Accounting: “the origination and development of China’s audit firms: ‘translation’ meets self-determination” by Shuwen Deng and Richard Macve. Presentation at the Interdisciplinary Perspectives on Accounting Conference 2012.
1. The authors state, page 3-4, “our primary research question is to explore how far it is realistic suppose that one or more indigenous Chinese firms can occupy a position internationally alongside the current Big 4”.
a. In your own words, provide a few details of what they mean – about 3 – 5 sentences.
Some people are predicting that the next big international firm will be a Chinese indigenous CPA firm – one that is purely a Chinese business. The authors ask if that is a realistic prediction to make. China’s indigenous businesses have been strictly controlled by China’s central government. On the other hand China’s government has been pushing businesses to adopt the international standards in order to enter the global market. The culture and language are so different between Chinese accounting firms and those on the international scene there may be some reason that an indigenous accounting firm will not be as successful in the global international marketplace. The culture of companies, the business ethics, the complexities of the bureaucracies and rigid hierarchies all might make it difficult for a Chinese CPA firm.
The Chinese have strong organizational goals of making sure the society has a high welfare (like food, clothes and housing). These are all activities planned and carried out in State Owned Enterprises (SOE). Some capitalist countries are not happy about the SOEs.
b. How would YOU (not them) research this primary question? What would you do? How would you set up the research? What would be your aims?
I think the basis of my research would be based on exploring issues of how firms and employees from different cultures work together with the focus being on the West and China. I would do a massive literature review on any studies about how business communications have been done between the West and China. I would identify the reasons there have successful communications and reasons that there have been misunderstandings and missteps.
I would also explore the historical growth of Chinese firms until contemporary times when they are ready to be big players on the international scene. I would compare that data to the growth of the West and how it developed into today’s giants. Then I would find the similarities and the differences.
One more thing would be looking at the business cultures from the inside and comparing how they are the same and how they are different.
For a quantitative portion of the research I would analyze the strengths and weaknesses of the West compared to Chinese companies in terms of accounting practices and ethical standards. This could be done by collecting data and then analysing it statistically to try to determine if there are any intersections that can be encouraged to develop between the two cultures.
I would also like to do a qualitative portion of the research by holding an interview with groups of professionals from both the West and China. I think it would interesting to compare the responses between those who had the most years of experience, those with a medium amount of experience and the young accountants who have had the least amount of experience working the multicultural environment of the US/UK and China.
2. Provide in bullet points the “huge gap between the first tier international accounting firms and the Chinese audit firms” (page 21; I count about five).
There is not a large enough independent indigenous auditing firm that could accomplish the work necessary to audit the big first tier international accounting firms
In China Guanxi relationships are a big part of cultural inter-relationships from the person to person relationship to the complex business organizations; this is not at all evident in the other international firms, only in the Chinese firms.
Chinese audit firms are considered to be not competent enough to handle the big firms, they do not have the same strong modern reputation that the Big 4 has, the Big 4 have experience in contemporary accounting business and accounting practices without out all the baggage of the historical strategies the Chinese firms have
The Big 4 does not offer enough opportunities for the Chinese firms; the field is highly competitive with not many positions available.
There is more risk for the Chinese firms because of the fast growth recently
The international standards are very different to the Chinese firms, they are difficult to understand and cannot be implement 100%; they also do not understand their international competitors
There is a tendency for Western international firms to become localised - the foreign employees are replaced with local Chinese employees
3. What do you think about the questions they posed to the interviewees? (Appendix II). What would you want to ask, in addition?
The questions are a bit complicated and difficult. The employees need to really understand the mission statement and even the psychology of their firm to even begin to answer some of the questions. Also the knowledge of both the UK and Chinese auditing systems would be necessary; although I think it is interesting to find out what the respondents had observed between the two cultures.
The questions about the firms becoming independent of the Chinese government are interesting because the government is centralized and has a lot of control.
Some of the questions are very snoopy and I wonder if I would want to answer them because some of the questions were about competition. For example what kind of clients the merged Chinese firms are bringing in. Also just before that 1b) seems to be a little bit leading because the question asks about achieving the goal even though there is only one firm in the top10.
I would maybe have chosen two sets of auditing standards – one from the UK and one from China. Then I would ask the respondents what similarities and what differences they observed between the two. Or at least something that was related to the international standards in more details and if they felt they would help or hurt Chinese firms in the international market.
I would be interested in finding out from the Chinese respondents how comfortable they felt in multicultural business situations. And if they felt that a Chinese business was at risk in multicultural situations. Maybe there is some kind of risk that the Chinese would identify that is not obvious to foreigners.
