The first Certified Public Accountants (CPA) institute was founded in Shanghai in 1925. But in 1956, when the thrust was on centrally-planned economy, all CPA firms were dissolved.
Under the command economy, accounting and auditing were mainly limited to SOEs or public sector budgeting, states the book.
"There is a need now to change the mentality to fit the rapidly-growing new economy, and to train new staff to fill the gaps as privatisation takes place and private sector companies move to the forefront as employers and centres of growth and change."
After a gap of more than three decades, there was a revival of the profession in 1981, soon after the Ministry of Finance issued `Interim Regulations about Establishing Accounting Consulting.'
In July 1986, came the `Rules for CPAs' that gave legal status to professional accountants.
More than a decade later came the independent auditing principles. "In 2001, the CPA, tax, and asset valuation were unified into a single industry administered by the China Institute of Certified Public Accountants (CICPA)," informs the publication.
There are six ways to enter the accounting market, you'll learn.
These are: Establishing a member firm, establishing or a cooperative firm with a Chinese company, setting up a representative office, applying for a temporary licence to practice, taking the CPA exam, or applying for CPA registration. "Cooperative firms jointly run and owned by the Big Four and Chinese firms are only 1 per cent of all CPA firms, but they earn 16 per cent of total sector revenues, and provide audit services for all 127 listed companies that issue B, N, and H shares.
Their clients include 80 per cent of the MNCs and international financial groups."
Bulk of the revenue for top firms is from "services to listed companies and foreign invested companies."
However, to provide such services, the accounting firm must get a special licence from the government. The typical CPA firm is small.
"It is rare to find a local CPA firm with more than 100 people and over RMB 10 million in revenues," says the book. Size impacts their capacity.
"Over 90 per cent of sector revenues come from audit services. Other related markets such as accounting, consulting, tax services and management consulting have not yet been exploited," analyses the study.
The China National Audit Office (CNAO) was established in 1983. "The Audit Law 1994 governs auditing and defines the basic principles for government auditing."
The book discusses the changing legal environment, entry of China into the WTO, and market prospects.
The future, forecasts the book, will see more mergers of CPA firms, rapid development of partnership firms, emphasis on consulting, launch of overseas practices, and standardisation.
Don't miss the history lesson where the book recounts that the earliest Chinese double-entry book-keeping method, dating back to mid-17th century, was called Dragon Gate.
In this method, there were four categories of accounts: "Revenues (jin), Expenditure (jiao), assets (cun), and Claims on assets (gai)." Shou and fu were labels for debit and its counterpart.
A rudimentary form of auditing emerged in China about 3,000 years ago.
Song Dynasty employed a `royal court auditor' in 992 AD.
"Accounting is the world's `business language'.
There is significant potential for further developing accounting services as China's professionals learn advanced skills and build-up sector experience," declares the book. Will we soon have
Chinese firms much like the ubiquitous Chinese eat outs?
As if to confirm such fears, a posting on www.financialdirector.co.uk states that the Indian government is considering allowing foreign accounting firms to conduct audits in India, "a privilege that has so far been reserved for accountants or partnerships registered with the Institute of Chartered Accountants of India."