A Study On Regulation Of Chinese CPA Industry

Accompanying with a series of significant accounting frauds cases of international and domestic listed companies, such as the Microsoft, IBM, GE, certified public accountant (CPA) industry is confronted with the unparalleled crisis of confidence. There exists serious financial fraud such as manipulation of profit, fictitious transactions in several industries. The capital market commotion has accelerated the USA financial crisis penetration to the world. The international community faces a new topic that is how to reinforce and perfect governmental control of CPAs and to increase its social trustworthiness.Currently, our country is in the economy-rotating period, so accounting services has low level of market mechanism degree. Because of all sorts of factors, such as faulty legal system and the mal-position government function, we have to pay much to regulate the CPA industry, but get low efficiency.Government had intensified regulating dynamics on CPA industry since a series of accounting fraud cases such as Enron event happened. The Ministry of Finance, who called back the principal of regulating-power to CPAs in October 2002, reinforced further regulation to CPA industry. However, considering public ratification degree of society in CPA industry and its self-discipline, the situation is not optimistic. Today the service quality of CPAs still has to be improved. Otherwise, it will initiate negative influence on the development of capital market. And it brings force questions to governmental regulations on CPA industry.For this reason, it is necessary to start research on current regulating style of CPA industry. Leading to a fast and healthy growth of the industry, we should build a new mode, which is adapted to the situation of China. The core problem we cannot avoid is how to regulate the industry at the lowest cost, and get the best efficiency.This dissertation, beginning with the supply -demand relationship, using cost-benefit analysis method, researches on the regulation theory and regulating mode of CPA industry, and proposes countermeasures. Our target is to rationalize the relation between government regulation and self regulation under the realistic regulation mode. So we have to manage the relations between governmental regulation and self regulation first. Then make clear the respective function branches of the government, the dominant position of government regulation department in industry regulations, the function of the industrial association allocation and its punishing rights. The last and most important one is that all the department should coordinate effectively. The study has important significance theoretically and practically.The target is to improve the governmental ability to regulate, to raise the social trustworthiness up, and to initiate the CPA industry developing faster continuously. Considering about the national condition, that our country is building the socialism market economy with Chinese characteristics, and using cost and profit analysis, the independent regulating pattern is the best choice. But thinking about the economy rotation of China, we cannot choose this pattern at once. Consequently, the mixed mode, taking governmental regulation as the primary measure and ego regulation as subsidiary ones, is reasonable and practical.This dissertation has six sections. The first one: introduction. It includes the background, the significance, the literature summary, the aim, the means, the main technology route and the innovation and the deficiency.The second section: the basic theory. It introduces the cost-benefit analyzing method and fundamental regulation theory. This section does basic work of the theoretical research, and also leads to other sections'research.The third section is research on regulating mode of CPA industry. It analyzes the character of CPA industry, all the factors which affect the demand or supply of CPAs, and does research on the supply and demand balance under different competitive market conditions. According to the cost and profit principal, the conclusion is that governmental regulations should concentrate on revealing the accounting information. Then establish the cost-benefit model of administrative control and self-control of CPA by using cost-benefit analysis method and econometric knowledge.The fourth section is a contrastive study of the historical evolution routines among the Continental Law System countries, the Anglo-American Law System countries, and China. Obviously, each country has chosen a certain regulating mode, which is just suitable for itself. According to the analyzing the characteristics of three modes of CPA government regulation, industrial regulation and independent regulation, we come to the conclusion that the mode oriented by government regulation and industrial regulation as supplementation is the realistic choice of Chinese CPA regulation.The fifth section introduces the situation and improvement of regulation in China. It also introduces quality and price regulating especially. The question is how to solve current problems and set up a better regulating mode later, and improve the mixed regulation mode oriented by the ministry of finance and industrial regulation as a supplement.The sixth section is the last one. It puts forward that we should perfect the governmental regulating mode which is dominated by the Ministry of Finance.This dissertation mainly adopts the comparative research approach with the methods of history and case analysis, to promote regulating economics into the research on the control of CPA. On the basis of that, it makes normative research, and applies mathematical methods to help studying. Considering the industrial character of CPA, it is necessary to regulate the CPA industry.The academic contribution of this essay is collecting the newest data information, and making a good foundation to the analysis next. Secondly, applying econometrics knowledge, it quantitatively analyzes the problem of how to combine governmental regulation and self-regulation of CPA industry effectively. The third contribution is that this essay presents new practical policies, which provide reference for the government to make decision. The forth one is constructing a basic framework of regulating mode, which is just fitting our practice. It is both the theory guidance and the operating direction. At last, the study plays a positive role in enriching and developing the regulation theory, and also driving CPA industry into a better situation.Of course, this dissertation still has some deficiency to improve. As it is difficult to obtain evidence by using cost-benefit analysis in the research of CPA regulation, we just got the corresponding theoretical model, and lacked of the quantitative analysisIt needs to obtain more data evidence to analyzing the cost and revenue of regulating quantitatively.