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Financial Audit

 

Overview of audit system in China

The audit system of China can be classified by government audit, internal audit and external audit. External audit is different from Statutory Audit and classified by optional audit. Statutory audit is limited to do by Chinese Certified Public Accountants belonged to Chinese Institute of Certified Public Accountants.

Contents of statutory audit:

  • Certification of investment
  • Financial audit
  • Taxation audit
  • Internal governance audit
  • Liquidation audit, etc.

Contents of optional audit:

  • Financial audit of head office’s consolidated accounting
  • Internal governance audit based on J-SOX
  • Audit of special items, etc.

Certification of investment

It is necessary to submit certification of investment to Tax Office and Finance Bureau. According to Articles of Association, the certification proves capital has been deposited to company. Hence, in the case of increasing capital after setup of company, it is also necessary.

Financial audit (Financial Statements audit)

Financial audit report is not only a basic material for dividend resolution by board of directors; it is but also required to receive the inspection of State Administration of Taxation and State Administration for Industry and Commerce. In China, the peak season of financial audit is from January to April with the influence of holidays of Spring Festival. Therefore, it is better to have an arrangement with head office and accounting office advance.

Taxation Audit

It is an audit certification required by some areas such as Beijing, Guangzhou for the purpose of tax declaration. It is one of the materials of yearly tax declaration materials.

Internal Governance audit (C-SOX)

It is necessary audit certification for the listed companies in China.

Liquidation audit

It is a necessary audit certification for liquidation of companies. In general, the audit of net assets conditions is necessary at the time of closing and the audit of liquidation conditions is required at the time of calculating surplus assets.

 

Contents and schedule of financial audit:

  • Combined with the audit contract, companies should make a audit plan. And based on the plan, the payment of audit will be calculated and decided.
  • The medium audit will be conducted from October to December. The purpose is to find out the problems of accounting and audit before the yearly closing. As a result, at the end of the term the audit can be conducted effectively.
  • After the closing work, the final audit will be conducted from January to April.

 

Basic Standards of Financial Audit

  • Audit standards
  • Audit review standards
  • Other assurance work standards
  • Assurance standards except financial audit and review
  • Quality management standards

To learn more about our incorporation assistance and a range of services of financial audit in China, send us a message or call us at +81-3-5369-2930.