A Quick Guide to Accounting and Audit in China 2024

AQuickGuidetoAccountingandAuditinChina2024(2ndEdition)1 AQuickGuidetoAccounting andAuditinChina2024 2ndedition Disclaimer ThiseditionofAQuickGuidetoAccountingandAuditinChina2024wasproducedbyateamofprofessionalsatDezanShira&Associates,withZhouQianastechnicaleditor.CreativedesignoftheguidewasprovidedbyNguyenHoangLinh. Thecontentsofthisguideareforgeneralinformationonly.Foradviceonyourspecificbusiness,pleasecontactaqualifiedprofessionaladvisor.Noreproduction,copyingortranslationofmaterialswithoutpriorpermissionofthepublisherispermitted. ©2023AsiaBriefingLtd. ThestartofanewyearisahectictimeforforeigncompaniesinChina.Tomeetthevariouscompliancedeadlinesscatteredthroughouttheyear,theyneedtobeginthelongandcomplicatedprocessoffinancialreporting,monthsinadvance.Failuretocomplywillriskthembeinghitwithdeterioratingcredit,additionalfinesandpenalties,andsuchcompaniesmightnotbeabletoremittheirprofitsoverseas. Withbusinessesoperatinginagrowingvolatile,unexpected,complex,andambiguous(VUCA)world,financialhealthandcompliancehasbecomemoreimportantthanever.Moreattentionshouldthusbegiventotheauditandcomplianceprocedurestorevealunexpectedirregularitiesorsuboptimalbusinesspractices,discovereligibilityfortaxincentivesthathadnotpreviouslybeencaptured,aswellasmaximizeefficiencywithintheorganization. ChinaBriefing’sAQuickGuidetoAccountingandAuditinChina2024(2ndEdition),producedincollaborationwiththeauditexpertsatDezanShira&Associates,aimstowalkforeignbusinessesthroughtheannualauditandcomplianceprocessfromstarttofinish,inadditiontointroducingChina’saccountingframeworkinacomparativecontext.WehopethisguidehelpsyourbusinessaddvaluetoitsannualstatutoryauditandcompliancereportinginChina. Ifyouandyourcompanywanttolearnmoreabouthowtogetreadyfortheannualauditandcompliance,youarewelcometogetintouchwithDezanShira&Associates.Formoreinformation,pleaseemailusatChina@dezshira.com. SABRINAZHANG Partner DezanShira&Associates CONTACT DezanShira&Associateschina@dezshira.comwww.dezshira.com Inthisyear’supdatedversionofAQuickGuidetoAccountingandAuditinChina,therearenotablechangesthatrequireyourattention: •RecalibrationofBusinessEnvironmentAnalysis:InlightofChinareopeningitsbordersandeasingCOVID-19restrictionsatthebeginningof2023,theprimaryconstraintsforbusinesseshaveshifted.Thepandemicisnolongertheforemostchallenge.However,withtheChineseeconomy’sunevenrecovery,increasinggeopoliticalrisks,andevolvingtaxanddatacomplianceregimesbothdomesticallyandglobally,companiesnowoperateinamorecomplexenvironment.Consequently,wehaveremovedspecificconsiderationsrelatedtotheCOVID-19pandemicfromtheguideandincorporatedananalysisofthecurrentbusinessclimatewherenecessary. •IntroductionofProposedPersonalInformationProtectionAudit:2023witnessedsignificantadvancementsinbusinessdigitalizationandthedevelopmentofdatalaws.InAugust,theChinaCybersecurityAdministrationproposedanewsetofmeasures,mandatingcompaniesprocessingpersonalinformationofindividualsinChinatoundergoregularcomplianceaudits.Toprovideacomprehensiveoverview,wehaveaddedabriefintroductiontothisproposedpersonalinformationprotectionauditinthe“OtherTypesofSpecialPurposeReviews”section. •AdditionofSpecialTaxInvestigationonTaxAvoidanceArrangements:Asjurisdictionsworldwideintensifyeffortstosafeguardtheirtaxrevenue,Chinaisnoexception.Incasesofunjustifiabletaxavoidancearrangementslackingeconomicsubstance,Chinesetaxauthoritiesmayinitiatespecialtaxinvestigations.Wehaveincludedageneraloverviewofthespecialtaxinvestigationprocessinthe“OtherTypesofSpecialPurposeReviews”section,alongwithpracticalsuggestions. •InclusionofRelatedReadingMaterials:Toenhancereaders’understandingofaccountingandauditinChina,wehaveincorporatedmultiplerelatedreadingmaterialsintocorrespondingchapters.Theseadditionalresourcesprovidebackgroundinformationordetailsonrelevanttopics,enablingreaderstodevelopamorecomprehensiveunderstanding. DezanShira&Associatesisapan-Asia,multi-disciplinaryprofessionalservicesfirm,providinglegal,taxandoperationaladvisorytointernationalcorporateinvestors.OperationalthroughoutChina,IndiaandASEAN,ourmissionistoguideforeigncompaniesthroughAsia’scomplexregulatoryenvironmentandassistthemwithallaspectsofestablishing,maintainingandgrowingtheirbusinessoperationsintheregion.Withover30yearsofon-the-groundexperienceandalargeteamoflawyers,taxexpertsandauditors,inadditiontoresearchersandbusinessanalysts,weareyourpartnerforgrowthinAsia. OurServices >Accounting >AuditandFinancialReview >BusinessAdvisory >BusinessIntelligence >CorporateEstablishmentandGovernance >DueDiligence >HRandPayroll >IntellectualProperty >MergersandAcquisitions >OutboundDirectInvestment >RiskManagement >Tax >Technology Preface03 What’sNewinThisGuide04 Part1|Chineseaccountingstandards08 WhataccountingstandardsareadoptedinChina?NewchangesmadetoCASinrecentyearsDiscrepanciesbetweenCASandthetaxlawsDifferencesbetweenCASandIFRS Part2|AnnualauditinChina 10 12 16 21 26 Whyisannualauditimportant?28 Whatdoestheannualauditinvolve?30 Howtoprepareforaneffectiveannualaudit?32