Meaning
Legislative frameworks in the People’s Republic of China establish the fundamental rules for financial reporting, daily bookkeeping, internal auditing and the supervision of accounting practices. The prc accounting law provides the basis for the national unified accounting system which all enterprises and government organs must follow.
Regulatory Oversight
The Ministry of Finance holds the authority to administer the regulations and issue detailed implementation guidelines. Under the prc accounting law, the head of a unit is legally responsible for the truthfulness and completeness of the accounting information. This creates a direct line of liability for company executives regardless of whether they personally performed the bookkeeping.
Penalties for falsifying records or maintaining secret accounts can include administrative fines or criminal prosecution.
Standardization Requirement
Enterprises must use the Chinese Renminbi as the functional currency for their books and records. While a foreign currency can be used for daily transactions, the prc accounting law mandates that the final financial reports be prepared in the local language and currency. Accounting vouchers and ledgers must be kept in accordance with the prescribed formats and retention periods.
This consistency allows the state to monitor the financial health of the economy through aggregated data.
Audit Process
Statutory audits are conducted by certified public accountants to verify that the financial statements comply with the legal requirements. The prc accounting law ensures that auditors have the right to access relevant documents and interview personnel. If an auditor discovers illegal acts, that individual is required to report these findings to the relevant authorities.
This oversight mechanism protects the interests of investors and the integrity of the tax system.
