Three days technical training, basically talking about the difference between IFRS and new China GAAP - Accounting Standards for Business Enterprises ("ASBEs"). The ASBEs cover nearly all of the topics under the current IFRSs literature and will become mandatory for listed Chinese enterprises from 1 January 2007. Most of my clients are banks and insurance companies under the supervision of China Bank Regulatory Commission (CBRC) and China Insurance Regulatory Commission (CIRC), and are required by the regulators to apply ASBEs from 1 January 2007 as well. The firm has developed a brochure of "A comparison wit current PRC GAAP and IFRS" which is very helpful.
The training also talked about audit quality. The facilitator mentioned as the cost of criminal in China is low, there are various illegal or unethical behaviors existing. Increase our professional skeptism is very important. He mentioned one case which was really made me eye open:
One entity had a building in progress on the book. The auditor reviewed the project plan, went to the construction site of the building, walked around and also talked to the reponsible person. Everything looked OK. On the 2nd year, the building in progress was still on the book. The auditor went to the location again and found out that the building was not really belonged to the entity. The auditor could not figure out that in the prior year, how the entity could arrange for the tour of the construction site and where the "responsbile person" was from.
There are also some other cases mentioned, especially on the confirmation controls. e.g. the accounting clerk from the entity has good relationship with the employee in the bank and could obtain whatever bank confirmation agree to the number of the entity's book; or some of the addresses of the confirmation were actually fake; or the chops/stamps on the confirmation were made by radish... ... The national quality team required us to check the confirmation address one by one, which brought the clamour from the audience.
As required by the local regulator, we are also required to have all the working paper in Chinese. Most of the audit packs we use are still in English. Similar as in Toronto, the most updated pack is the manufacturing industry pack, which is bilingual in China. For banking and insurance, we use HK and US packs which are not available in Chinese. I could just say translation and review of the translation are not easy jobs, - especially to me. As I learnt Accounting in Canada, I don't kown a lot of terms in Chinese. Not only to me though, I saw people from US, UK, Italy etc. in the training room. And of course, there are a lot of people from Hong Kong who are more comfortable to communicate in Cantonese (vs. Mandarin) and Traditional Chinese (vs. Simplified Chinese).
My partner H and my mentor L are from HK as well. Both of them could speak good Mandarin and English. There are internal policies of manager's utilization and $$$ portfolio, the same as in Toronto I guess. H assigned me about 27 jobs at once, most of them are branches of foreign banks and insurance companies. Although some of the jobs are not big, but it is 27!!!! "You don't feel itch while there are so many lice." I told myself I have no fear.
Oct. 13th.
The managers & partners of FI group had a lunch gathering today. Most of them only come back for training in these three days and would leave for engagement to different provinces again next week. Totally we have about 12 people, can't compare with FI group in Toronto:) Due to the big new engagement, one manager need to be in charge of the audit of several branches in different provinces. They call themself the "captain of the air group" cos' they need to lead the team fly to different locations all the time. However, all of them looked happy and full of vigour. They told a lot of funny things, e.g.
- sometimes the auditor selected a sample of loan from a mountain subbranch, a person need to ride a horse and then take a bus, then take a train, and send the loan file to the auditor to review;
- in some places, people think the auditors are from the government supervison bureau, and come to report all kinds of stuff (maybe a good thing for us I think);
- and last but not least, a guy came to the auditor's hotel to commit suicide. He got laid off due to the whole department was disposed. He thought it was suggested by the auditors.
Finally I got my system account set up. I got first email from a good friend from Toronto, which made me happy all day.
I got caught at about 6pm to help to reivew one of the audit file of one branch of the above mentioned big engagement. I found the quality, especially the documentation of the file was not satisfied. As a reviewer, I always could not understand the purpose of the testing, where the samples were selected and the methodology of the selection. From the review, I also identify that I need to develop my knowledge on the requirements from the local regulators, CIRC & CBRC for example. As the engagement is so called "Statutory Reporting", which should comply the requirement of the regulators. E.g. all the loans should be classified as one of the five classes as per CBRC.
When I left the office, it was all dark. The office building is beautiful in the evening. And the buildings along the Bund looked splendid.
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