2015I18-072 Report on Construction Of a Cohesive Information Technology Framework For the Chinese Accountancy Profession (Released by The Chinese Institute of Certified Public Accountants on December 9, 2011)
CONTENT The importance of IT to the Chinese accountancy profession... 2 Guiding philosophy, overall objective and construction principles... 4 Guiding philosophy... 4 Overall objective...4 Construction principles... 4 The overall IT system construction framework for the profession... 7 The CICPA s IT framework... 7 Local Institutes IT framework... 8 Large accounting firms IT framework... 8 SMP s IT framework... 8 The profession s IT system construction phases... 10 The planning phase (2011)... 10 The construction phase (2012)... 10 The applications integration phase (2013-2015)... 13 Safeguarding measures for the profession s IT systems construction... 16 Affirmative tone at the top complemented with effective organisation... 16 Ensuring proper funding for IT implementation and operation... 16 Introducing the right incentives to achieve the desired outcomes... 16 Intensifying IT training to raise competency... 16 Intensifying the promotion of IT and its benefits... 17
Information technology ( IT ) is a prominent feature in the trend of economic and social developments taking place across the world today. IT is a key driver of economic and social reforms and a major factor in enhancing productivity and realising economic transformation. For the Chinese accountancy profession, IT would increase competitiveness, boost practice development, foster the building of a professional integrity monitoring system, and drive globalisation of the profession. As a result, the Chinese accountancy profession must put IT at the forefront of its development in order to achieve a high level of performance through increased IT proficiency and applications. 1
THE IMPORTANCE OF IT TO THE CHINESE ACCOUNTANCY PROFESSION Since its reconstitution, the Chinese accountancy profession has placed great importance on the applications of IT through investing a significant amount of resources in hardware configurations, software implementations and personnel training, all of which have laid the foundation for the further development of IT applications in the profession. In terms of the overall supervision and service of the profession, the Chinese Institute of Certified Public Accountants (hereinafter referred to as CICPA ) together with local institutes of CPAs (hereinafter referred to as Local Institutes ) have established a two-tiered IT system that currently provides 7 on-line facilities to accounting firms and individual practising and non-practising CPAs, including on-line examination registration and result enquiry, on-line membership registration, on-line training, and on-line business and financial reporting. An on-line professional integrity monitoring system has also been introduced to provide information to the general public relating to recording of practice information of accounting firms and CPAs, disclosure of their integrity status, warning of violations and other relevant information. At the practice level, Chinese accounting firms have made progress in their IT system implementations. Large accounting firms have established service and office management systems, and small to medium-sized practices ( SMPs ) have implemented simpler versions of service management systems. However, there is plenty of room for improvement on the part of the Chinese accounting firms in order to measure up to their international counterparts. The current predicaments faced by Chinese accounting firms are due to the following factors: a general lack of IT awareness and knowledge; a lack of appreciation of the importance and urgency of digitisation; a relatively low usage of IT applications makes it difficult to meet regulatory requirements and service standards; IT research and development efforts lag behind international counterparts, affecting competitiveness and globalisation ambition; under-investment and frequent upgrades and revisions have resulted in slow progress in IT implementation; the level of data integration and exchange in the profession is low, resulting in a significant amount of redundant data and information; and IT operations are not properly established and maintained due to a lack of IT personnel. In order to fully tap into the opportunities and benefits brought by IT, the Fifth National Assembly of the CICPA decided on a five-year strategy to promote the creation of a cohesive IT framework for the Chinese accountancy profession with the aims to transform professional practices, overcome current developmental stalemate, and drive the profession to greater heights. As IT is already playing a crucial role in social and economic reforms, increasing the pace of IT system construction has become a priority for accounting firms to enhance their competitiveness. Accelerating the pace of IT system construction would boost accounting firms productivity, improve their standards of 2
governance and management, streamline their processes, enhance service quality, and increase client value, all of which make IT a key driver to increasing accounting firms competitiveness. From the CICPA perspective, as a professional supervisory body, accelerating construction of its IT system would greatly enhance its supervision and service of the Chinese accountancy profession. Since its reconstitution, the accountancy profession has progressed in leaps and bounds in terms of the number of professional accountants and accounting firms, as well as the scale of revenue, presenting increasing challenges to the traditionally manual supervisory approach. Increasing the pace of IT system construction would enable the CICPA to adopt innovative solutions, expand the scope of supervision and service of the profession, and optimise its processes in order to supervise and service the accountancy profession that meets the society s increasing demands effectively and efficiently. IT plays a crucial role in Chinese accounting firms realising their globalisation ambition. As relative late-comers in the modern accountancy world, Chinese accounting firms are able to take advantage of building cohesive IT systems through adopting current IT global best practises in terms of IT governance, infrastructures, applications and supports, which are particularly conducive to large Chinese accounting firms in building service and office management IT platforms that would be instrumental in realising their globalisation strategy on the international stage. Intensifying the role of IT in the Chinese accountancy profession would also contribute to the macro-economic management of the nation. It would first of all improve the quality of assurance and advisory services provided by accounting firms, which in turn increases the quality of data and information generated from these services, that then provides good quality inputs into the macro-economic statistics which would lead to a better understanding of the nation s economic performance and thus assist in the country s planning for economic growth. 3
GUIDING PHILOSOPHY, OVERALL OBJECTIVE AND CONSTRUCTION PRINCIPLES GUIDING PHILOSOPHY IT system construction should be based on maximising the accountancy profession s competiveness and ability in meeting the needs of the country and society; through optimising the supervisory framework and processes in a manner that enhances the ability to supervise and serve the profession; through intensive investment in IT infrastructures and extensive deployment of IT applications in order to raise the international standards of informatization; and through using IT intensively as the means to realise continuous management and service innovations for the benefits of the country and society. OVERALL OBJECTIVE The overall objective has been to exploit and maximise the use of IT in the accountancy profession through the establishment and operation of robust IT infrastructures, extensive deployment of IT applications, together with a high level of connectivity between IT systems and sharing of open data and information. Specifically speaking, by 2015, the CICPA and Local Institutes would have established world-class IT infrastructures and on-line platforms that provide a comprehensive range of web-based supervisory and service facilities to the profession and general public; large accounting firms would have IT systems with functionalities that match those of international accounting firms; and SMPs would have established their websites and used audit software in delivering their audit assignments. CONSTRUCTION PRINCIPLES (i) The Four Uniforms principle (a) Uniform planning: The profession should design the overall framework and plan the undertakings in a systematic manner. (b) Uniform standard: The profession should develop uniform standards for design of data exchange protocol, core applications, hardware configuration and IT personnel competency requirements. (c) Uniform structure: The profession s IT framework should consist of an integrated system where the CICPA s applications platforms serve as the core, the Local 4
Institutes applications systems serve as the hubs, and the accounting firms applications systems as the foundation. (d) Uniform implementation: Based on the planning requirements, implementation of IT systems should be carried out in an organised manner and properly appraised at key stages. (ii) The process re-engineering principle Based on an extensive evaluation of current business processes, and in the context of IT design and implementation, re-engineer business processes in a comprehensive, organised and innovative manner with the aim to ensure proper compliance with rules and regulations as well as the establishment of effective and efficient business processes. (iii) The globalisation principle The profession s IT framework should be based on international best practises in terms of concepts, governance, technology, applications, and systems, and updated at appropriate intervals in order to ensure the realisation of the profession s globalisation ambition. (iv) The differentiated guidance principle Accounting firms of different size and nature should be guided on a differentiated basis in relation to the construction of their respective IT systems. Firstly, to the extent that home country security rules and regulations are complied with, large Chinese accounting firms that are members of international networks may either adopt their international networks IT systems or develop IT systems that emulate those of their international networks. Secondly, other large Chinese accounting firms that are authorised to provide securities and futures related assurance services may either adopt world-class IT systems recommended by the CICPA or develop its own world-class IT systems. Thirdly, SMPs should adopt world-class IT systems selected and recommended by the CICPA. (v) The inter-connectivity principle The construction of IT systems within the profession involves those of the CICPA, Local Institutes, large accounting firms and SMPs. As a result, it is imperative that, through mutual cross-validation, these IT systems maximise their inter-connectivity in terms of hardware and software as well as optimise data exchange with the aim to creating an open system with minima data redundancy. (vi) The joint initiative principle 5
The profession s success in constructing a world-class IT framework is dependent on mobilising the active participation of its constituent organisations. In particular, the CICPA shall play a leadership role in designing the overall framework, establishing the project and planning its implementation, setting relevant standards and policies, providing guidance and illustrations, arranging appropriate training, and promoting the initiative. Based on the overall blueprint and plan, Local Institutes shall enhance their IT systems in order to improve supervision of and serving local members, guiding IT implementation initiatives of local accounting firms, and arranging appropriate local training. Accounting firms shall intensify investment in terms of human and financial resources with the aim to combine process re-engineering and IT initiatives to construct world-class IT systems. 6
THE OVERALL IT SYSTEM CONSTRUCTION FRAMEWORK FOR THE PROFESSION The profession s IT system construction framework should be derived from comprehensive studies and analyses conducted by the CICPA, Local Institutes and accounting firms on the profession s key processes and data flows. The outcome shall be the establishment of a framework that covers the four major constituents and four major components, namely the CICPA, Local Institutes, large accounting firms and SMPs as the four major constituents and applications, support, data and facilities as the four major components. Each IT system construction initiative shall adhere strictly to the set core applications and data exchange standards so as to ensure data consistency and connectivity between systems within each constituent and across all constituents in order to connect the whole profession effectively and efficiently. THE CICPA S IT FRAMEWORK (i) The application component consists of supervisory and service applications for the profession and internal management applications. The former includes twelve on-line applications for managing examinations, membership registrations, supervision of the profession, continuing professional development, financial reporting, etc.. The latter includes six applications that manage co-operation affairs, human resource, finance, fixed assets, international affairs and communication affairs with the aim to achieve an optimised internal management and office operating environment. (ii) The support component refers to the core technologies and activities that ensure the normal, safe and stable operation of the systems, including maintenance and security. (iii) The data component structure refers to the uniform database for the profession that provides a consistent data format, structure and exchange protocol that minimises data redundancy and promote a high degree of connectivity between systems within the profession. (iv) The facility component refers to the hardware infrastructures that provide for the stable and safe operational of the IT systems that consist of main servers, storage devices, back-up medium, internet facilities, security facilities, computer rooms, etc.. 7
LOCAL INSTITUTES IT FRAMEWORK (i) The application component consists of supervisory and service applications for the profession and internal management applications. The former category is an extension of on-line applications established by the CICPA. The latter category consists of four applications that manage co-operation affairs, human resource, finance, and communication affairs. (ii) The support component refers to operation, maintenance and security support. (iii) The data component refers to the supervision of profession and service database and internal management database that should be fully connected with those of the CICPA. (iv) The facility component includes main servers and internet facilities, and storage, backup, security facilities and computer room should be installed according to local needs. LARGE ACCOUNTING FIRMS IT FRAMEWORK (i) The application component comprises of service management applications and office management applications. The former includes client management, independence management, project management, assignment management and follow-up management applications. The latter includes finance management, human resource management, training management, administrative services and policy support applications. (ii) The support component includes knowledge search, operation and maintenance support and security. (iii) The data component comprises of four databases for financial information, client projects, human resource and working papers. (iv) The facility component includes main servers, and storage, backup, network and security facilities, and computer room. (4) SMP s IT FRAMEWORK (i) The application component shall comprise of service management applications and office management applications. The former includes independence management, project management, assignment management, and follow-up management 8
applications. The latter covers financial, human resource, training and administrative services management applications. (ii) The support component includes operation and maintenance support and security. (iii) The data component comprises of four databases for financial information, client projects, human resource and working papers. (iv) The facility component includes main servers and internet facilities, and storage, backup, security facilities and computer room should be installed according to local needs. The overall IT system construction framework should be promulgated through the publication of a guide to the profession. 9
THE PROEFSSION S IT SYSTEM CONSTRUCTION PHASES It was planned that the profession s IT system construction would take a period of five years. The establishment of the profession s IT framework that covers the four major constituents and four major components should be accomplished through a three-phase strategy consisting of the establishment of four directives during the planning phase, achievement of six breakthroughs during the implementation phase, and consolidation of the three major applications platforms during the operation phase. THE PLANNING PHASE (2011) The four following directives were enacted with the aims to identify obstacles, setting direction, determining approach and instituting implementation steps: (i) Establishing the overall framework for the construction of the profession s IT systems in order to promote the importance of utilising IT and disseminate the overall construction objectives, principles, framework, steps and safeguards. (ii) Establishing construction guidelines with the aims of setting clear objectives, implementation methodology, technical standards, core applications, construction requirements, etc.; and providing procedure manuals to guide the institutes and accounting firms on the construction of the four major components of applications, support, data and facilities. (iii) In order to maximise the collection and sharing of common open data and information, establishing standards for core applications that ensure the four major constituents could establish IT platforms that collect and share data and information in relation to examinees, members, general evaluation, business reporting, etc. in an efficient manner. (iv) Establishing data exchange standards, especially for core applications data, by drawing on international data exchange standards such as XBRL and establishing common communication protocols, universal reporting formats and standard data capturing timeframes in order to maximise inter-connectivity between the systems within the profession. THE CONSTRUCTION PHASE (2012) With the four major constituents and four major components as the foundation, the profession saw breakthroughs in several key IT construction areas in 2012, namely 10
examinations management, supervision of the profession, serving the profession, practice management and serving the economy and society, as indicated below. (i) Breakthroughs in the management of professional examinations Based on the principle of applying IT in a safe and secured manner, the profession accelerated the automation and digitisation of its professional examinations management processes and took the opportunity to instigate measures to manage and prevent examination frauds and other key risks effectively in order to improve the quality of the examinations in a secured manner. Improvements that covered aspects at the national, provincial, examination site, on-line registration and payment, second generation ID card verification and examination office levels were made to the professional examinations management system with the aims to facilitate on-line registrations, confirmations and result enquiries made by examinees, optimise allocation of examination premises and facilities, as well as collection of data and information in a secured manner. Following feasibility studies conducted on on-line examinations frameworks, related IT platforms and service providers within the country and in developed countries, pilot on-line examinations in selected regions were conducted. (ii) Breakthroughs in the supervision of the profession The CICPA established an IT system to manage its memberships from start to end (i.e. from registration to resignation of membership) more comprehensively and effectively, covering aspects such as members registration, continuing professional development, financial reporting, supervision and inspection. The CICPA introduced an on-line members annual declaration facility in order to enhance the verification and validation of documents and information submitted by members in an expedient manner. The CICPA introduced an on-line training platform with the objective of improving members access to a wider range of continuing professional development topics and opportunities. The CICPA enhanced its financial reporting platform with the aims to streamline reporting by accounting firms in order to enhance collection and analyses of data and information in an accurate and timely manner, as well as providing a facility to enable accounting firms and members pay their dues through on-line banking. 11
The CICPA introduced an IT system to facilitate its quality reviews of accounting firms and members, the submission of annual financial statements of listed companies audited by members, and key supervisory responsibilities. (iii) Breakthroughs in serving the profession The CICPA initially built an on-line knowledge database and communication platform in readiness for serving the profession in a more productive manner. Aiming to provide the profession with a co-ordinated source of information, the CICPA populated the on-line knowledge database with contents relevant to the profession, such as accounting and auditing standards, laws and regulations, audit and management cases, professional newsletters, macro-economic data, etc. and made it accessible by the profession. The CICPA also established an on-line facility to enable the profession to exchange ideas and information and gain support from fellow professionals. A communication system that consists of video and audio conferencing, instant messaging, text messaging, digital fax and email facilities was established by the CICPA, providing a multi-channel and visual communications platform between the CICPA and its members as well as between members. The CICPA enhanced its website facilities to promote greater public disclosures, on-line services, discussions of technical issues, members participation in key initiatives, etc. with the aim to enable consultation, reporting, administrative and enquiry activities conducted through the extranet, and approval and disciplinary activities carried out through the intranet. (iv) Breakthroughs in practice management Based on the principle of differentiated guidance that achieves major breakthroughs, large accounting firms were given priority which would in turn help to promote SMPs to higher levels of IT construction. The first and foremost priority was to established an independence management IT system concentrating on establishing and maintaining a list of clients in which partners and staff are not permitted to invest in; a set of procedures on conducting periodic reviews of investments, if any, made by partners and staff; and a requirement for independence declarations from partners and staff, etc. with the aims to effectively manage professional independence through automation and demonstrate a high standard of compliance with professional conducts and ethics. Project management IT system was constructed covering functionalities such as project 12
acceptance and continuance, project human resource management, project service quality control, project performance, etc. with the aims to assist accounting firms in managing their project risks and effective planning, execution and conclusion of projects. As a subject of project management, assignment management IT system was constructed covering activities such as performing risk-based audit, identifying risks of material misstatements and errors, conducting peer audit review and other key audit activities. Accounting firms built or enhanced their websites with the aim to promote their brands, disseminate information, develop business opportunities, provide on-line services, consultation and enquiries, and recruit staff, etc.. Accounting firms qualified to audit H-shares were required to be the first to complete construction of the four major components of their IT systems which would form the benchmark for the profession. Other firms qualified to provide securities and futures related assurance services were required to establish independence management system and utilise audit software and project management software to conduct their audit activities. 50% of SMPs should utilise audit software and project management software to conduct their audit activities. (v) Breakthroughs in serving the economy and society An anti-fraudulent reporting system was implemented. The system gathers personal details of members and the reports audited by them and carries out real-time analyses and monitoring of this information with the aim to prevent and monitor counterfeiting, and report instances of fraudulent reporting to the general public in order to promote the credibility of the profession and its contribution to the proper functioning of the market economy. THE APPLICATION INTEGRATION PHASE (2013-2015) Having enshrined the four major components into the construction of IT systems in the preceding construction phase indicated above, it is time to standardise applications and data exchange relating to the three major platforms of supervising and serving the profession, service and office management and serving the economy and society so as to create a set of three-dimensional, comprehensive, well established and inter-connected IT systems. At the same time, the CICPA has been encouraging accounting firms to take this opportunity to absorb world-class management concepts and re-engineer key processes as part of their IT construction initiatives in order to ensure sustainable and effective utilisation of IT. 13
(i) Refining the platform for the supervision and service of the profession Based on established data standards, the CICPA constructed databases on examinees, members, general evaluations, laws and regulations and internal management, and accounting firms constructed databases on finance, client projects, human resource and working papers. This data was then gathered, processed, analysed and integrated with the aim to use it to support management and policy making decisions. Based on established data standards, the CICPA worked with Local Institutes and large accounting firms on establishing a common data exchange interface, with SMPs readily adopting the established protocol, in order to connect the IT systems of the four major constituents of the profession to maximise data exchange. The CICPA constructed IT systems for managing collaborative activities, human resource, finance, fixed assets and international affairs in order to optimise internal and external working environment, realise the workings of mobile office and paperless office, and improve standard of administration and efficiency of collaborative undertakings. Based on certification as the key driver in constructing its IT systems, the CICPA continued to refine its IT systems relating to professional standards, CICPA Magazine, professional examinations, membership management, continuing professional development, supervision of the profession, financial reporting, experts pool, etc. and worked with Local Institutes to establish high connectivity with the aim of enabling comprehensive supervision and service of the profession through extensive use of IT. (ii) Refining accounting firms platforms for managing service and office activities Accounting firms established a client management system covering features such as client file management, client marketing management and client care management, and use such functionalities to manage clients cohesively, serve clients at various value levels, promote client loyalty and retention, and perform client risk assessment in accordance with auditing standards. In accordance to provide evidence and quality of audit work performed, accounting firms also established post audit management systems to manage working papers, quality control, regulatory reporting in accordance with the laws and regulations, and to provide an coordinated and automated facility for reporting to supervisory bodies. Accounting firms constructed office management system to manage internal affairs and processes, such as finance, human resource, training, administration and policy making in order to maximise internal sharing of knowledge and information and support decisions making. 14
Through the issue of guidelines on IT system construction and using firms qualified to audit H-share listed companies as role model, large accounting firms have been encouraged to continue refining their IT systems, with SMPs adopting feasible features of these models, in order to realise the comprehensive inter-connection of the profession that is based on international best practises. (iii) Refining the platform for serving the economy and society In conjunction to the anti-fraudulent reporting system, a business report reference system would be established and be connected to systems of relevant authorities in order to provide information inquiry services to report users and the public. Enhancements were made to the professional integrity monitoring system, enabling the general public to gain access to information about accounting firms, and members qualifications, experience, capability, etc. in a comprehensive and timely manner. The CICPA implemented a comprehensive evaluation system of accounting firms that provides the basis of evaluation and ranking of the top100 accounting firms on an annual basis in order to provide the general public with in-depth information about the development trend and composition of the profession on a year to year basis. 15
SAFEGUARDING MEASURES FOR THE PROEFSSION S IT SYSTEMS CONSTRUCTION AFFIRMATIVE TONE AT TOP COMPLEMENTED WITH EFFECTIVE ORGANIZATION It is imperative that the CICPA and Local Institutes lead the charge towards establishing effective IT systems for the profession through establishing well defined working groups, roles and responsibilities, and policies and procedures, as well as guiding accounting firms with the right credentials to participate in that collective leadership. ENSURING PROPER FUNDING FOR IT IMPLEMENTATION AND OPERATION The CICPA and Local Institutes are committed to enshrining adequate IT spending into their annual budgets and with increased IT funding on a year-on-year basis. Accounting firms are also required to commit adequate IT funding, particularly in applications development and staff training. The profession should pay particular attention to and draw on any national, provincial and local support (in the form of, for example, general financial grants, technical grants, grants for the construction of the professional integrity monitoring system, or low interest loans, etc.) to construct or modernise IT systems. INTRODUCING THE RIGHT INCENTIVES TO ACHIEVE THE DESIRED OUTCOMES IT system construction would form part of the evaluation of Local Institutes annual performance. The CICPA would evaluate progress made by Local Institutes in constructing their IT systems on a periodic basis. Those Local Institutes that make good progress would be rewarded and given public commendation. Local Institutes would in turn appraise progress made by accounting firms, and where necessary, clarify requirements and guide implementation. Accounting firms making good progress would be rewarded and given public commendation. Software providers are encouraged to participate in the construction of the profession s IT systems, and those who contribute productively would be enlisted as preferred suppliers. INTENSIFYING IT TRAINING TO RAISE COMPETENCY The CICPA would intensify its promotion of IT training to the profession, increase the number of IT subjects within the continuing professional development program, expand IT contents within the CICPA examinations syllabus, and run IT related seminars on a regular 16
basis. By the same token, accounting firms should intensify their recruitment of a good mix of personnel who are conversant with technical, strategic and project management aspects of IT systems in order to provide general, innovative and technical solutions to the construction of IT systems. INTENSIFYING THE PROMOTION OF IT AND ITS BENEFITS The CICPA would promote through a wide range of media the role and importance of IT to the profession in order to enhance IT awareness in the profession, and inspire enthusiasm and proactivity in constructing IT systems. The CICPA would propagate best practise models and provide good case studies, so as to arouse the profession s passion in completing the initiative and carrying on construction beyond that. 17