Regulation of Business Organizations in a Socialist Market Economy
Chapter 10: Financial affairs, accounting, and profit distribution
The Company Law largely leaves other laws to regulate a company's internal financial and accounting affairs. Article 164 provides that 'a company shall establish its own financial and accounting systems in accordance with laws, administrative regulations and rules of the treasury department [Ministry of Finance] of the State Council'. China's accounting system underwent revolutionary changes during 1992-2002, moving basically in the trend to converge with international accounting standards. The China Auditing Standards for CPA issued by the PRC Ministry of Finance in 2006 marked China's full embracing of the international best practices on accounting and auditing. As the CSRC notes, These new auditing standards cover almost all items of international auditing criteria … [They] are based on the structure of international auditing standards and cover nearly all of its items. They adopt all the basic principles and core procedures of the international standards. Major aspects such as the auditing objective and principle, evaluation and risk management, access to auditing evidence and evidence analysis, drafting and report of auditing conclusions, as well as formulation of professional responsibilities are in conformity with international auditing standards. In addition, a few provisions in Chapter 8 of the Company Law (entitled 'Financial Affairs and Accounting of Companies') emphasize the company's obligations to report and disclose information, some of which are also provided in other parts of the Company Law as well as in the Securities Law.
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