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Accounting

Cautious optimism over China trades

by Mariejean Li

Patrick Rozario, principal business risk services
Grant Thornton Hong Kong
Photo: Johnson Poon

Professional advisory services help keep business risks at bay

International trade and investment are providing ongoing impetus to economic growth on the mainland and at the same time helping to enhance the rising economy's prospects by introducing stringent business regulatory concepts.

While the mainland presents investors with a wealth of business opportunities, growth industries within the region are calling for expertise in business risk to clear obstacles and pave the way to further business success, says Patrick Rozario, principal of business risk services, Grant Thornton Hong Kong.

By offering clients a thorough evaluation of their internal business controls and providing recommendations, Grant Thornton Hong Kong assists in the successful development of business strategies and determining companies' financial value, as well as helping to ensure profits and staying power in a competitive market. "Our capability to document, walk through, evaluate and test the effectiveness of controls are extremely important for a business' overall success," Mr Rozario remarks.

Get in on the act

Several factors have contributed to the optimistic outlook on trade with China. "In the meantime, institutional infrastructure elements such as a well-defined legal system, strict law enforcement and well-functioning financial markets are quick to take shape," says Mr Rozario.

While it is important that a higher level of corporate governance is developed, China has in recent years been following global trends to develop good corporate governance practices and a regulatory framework to upgrade accounting practices and increase accountability to company stakeholders. This follows the US' adoption of the Sarbanes-Oxley Act (SOX) which aims to strengthen auditor independence, improve internal control requirements with respect to financial reporting; and independently oversee the audit profession through the creation of the non-profit statutory Public Company Accounting Oversight Board (PCAOB).

By the end of 2005, a string of revised laws and regulations following a rules-based approached were pushed forward to form China's very own "SOX". In particular, the Company Law of the PRC and the Securities Law of the PRC (known as the Two Laws) were revised and made effective from January 2006 to oblige listed and unlisted corporations to abide by the detailed requirements and responsibilities to their stakeholders. Mr Rozario's role at Grant Thornton Hong Kong is to help interpret and develop practical applications for the respective compliance needs.

Good and ready

Along with the China SOX, Shanghai Stock Exchange and Shenzhen Stock Exchange have also adopted detailed guidelines, respectively the "Shanghai Stock Exchange Guidelines for the Internal Control of Listed Companies" and the "Shenzhen Stock Exchange Guidelines for the Internal Control of Listed Companies", for more comprehensive, reasonable and effective internal control systems.

Companies listed on the two stock exchanges are required to implement these guidelines, under which directors and audit committees now bear a greater legal onus to be accountable to stakeholders. Furthermore, an evaluation of internal control systems, and an attestation of the effectiveness of its system of internal control have been made mandatory requirements. Companies and their signing partners performing this audit are held accountable for the opinions they provide. This poses as a challenge, yet also excellent opportunities to audit firms and audit practitioners at large.

Amidst these challenges, the emerging mainland economy continues to offer exciting international opportunities. Investors are keen to seek professional advice and compliance support from business risk professionals such as Mr Rozario, in order to achieve operational efficiency and compliance with mainland regulations, and to gather reliable financial information.

"The more stringent rules and regulations, along with political and social stabilities, will only encourage more foreign investors to flock into the China market," Mr Rozario says.

As the demand for business risk services in China continues to soar, Grant Thornton Hong Kong plans to expand its services over the next year with the addition of offices in Beijing and Shanghai. Mr Rozario notes, "Candidates with excellent communication skills and a desire to enter the field, from any major disciplines are always encouraged to apply."


 

Taken from Career Times 31 August 2007

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