraph, a management’s responsibility paragraph, an auditor’s responsibility paragraph and an opinion paragraph. The introductory paragraph sets out the areas covered for auditing; the management’s responsibility paragraph sets out the preparation and fair presentation of financial statements; the auditor’s responsibility paragraph sets out the principal audit work and procedures carried out and the results. The opinion paragraph sets out whether the accounts have been prepared in accordance with the relevant laws and regulations. Any reservations in the opinion need to be elaborated on.

In some instances different government bureaus may stipulate their own requirements as to what certified public accountants should give their opinion on. Sometimes these additional requirements have not been agreed by the Ministry of Finance or the CICPA and fall beyond the expertise of what is normally expected of a certified public accountant. In some circumstances these requirements issued by other government bureaus have been retracted.

What role does the professional auditor play in national economic activities?

Only very recently has the impact of accountants or auditors on national economic activities become more apparent. By virtue of the PRC Accounting Law promulgated in January 1985, the function of certified public accountants in carrying out audits was established. This law has now been superseded by the PRC Registered Accountant Law which became effective January 1, 1994.

Following the setting up of the Chinese Institute of Certified Public Accountants in 1988, the status of certified public accountants and professional accounting firms in society received a major boost. In China some accounting firms are direct functional units of certain government bureaus. Although other professional accounting firms are not direct functional units of any government departments, many of them are still financially dependent units and require approval from the State to conduct their business as certified public accountants. In 1998 the State Council set forth regulations that require certified public accountants to be independent from any government bureaus. Many professional accounting firms have transformed (or are in the process of transforming) in order to operate the form of sole proprietorship or partnership with unlimited liabilities.

In December 1988 the Ministry of Finance promulgated the Auditing and Certification Regulations (Provisional) which sets out the roles of certified public accountants, audit scope and procedures and the requirements for maintaining audit working papers. From 1995 to 1996 four General Independent Auditing Standards – Basic Standards, Quality Control, Continuing Education and Ethics were issued. New specific auditing standards applicable in March, 2006 were also promulgated, which complete and clarify the provisional regulations and general standards. In 2010, in order to move forward to be more convergence with International standards on auditing, a revised thirty-eight specific auditing standards had been promulgated. So far, forty-eight specific auditing standards have been issued.

Does China follow international accounting practice?

China does not follow international accounting policies and guidelines, although it has been moving in this direction for a while and with its accession to the World Trade Organisation will be fully compliant within a few years. Many of the accounting regulations are the same or similar to international practice, however it is important for organisations in China to understand the differences.

Tax deductibility for instance is different and a lack of understanding of this could lead to significant tax charges on such items as intercompany transactions. China treats transfer pricing with high importance and as with many other countries it wants its fair share of the international tax pie. Meanwhile proper planning and compliance can reduce an organisation’s tax burden.

Another area where differences lie is in depreciation of capitalised assets. China specifies that companies must use the straight-line method unless they obtain approval from the Ministry of Finance for use of an accelerated method. The period over which a company may depreciate its assets also can vary to that of the holding companies own country’s accounting practice. The depreciation rates per China’s income tax law are:

  1. For houses and buildings: 20 years;
  2. For airplanes, trains, shipping vessels, machinery, mechanical apparatus, and other production equipment: 10 years;
  3. For fixtures, tools and furnishings related to production and business operations: 5 years;
  4. For transport other than airplanes, train, ships: 4 years;
  5. For electronic equipment; 3 years.

Companies therefore on the one hand need to comply with their HQ’s requirements, being usually their countries GAAP, whilst on the other hand maintain compliance with China’s rules and regulations. LehmanBrown provides assistance in setting up accounting procedures and systems to bridge this.

What is the difference between Western and China’s accounting standards?

In Western countries, although amendments and revisions to accounting practices or standards do not have legal binding power, they are formulated according to an existing national legal framework which is provided in most cases by Companies Ordinance or Acts. Companies Ordinance or Acts together with other regulations applicable to individual industries, such as the Banking Ordinance for financial institutions and Listing Rules or Securities Acts for listed or public companies, provide a framework upon which accounting professional bodies formulate accounting and auditing standards. These standards form the basis for establishing accounting principles, and perhaps conventions, that allow enterprises flexibility in formulating their own accounting policies best suited to their individual circumstances. The ultimate objective, in a nutshell, is to produce a set of financial statements that are ‘true and fair’.

Until 1994, China lacked a regulatory framework on which accounting and auditing standards could be set since the country’s first national Companies Laws were not effective until 1 July 1994. The lack of such a framework also rendered the formulation of other regulations, such as the national Securities Laws and Listing Regulations, more difficult and time consuming.

Nevertheless, having realised the need for establishing acceptable accounting principles to enable PRC enterprises to attract foreign investment or have their stocks listed on overseas markets, the MOF promulgated a separate set of accounting regulations for selected joint stock companies in January 1992.

In addition, MOF was made effective on July 1, 1993, and were the first set of accounting standards – Accounting Standards for Enterprises – applicable to all PRC enterprises. Although it might be confusing at times which accounting regulations or standards should be applied, together with the then Accounting Regulations for Foreign Investment Enterprises of the PRC, they have provided relatively uniform accounting practices for enterprises to follow in preparing their financial statements. More importantly because of the lack of a complete regulatory and conceptual framework, these accounting rules or regulations are so comprehensive that they encompass accounting concepts, disclosure requirements, accounting entries, control procedures, record keeping and some aspects of auditing requirements and liquidation.

With the introduction of the Accounting Law in 1999, the Regulations on Financial Reporting of Enterprises in 2000 and the Accounting Systems for Business Enterprises in early 2001, which harmonises the different accounting standards and regulations applicable to different enterprises, the framework of modern Chinese accounting has finally become clear. With the implementation of the Accounting Systems for Business Enterprises in 2006, accounting standards in China have become more convergent with IAS and IFRS.

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