Spreading knowledge: U.K. acc'ts to train China's CPAs

Facing a radical shortfall of CPAs in China, where the Chinese Institute of CPAs has just 140,000 members and needs roughly 300,000 to serve the needs of global capital markets, Britain's largest domestic institute of chartered accountants is implementing a radical training plan.The Institute of Chartered Accountants of England and Wales will send some 50 "elite" professionals - but the number could increase later - for intensive training that will focus on accountancy and keeping China competitive in the global market environment.

According to the ICAEW, China is eager to move towards an efficient capital market. Also, it requires foreign banks to enter the marketplace. And most important, the country needs skilled accountants and financial literacy in order to implement much-needed financial reforms.

To illustrate the country's shortfall of accountants, of the 140,000 CICPA members, only half are, in fact, practicing. To achieve the same ratio of CPAs to total population as in the U.K., China would need over 5 million CPAs.

In December, China - where the annualized economic growth rate is as high as 10 percent thus far in 2006 - announced that it would adopt International Financial Reporting Standards for its 1,200 listed public companies beginning Jan. 1, 2007.

To adopt even a diluted version of IFRS appears to be a colossal challenge. Its principles-based approach is still in the relatively early stages of application in the European Union, where listed companies started to put it into practice on Jan. 1, 2005.

China's breakneck growth stemmed from a low-wage/low-capital-investment base. With one of the world's fastest growing economies, China wants quickly to step up second-tier level activity, with its manufacturing based on a higher level of investment. And with that strategy comes an urgent need to gain the confidence of global capital markets.

The general importance given to accountancy in China, which the country intends to maintain at a high level, is exemplified by a statement from the nation's auditor general, Li Jinhua. He described auditing as "not only a kind of supervision, but also a tool in pushing ahead democratic and legal construction."

Jinhua also said, "One of the important priorities of audit work in recent years is to promote the opening of government actions - particularly actions by departments in charge of money."

It may be guessed that he has in mind the need to guard against the kind of collapse that took place in Asian "tiger" economies in the late 1990s. Big Four firm PricewaterhouseCoopers has warned of "how quickly the wheels can come off the economic juggernaut."

Plenty of teachers

On the issue of training for China's CPAs, the ICAEW is by no means alone in its plans.

Long-established in the field of training accountants in developing countries is another London-based body, the Association of Certified and Chartered Accountants. Chief executive Allen Blewitt maintained that the ACCA is predominantly the market leader in terms of international development of the profession.

"Going global is in the genes of the organization," he said. The group currently has a network of over 70 offices and active centers, and is active in more than 170 countries around the world. Their major growth was outside the U.K., with strong areas in the Asia-Pacific region, particularly in China and Hong Kong, Singapore, and Malaysia. Other strong areas were in Central and Eastern Europe - particularly Russia and the new EU accession states - the Middle East, and Africa.

In China, the ACCA has 12,000 students and 1,500 members. In Hong Kong, it has 12,500 students and nearly 17,000 members. Students and members work in all sectors, including the capital markets, an ACCA spokesman said.

To become a member, a student needs to spend three years working in a financial services background. Students may work in colleges, or at home, in their spare time. The organization, which has a record of 25 years in China, said that it is growing about 10 percent a year. Its alumni include a number of government ministers, and over 25 auditors-general. A gifted candidate might qualify in a developing country, take a job with one of the Big Four accounting firms, move to an advanced country such as the U.S., and then return to his native country at a high level.

The training of the elite organized by the ICAEW will involve members of the CICPA to lead China's development in the global capital markets, by "filling an urgent skills gap in local leadership talent." The first wave of "students" will spend one year in Hong Kong, followed by one year in London.

Eric Anstee, retiring chief executive of the ICAEW, told Accounting Today that these top Chinese CPAs would be exposed to hands-on, work-based experience in international capital markets under a Harvard-based case study scheme.

The Chinese government is contributing about $1,000 per head per year for the period in Hong Kong, and $3,250 for the period in London. This is set to cover the costs of the course, and to contribute towards travel costs. Funds are currently being sought to cover living and accommodations costs.

Anstee explained that work was currently in hand to translate a 57-page case study course into Mandarin, a task that is expected to be completed by August. They were cooperating with Wolters Kluwer, the Dutch publisher, and Pearson, the publisher that owns the Financial Times, to produce paper-based and online learning systems for the students. Anstee anticipated that the initial, limited number "will increase quite dramatically." He added: "We should eventually like to take the top 10 percent of the top sector of the profession into training in capital markets. These are the people who will be signing accounts using capital markets on a regular basis."

The ICAEW is working with a group of international chartered accountancy institutions, which is being brought together as a "global accounting alliance." Representing over 700,000 of the world's professional accountants, its aims include bringing together interests concerned with capital markets around the globe. The alliance, which gives emphasis to global education in its field, includes the American Institute of CPAs as a member. Other members include the Canadian Institute of Chartered Accountants, the Hong Kong Institute of CPAs, and similar bodies in Australia, Ireland, Scotland, New Zealand and South Africa.