What Are Equivalent Units of Production?

Equivalent audit is a document signed by Wang Jun, Secretary General of the China Accounting Standards Committee and Chairman of the Auditing Standards Committee, and Fang Zhong, Chairman of the Hong Kong Institute of Certified Public Accountants on December 6, 2007.

Equivalent audit

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Equivalent audit is a document signed by Wang Jun, Secretary General of the China Accounting Standards Committee and Chairman of the Auditing Standards Committee, and Fang Zhong, Chairman of the Hong Kong Institute of Certified Public Accountants on December 6, 2007.

After a year of operation in the domestic market and initial approval, CAS and the Chinese accountant industry have also begun to consider going global. On December 6, 2007, Wang Jun, Secretary General of the China Accounting Standards Committee and Chairman of the Auditing Standards Committee, and Fang Zhong, Chairman of the Hong Kong Institute of Certified Public Accountants signed the Joint Statement on Equivalent Accounting Standards for Mainland Enterprises and Hong Kong Financial Reporting Standards (HKFRS) "," Joint Statement on Equivalence between Mainland Auditing Standards and Hong Kong Auditing Standards. "

According to the spirit of the equivalent statement, in the future, companies listed on the other party s stock exchange are expected to no longer fully convert and issue complete financial statements in accordance with the other party s financial reporting standards. Instead, they only need to prepare individual financial statements after preparing financial statements in accordance with local accounting standards. Make explanations or prepare reconciliations for very few items. At the same time, listed companies can also hire only accounting firms with local qualifications to issue audit opinions in accordance with local auditing standards.

Zhou Zhonghui, chief accountant of the Securities and Futures Commission, told reporters that in the future, if it can further achieve equivalent accounting and auditing with the European Union and the United States, it will greatly benefit other countries and regions to recognize China's market economy status.

However, the accounting and auditing equivalence between the Mainland and Hong Kong is still only at the level of the accounting associations of the two places and has not been accepted by the securities regulatory authorities of the two places. It is reported that the two accounting associations are actively coordinating this. According to industry analysis, the securities regulatory authorities of the two places have not yet recognized the above equivalent measures, and investors' interests may be considered first. For example, can investors accept financial statements prepared in accordance with Mainland standards and audit opinions issued by Mainland accountants, how to judge and reasonably value financial indicators of enterprises applying the two accounting standards and auditing standards, and so on. It is expected that the securities regulatory authorities of the two places will further discuss the above issues and develop guidance.

Although the Hong Kong securities regulatory authorities have not yet recognized equivalent measures, some companies have told reporters that once the policy allows them, they will consider hiring a domestic accounting firm with lower costs and easier communication, and issue audit opinions under Mainland auditing standards. In response, some local CPAs in Hong Kong have expressed concerns about future business development.

From a practical point of view, compared with local firms in Hong Kong, international accounting firms in the country may be more affected. At present, the audit work of Mainland companies going public in Hong Kong is mainly undertaken by four major international accounting firms (hereinafter referred to as the Big Four) including Pricewaterhouse, Ernst & Young, KPMG, and Deloitte. A convenient factor of the Big Four is the establishment of branches in both the Mainland and Hong Kong. It is possible to adopt a work method in which a certified public accountant qualified in Hong Kong is responsible for the project and signing, while the employees of the Mainland branch perform specific auditing work. Audit fees are generally 2-10 times higher than those of local accounting firms. If companies consider cost reduction factors, local accounting firms will be attractive.

However, Zhou Zhonghui believes that at present, local accounting firms have inadequate experience in overseas markets, and they do not have the ability to solicit overseas audit clients on a large scale in the short term.

Chen Yugui, Secretary General of the Chinese Institute of Certified Public Accountants, said that in the future, the Chinese Institute of Certified Public Accountants will use five to ten years to develop and cultivate about 100 accounting firms of a certain size that can provide comprehensive services to large enterprises and enterprise groups. About ten international firms can serve Chinese companies' global strategy and provide comprehensive services for multinational operations