Research

Main Contents of “the Chinese CPA” (No.2, February 2008)

accountingview — Thu, 03 Jul 2008 01:43:00 GMT

Features

Liu Zhongli, president of CICPA, answers to reporters’ questions on the Several suggestions on supporting the expansion of service exportation of accounting firms

Nine Ministries and Commissions in China jointly issue the Several suggestions on supporting the expansion of service exportation of accounting firms

Profession Development

Series report on professional development and the construction of institutes

Announcements

CICPA issues the Guidance on related businesses of corporate bankruptcy cases undertaken by CPAs (trial)

CICPA issues the information disclosure system of CPAs and accounting firms

Notice of CICPA concerning financial report auditing of listed companies in 2007

Name list and regulations on the CICPA Registration and Management Committee

Name list and regulation on the CICPA Bankruptcy and Liquidation Professional Guidance Committee

Firms Governance and Management

Perceptions on the governance and leadership of CPA firms

To develop business with innovation, and create harmonization with progress

Professional Training

Discussion on the internationalization of professional talents construction

Practice on carrying out 30 guidance of professional talents training

How to establish a learning organization for accounting firm

Auditing & Assurance

Discussion on the auditing for Centralized Trading System of Security companies

Related issues on accounting and auditing for contingency

Change a point of view to discuss audit risk

Accounting

The practice of income tax accounting in consolidated statement

Problems and difficulties occurred during implementation of the Enterprise Accounting Standards

Case Study

The influence of two acquisition cases of the United States on the materially principle of CPAs

Theory

Several issues on using innovation ability of human resource in accounting firms

The establishment of the bid system for auditing business

Main Contents of “the Chinese CPA” (No.1, January 2008)

accountingview — Wed, 02 Jul 2008 10:54:00 GMT

Features

Mr.Xie Xuren, minister of MOF, puts forward requirements regarding the Chinese accounting profession in 2008, at the National Finance conference

Mr. Wang Jun, deputy minister of MOF, writes an article: A significant theoretical creation of the localization of Maxism

Mr. Liu Zhongli, president of CICPA, requests that thoroughly study the spirit of the 17^th National Party Congress of the CPC, and strengthen the professional construction in all respects

Profession Development

Joint Declaration of the China Accounting Standards Committee and the Hong Kong Institute of Certified Public Accountants on the converged China Accounting Standards for Business Enterprises and Hong Kong Financial Reporting Standards

CICPA’s job summarization of 2007 and outline of 2008

Professional Training

Discussion on the innovation of professional talents growing mechanism of accounting firms

A brief discussion on the cultivation of international professional talents of China’s accounting profession

Discussion on the competency enhancement of CPAs

Firms Governance and Management

My perception on learning the Guidance of Internal Governance of Accounting Firms

Perfection of the Internal Governance Mechanism with strengthening the three pieces of construction

Auditing and Assurance

Discussion on the auditing of anti-money laundering by CPAs

Discussion on related issues of the implementation of new standards

Accounting

Some issues on related accounting problems with the current Corporate Law

The contents and approach of professional judgment in new accounting standards

Theory

Research on the impact of the market concentration rate, assets scales of customers and the nature of CPA firms to the quality of auditing

A brief introduction on the thinking model of CPAs

Global Outlook

Methods of ensuring the sustainable development of Small and Medium-sized Practices

History

An invoice from Shanghai Zhengming accounting firms

Main Contents of “the Accounting Research” (No.2, February 2007)

accountingview — Sun, 10 Jun 2007 15:55:00 GMT

Comment on Convergence Conceptual Framework for Financial Accounting (Preliminary Views) issued by FASB and IASB together
The paper focuses on the main topics of the Convergence Conceptual Framework for Financial Accounting (Preliminary View) issued by FASB and IASB together on July 6, 2006. The topic include the background of the Convergence CF and the main content of the Convergence CF which includes the objective of financial reporting and the qualitative characteristics of financial reporting information, especially for the difference among the Convergence CF and FASB and IASB Framework. And then, the paper provides the comments on the main content of the Convergence CF including the question ‘should the Convergence CF can be established only by IASB and FASB together’ and ‘should the Stewardship View can belong to Decision Usefulness View’. Finally , the paper analysis the important meaning of the Convergence Conceptual Framework to the Chinese Basic Standards.

A Theoretical Analysis of Fair Value Accounting Practice
This paper makes an analysis of the factors that affect the practice of fair value accounting. Based on our study, we conclude that the inadaptability of historical cost accounting to volatile business settings is the inducement, and the objective that the financial reporting of an entity should provide useful information for decision making has created a suitable environment, for the practice of fair value accounting. We also conclude that the seeking to measure the economic income of an entity has motivated, and the trade-off between relevance and reliability has imposed a key restriction on, the practice of fair value accounting. Therefore, good practice of fair value accounting requires that some unambiguous criterion be established to facilitate the trade-off between relevance and reliability, and the qualitative characteristics of accounting information useful for decision making be rethinked and reconstructed.

On Fair Value Measurements and Disclosures Based on Uncertaninties
In this paper, firstly value accounting is placed in an uncertain economic environment and uncertainties produced by fictitious economy. This is followed by an argument to analysis the essence of fair value from the perspective of economics. The paper goes on to explain the causes of the fair value accounting problems. It is then argued that fair value is not “value”, but price, and that fair value is the point estimate of intrinsic value. The information of fair value is incomplete. And finally, the paper underlines it is important to disclose the range of value estimate and its uncertainty information.

The Extent of Earning Management to Avoid Loss: Comparisons between Listed and Non-Listed Firms
With the non-listed firms as benchmark, this paper studies whether the stock market increases the extent of earnings management of firms using the method of parameter estimation. The result shows that both listed and non-listed firms in China managed earnings to avoid reporting losses from 1998 to 2004. On the whole, there are 15.87% listed firms that employed earnings management, which is about three times of that of non-listed firms (5.49%). The average magnitude of earning management of listed firms is 0.0122 which is about 13 times of that of non-listed companies (0.0009). The difference in the extent of earning management between listed and non-listed firms increases along with the time from 1998 to 2004. The extent of earning management of non-listed firms keeps stable, while the extent of earning management of listed firms increases. The result suggests that the stock market increases the extent of earnings management of firms.

Materiality and Its Application: Foretime and Aftertime
Materiality is an important concept in accounting and auditing, the past five decades have seen substantial research effort devoted to studying the concept of materially. The paper has main objectives: first, to put in order existing understanding about the concept of materiality; second, to probe the fundamentals of concept of the materiality, and clarify the real implication of mathematics analysis for the concept of materiality; third, to explain the future direction of determining the standard of materiality by introducing IAASB’s the latest development regard to the standard of materiality.

Challenge and Reform: A Rational Thinking about How Traditional Accounting should Adjust Its Ideas and Methods under the Circumstances of Information Society
Starting with the concept of information society, this paper sets forth the four basic characteristics of this society, which are prerequisite logic that can help us to comprehend those challenges that accounting will probably be confronted. Then the paper concludes three challenges which accounting will face in the environment of information society, and deeply analyses the details and contributing factors of these challenges, Finally, this paper puts forward that traditional accounting need change in three main respects in order to meet the above three challenges which confront accounting in information society. The basic idea of these changes is that IT should be penetrated into finance and accounting organically and completely, and this is the way of accounting informatization.

Assessment on the Quality and Decision Value of the Social Responsibility Disclosures: A Content Analysis of the Financial Annual Reports of List Companies
In this study, according to the information quality characteristics conceptual framework we conduct a content analysis to give the quality and decision value of social responsibility disclosures in annual reports of list companies from China a whole assessment, and find that the quality and decision value level of social responsibility disclosures in annual reports is lower. Finally, we suggest that financial annual report is not the optimal choice for social responsibility disclosure if there lack of regulations.

Examine the Sustainable Growth of Market Companies from the Financial Angle: the Empirical Study of the Information Industrial Listed Companies
The paper is based on the SGR model by Robert•C•Higgins and James C Van Home, Through Paired-Samples T Test and Wilcoxon Signed Ranks Test, We find that the practical growth rate exceeds the sustainable growth rates, the sustainable growth rates glides year by year and there is the excessive investment phenomenon of finance concerning the Chinese information industrial listed companies. Based on these, we analysis the reasons, put forward to some counter-measures and suggestions.

Study on the Effect of the Implementation of Stock Incentives by Chinese Listed Companies
Recently, the stock incentive has been taken more and more focus in China. As the stock incentive is a way of long-term incentive mechanism, the effect on stock incentive should be measured based on the increase in the financial performance. This article used an empirical analysis to study the effect on the stock incentive, exclusive of industry factor, and indicated that effect on stock incentive appears unconspicuous in long-term period in China. However, the company in transportation industry seems more effective.

The Research on Function Mechanism of Convertible Bond In Sequential Financing: Example for Vanke Co.
The paper analyze function mechanism of convertible bond in sequential financing by model and function of Vanke convertible bond in the case of using convertible bond financing of Vanke Corporation. In sequential-financing basing on the uncertainty about value of future invest option, if future invest option have value, Vanke Corporation diverts the cumulated proceeds from initial project to invest option project by forcing conversion in favor of sequential financing of future invest option. Our results provide support for the sequential financing hypothesis advanced by Mayers (1998).

A Review and Prospect of the Working Capital Management
Working capital management in the main contents of corporation finance, so the study in this field should gain much attention. Compared with the rapidly development of the practice, the development of the theory has been lagged obviously since 1990’s. We suggest that the study should begin from the reclassification of working capital, and then, the new framework of the theory should be set up, which is based on the supply-chain management, the channel management and the customer relationship management. Meanwhile, we should launch on the survey of working capital management of Chinese companies and promulgate the results, which can offer the data for the study and evaluation of working capital management.

Main Contents of “the Accounting Research” (No.1, January 2007)

accountingview — Fri, 08 Jun 2007 04:47:00 GMT

Property Action Based Reconstruction of Human Resources Accounting Patten
The painstaking research on human resource accounting has still confined to cost accounting and value accounting so far. On the one hand, the research completely ignores affirmation of accounting elements which human resources are taken as an object of accounting and led into its handling process. On the other hand, the research blindly lays stress on measurement of human resource cost and value given by accounting pattern. As a matter of fact, this kind of research neither really demonstrates investment cost and output value nor ultimately forms a complete accounting pattern on human resources. Therefore, the related researches should be aimed at property operation process and the involved property action should be systematically divided into two types; human resource property investment and human resource property right exchange, therefore business distribution of human capital income will be an operation result. Only on the basis of this understanding can accounting pattern be reconstructed.

On the Difficult Position of Intellectual Capital Information Disclosure
Based on the Resource-base Theory, this paper first discusses the relationship between intellectual capital and firm’s sustained competitive advantage, stresses the significance of intellectual capital information disclosure to the outside stakeholders of the firm, then analyses the difficult position of intellectual capital information disclosure, and systematically dissects the reasons from several different aspects of property rights, accounting model, competition of product market, political motives and theoretical development of intellectual capital. At last, some suggestions are put forward to improve the efficient disclosure of intellectual capital information.

Calculating Model and Means to Divide the Profit of Human Capital Property Value Based on Current Profit
The modern theory on corporation believes that a corporation is a contract between the human capital and non-human capital. The combination of human capital and non-capital is to create the profit, so the profit should be shared by human capital and non-human capital. The problem is how to quantify the value of human capital property and divide the profit between the human capital and non-human capital. This paper reviews relevant literatures about calculating model of human capital property value, analyses calculating basis of human capital property value, puts forward the method of property profit, and create a kind of calculating model and means to divide the profit of human capital property value based on current profit.

Approach to Corporate Internal Control Framework in the Informationized Ecological Environment
This paper studies the trend of changes in corporate internal control in the informationized ecological environment and proposes that a corporation should introduce and build in time an internal control system in consistence with governance risks of information system planning, weakness risks in internal control devices software, unsteadiness risks of system function, and subjective risks in operation, in which the internal control mechanism of information system can learn from the advanced frameworks, such as COBIT, ITIL, ISO/IEC17799, eSAC, etc.

The analysis of Accounting Entity Postulate of Social Insurance Funds between China and America
Social insurance accounting, both in China and America, based accounting entity on funds and has adopted fiscal special account as means of management, In America, the fiscal special account manages unitary PAYG funds based on government responsibility, while in China the account manages mixed funds of social pooling and individual account, Using the same accounting model in two funds of different nature has made a series of confusion and contradiction both in theories and practices of our social insurance accounting. To improve current situation, the effective countermeasure is to design two accounting systems for the different funds on the basis of the separate management and the calculation of social insurance funds and individual account funds.

Pyramidal Ownership and Voluntary information Disclosure: Empirical Evidence from Chinese Family Controlled Listed Corporations
This paper studies the impact of pyramidal ownership structure on voluntary disclosure with simple theoretical model and empirically examines the theoretical analysis results based on the sample of family controlled corporations from 2002 to 2004. The paper finds that the ultimate controlling shareholders will like to disclose less private information, that is the more divergence of the ultimate voting rights and cash flow rights and the larger ultimate voting rights, the lower level of voluntary disclosure will be. The board of directors has some active monitoring to the ultimate controlling shareholders.

Corporate Characteristics and Social Disclosure——Evidence from Listed Companies in China
Under the research framework of voluntary disclosure and combined with the theory of Corporate Social Responsibility (CSR), the paper empirically analyzes the relationship between corporate characteristics and social disclosure. The paper selects A share companies listed in Shanghai and Shenzhen Stock Exchanges during 1999-2004 as a sample, and develops Social Disclosure Index(SDI) based on content analysis, The results show that: (1) the companies with big scale and excellent long-term performance tend to disclose more social information; (2) the leverage and refinancing demand are irrelevant with social disclosure; (3) the disclosure environment, including listing status and disclosure period , is significant related with social disclosure. The paper finally provides some suggestions for the providers, users and regulators of social information.

Empirical Research on Correlation between Compensation Schemes of Management and the Change of Performance of Public Listed Companies
Based on literature review on related research and particular institutions surrounding China, the paper selects both accounting performance index (ROE; ROA), market performance index (Tobin’q) and owner fortune (OF) to construct a model to analyze the relevance between cash compensation schemes and the change of performance of public listed companies, including dealing with multi-collinearly problem. The paper discovers that there is positive relation between compensation schemes of management and current period change of Tobin’q and positive relation between compensation schemes of management and last period change of Tobin’q. Moreover, the paper also discovers that direction committee or bonus committee depends on accounting earning index than on owners wealth index to decide the compensation scheme.

On the Improvement of Going-concern Audit Judgment: Operational Efficiency Evidence’s Introduction
On the basis of the implementation of going-concern audit judgment and the state of research and application of operational status evidence, this paper analyses the uncertainty of audit standards, incompleteness of study conditions and slight probability of practical applications; restates that operational status is the important evidence for going-concern audit judgment; and discuss that operational efficiency is the core indicator for weighing operational status. Then it utilizes Factor Analysis to choose financial indicators, uses DEA to calculate operational efficiency, constructs basic judgment model based on present guides and improvement model after introducing operational efficiency through Logistic Regression, and proves the validity for operational efficiency evidence’s introduction.

Accounting Information and the Managerial Compensation Contracts: A Literature Review
The paper base on a review of the literature on accounting information and the compensation of managerial incentive contracts, discuss the accounting information acts upon the compensation of managerial incentive contracts, and further explores measures of managerial incentive contracts in China.

Review of Research on the Accounting Conservatism
Growing studies suggest that accounting conservatism is the most important characteristic of financial report. This paper comments on the latest research on the accounting conservatism systematically. The first one is on the various measurement of accounting conservatism and their relationships. The second one is the latest research of the cause of conservatism, especially the impact of contracts on the accounting conservatism. The third one is on the economic consequence of accounting conservatism, including the effect on the cost of capital and real activities. At the end of this paper, the author points out some directions for future research.

Main Contents of “the Audit & Economy Research” (Vol. 22, No.2, February 2007)

accountingview — Thu, 07 Jun 2007 05:02:00 GMT

Developmental Path of Governmental Performance Audit in China
QI Xing-li, SHAO Hui
(School of International Audit, Nangjing Audit University, Nangjing 210029, China)
Abstract: The governmental performance audit in China is at a preliminary stage. This paper, starting from the actual conditions, analyses the bottleneck in this regard and put forward some proposals to improve this situation.
Key Words: governmental performance; audit; developmental path

Re-constructing Some Important Concepts under the New Auditing Standards
WANG Xi-qin, TANG Mei
(School of Economy and Land Management, Central China Agricultural University, Wuhan 430070, China)
Abstract: The new model of audit risk puts more emphases on the estimate of significant risks. The new evaluating frame makes it possible to reconstruct some important concepts, this paper first compares several basic concepts in both old and new auditing standards, such as accounting responsibility, internal control and audit evidence, and then discusses some ways of their expression, modification of connotation to grasp the gist of new standards in a systematic way.
Key Words: new standards; verification; risks

Auditing in Lawsuit Risks
HUANG Shen
(School of Management, Xi’an Jiaotong University, Xi’an 710049, China)
Abstract: Risk-based auditing can reveal the material errors in the statement to avoid the statement risks but not the auditing risks. Base on a deductive method, this paper first analyses the limitation of material errors auditing pattern, and then puts forward a new type of auditing pattern on the basis of lawsuit risks and finally discloses the business risks of audited unite to avoid effectively the auditing risks of CPAs.
Key Words: auditing risks; statement risks; business risks; lawsuit risks

Setting-up of Auditing Fees Standards Based on Economic Factors
ZHAO Bao-qing, YAO Chang-cun
(School of Accounting, Beijing Technology and Business University, Beijing 100037, China)
Abstract: Many factors influence the setting-up of audit fees standards. The audit fees standard for the amount of capital cost decreasing and the amount of agency cost decreasing is a best equilibrium point in theory. If adding the potential allowance for lawsuit, the average profit of accounting firms and the disparity of the economic position of different regions, we can get the scope of audit fees standards, decide the number of firm’s capital cost and the number of average profit level based on average profit level of special industry and CPA vocational average profit level, we can also decide the amount of potential allowance of lawsuit based on the antecedents.
Key Words: audit fees standard; economic factors; agency cost; capital cost

Gray Analysis on the Key Influence Factors of Top Accounting firms’ Operational Performance in China
XU Han-you, DING Chang-qing
(Nangjing Audit University, Nangjing 210029, China; School of Business Hohai University, Nangjing 210017, China)
Abstract: By using the method of gray system, this paper first surveys top 20 accounting firms’ operational performance on the list in China. According to the gray interrelated coefficient, we put the influence order. This research indicates that the key influence factor of accounting firms’ operational performance is not the transaction structure we used to claim, but the number of young CPAs with high degrees. Finally this paper put forward some proposals on how to promote the operational performance of accounting firms.
Key Words: accountants’ firm; operational performance; gray system

Motivations for the Industrial Specialization Operation of Accountants’ Firms
LI Tie-qun
(Department of Accounting, Hunan College of Finance, Changsha 410205, China)
Abstract: By a theoretical analysis, this paper first demonstrates that the industrial specialization operation of the accountants’ firms can effectively avoid auditing risks, transmit the signal of high quality products and obtain the competitive advantage in a specific field and finally promote the large-scale development of the accountants’ firms.
Key Words: accountants’ firms; auditing quality; industrial specialization operation; competitive advantages

Coordination between Auditing Decisions for State Construction Projects and Legal Force of Contracts
GAO Zhi-ming
(Section of Law and Regulations, Department of Audit, Hubei Province, Wuhan 430070, China)
Abstract: Auditing decisions and civil contracts have public and private features which take legal effect within their own domain. It is a wise move to coordinate the legality between the two parties. The pricing of auditing contracts has to be confirmed by the construction unites in written or it is void. The best policy, however, is to perfect the legislation, balance the public power and the private rights in accordance with the law.
Key Words: public law; private law; civil contracts; administrative contracts; auditing decisions

A New Field of Environmental Auditing
——A study on evaluation of treatment, storage and disposal facility auditing
XIAO Zhen-dong
(School of Business, Renmin University of China, Beijing 100872, China)
Abstract: The auditing of treatment, storage and disposal facility belongs to the new field of environmental auditing which is a good tool to avoid environmental risks and losses. This paper first introduces the institutional and regulatory basis, and then discusses the ways on how to develop such kind of auditing and finally put forwards some proposals on how to promote the above auditing in China. It is hoped this study will improve the measures of treating dangerous wastes, and promote enterprises to strengthen environmental management.
Key Words: treatment, storage, disposal, environmental auditing

New Development of International Standards on Auditing 320 and 450 and Its Revelation for China
LU Yue-jin
(College of Economics and Management, Zhejiang University of Science and Technology, Hangzhou 310018, China)
Abstract: This paper introduces the contents of the new exposure drafts of ISA 320(Revised), Importance in Planning and Performing an Audit and ISA 450, Evaluation of Misstatements Identified during the Audit, and then analyzes mainly the new development of ISA 320 and ISA 450 by comparing both the new and the old exposure drafts, and finally put forward some proposals to establish China auditing standards.
KeyWords: importance; misstatements; evaluation; correction; communication

New Developments of International Standard on Auditing 260 and Its Revelation for China
ZOU Xiao-ping
(College of Management, China calculation and Measurement University, Hangzhou 310018, China)
Abstract: Under the international convergence of auditing standards, China should learn something useful from International Standards on Auditing to improve China’s Auditing Standards. This paper main introduce the developments of ISA260(Revised and Redrafted), Communication with Those Charged with Governance, and analyses its improvement and revelation for China.
Key Words: governance layer; communication; matters in question

A Comparison of the Recently Issued Recognition and Measurement Standards for Goodwill with Old One in China
QIU Ying
(School of English for International Business, Guangdong University of Foreign Studied, Guangzhou 510420, China)
Abstract: In Feb. 2006, the Ministry of Finance published the new system of accounting standards, and there are many changes in the standards for recognizing and measuring the goodwill. These changes enrich the accounting standards for goodwill and enhance the consistency of each special accounting standard. This paper analyzes the difference between old standards and new ones and finally proposed some proposals to correct the flaws of the new standards for goodwill.
Key Words: goodwill; recognition; measurement

Research on the Essence of Accounting Policy Choice
HUANG Wen-feng, ZENG Xiao-ling
(Department of Accounting, Jinan University, Guangzhou 510632, China; Huatian industrial Holding Group Corporation, Changsha 410001, China)
Abstract: By comparing the essential difference between the traditional and modern accounting, this paper explores the essence of accounting policy choice and points out the behavior of such choice is actually the continuous game of the economic consequences. The study indicates that by using the function of signal transmission of accounting policy choice behavior, we can promote the healthy development of China capital market.
Key Words: accounting policy choices; economic consequence; signal transmission

Economic Analysis of Financial Governance of Non-profit Organizations
YU Guo-wang
(Department of Accounting, Xiamen University, Xiamen 361005, China)
Abstract: This paper first propose a theoretical framework of financial governance for nonprofit organizations on the basis of related economic theories. It is to correct the flaw of simply hypothesizing nonprofit organization as a kind of productive function. And then offers some suggestions on how to promote the reform of administrative system and effective management of nonprofit organizations.
Key Words: nonprofit organizations; financial management

Rent-seeking and Game in the Evolution of Accounting Systems
PENG Shu-xue
(Department of Accounting, Yang En University, Quangzhou 362014, China)
Abstract: The accounting systems has economic consequences as a kind of public goods. The course of its changes will bring out rent-seeking and game of the relevant interested parties. After an abundant game, accounting systems will reach Nash equilibrium and recur because of the new inducement, reaching the ideal of accounting system-Pareto equilibrium to realize the optimal disposition of social resources.
Key Words: evolution of accounting systems; public goods; rent-seeking and game; Pareto equilibrium

Financial Operation, Management and Governance: Re-construction of Financial Function
WANG Yue-wu
(School of Accounting, Hunan University, Changsha 410079, China)
Abstract: An enterprise can be considered as a productive or technical organization, a mechanism to promote and adjust the scarcity-value of economical goods, and a special carrier of the union of property rights and team production. We can describe its nature from three different levels. The activities of an enterprise are executed through different sorts of transactions, so they can be comprehended and an intensive institution of transactions. Accordingly, enterprise financing activities are performed through bargaining transactions, managerial transactions, and rationing transactions, taking shape three forms or mechanisms of allocating its financial resources, performing actual functions of financing operation, management, and governance, which jointly make up the basic financing function, namely, allocating financial resources.
Key Words: transaction, bargaining transaction, managerial transaction, rationing transaction, financing function

Using the Distance to Default to Identify Credit Risks: An Empirical Study
ZHOU Zi-yuan, YANG Yong-sheng
(School of Finance, University of International Business and Economics, Beijing 100029, China; School of Finance, Yunnan Normal University, Kunming 650222, China)
Abstract: Using the data of selected firms listed in Chinese stock markets, including four ST firms and four contrastive firms, the authors calculate the distance to default both under the hypotheses of static assets value and assets value with a constant growth rate during the period from 2003 to 2005, and find that the latter indicator outperforms the former. We also investigate the sensitivity of the distance to default and find that it is highly sensitive to the volatility on the stock returns.
Key Words: distance to default; KMV model; listed firms; credit risks

Relationship between Foreign Direct Investment in Service Sector and Regional Economic Growth
——A empirical analysis of the data of Yangtze River Delta
WU Jing
(School of Public Economy Administration, Shanghai University of Finance and Economics, Shaghai 200439, China)
Abstract: This paper first explores the relationships between the Yangtze River Delta FDI in service sector and the economic growth on the basis of a model. The research indicates that the Yangtze River Delta FDI in the service sector has a strong push to the economical growth, but depending on the economic output increase is not sufficient enough to further attract foreign direct investment, the key is the system construction and perfection.
Key Words: FDI in service sector; regional economic growth; co-integration testing; cause and effect relationship

Project Investment Decision-making Model and Its Application under Real Options
WU Shu-chang
(School of Accounting, Shandong Institute of Business and Technology, Yantai 264005, China)
Abstract: This paper first analyses the real options embraced in projects, and the disadvantages of discounted cash flow (DCF) and then, take exit options as an example, explores the revision of the decision-making model of project investment by means of real option theories.
Key Words: discounted cash flow; exit options; project investment decision-making

The acceleration of Chinese Industrial Clusters Imbedding MNCs’ Value Chain
HUANG Jian-kang, JIANG Fu-xin
(School of Economics, Nanjing Audit University, Nanjing 210029, China; School of Business, Nanjing Normal University, Nanjing 210097, China)
Abstract: This paper first discusses issues emerged in the development and acceleration of Chinese industrial clusters under MNCs’ value chain strategy, and then maintains that the corporations in the clusters in China should find a right link in the global value chain and voluntarily get involved to build up a competitiveness of their own as well as the international competitiveness of Chinese industrial clusters.
Key Words: MNCs; value chain; industrial clusters; international competitiveness

Positive and Negative Effect on Industrial Clusters and the Approach to Eluding the Latter
SUN Guo-feng, GAO Yan-chun
(Nanjing Audit University, Nanjing 210029, China)
Abstract: Currently, industrial clusters has been becoming the mainstream of regional economy development. When the centralization effect is exerted by industrial clusters, the negative effect cannot be neglected. The positive and negative effect of industrial clusters at different stages of the life cycle is analyzed. Then, the approach to eluding the negative effect if put forward in the paper.
Key Words: industrial clusters; the positive and negative effect; elusion approach

An Innovative Research on the Financing Management of SMEs
——Based on the view of stakeholders’ value
ZHAO Hua
(School of Management, Changsha University of Science and Technology, Changsha 410076, China)
Abstract: Beginning with the exact definition of the connotation of the financing management mechanism of SMEs, this paper first analyses the effective operation and integration mechanism of the financing management mechanism of SMEs, and then proposed five mechanisms for the financing management of SMEs Whicn are based on the view of stakeholders’ value, such as flexible financing management, the joint financial management mechanism, the contingent financial management mechanism, the balanced finance control mechanism and the enterprise risk management mechanism.
Key Words: stakeholders’ value; SMEs; financing management mechanism; innovation; integration-systematization

Game Theory of Check-and-Balance of Stock Ownership in Corporate Governance
WANG Jing-yong, XUE Li-da
(Management Department, China University of Mining and Technology, Beijing 100081, China; School of Accounting, Nanjing Audit University, Nanjing 210029, China)
Abstract: This paper first analyzes the behavior of controlling and non-controlling shareholders by static and dynamic game with the complete and incomplete information. We can get these results that first-best choice of the controlling minority lies in supervisory probability of non-controlling shareholders under static game with complete information; invasion of controlling shareholder is the best reaction to non-controlling shareholders with strategy under dynamic game with complete information; invasion is always chosen by controlling shareholder under dynamic game with incomplete information; and that the strategy (non-supervision, non-invasion) may be in existence under repeated game. Finally, some proposals are presented for the resulets.
Key Words: check-and-balance of stock ownership; game theory; incomplete information

Virtual Enterprise Information System of Integration Model Based on Web Services
CONG Qiu-shi, LIU Qiao-ling
(Nanjing Audit University, Nanjing 210029, China)
Abstract: From the characteristics of virtual enterprises and the dynamic integrated services, a kind of virtual enterprise information system integrated model based on web service is put forward. This model makes the virtual enterprise information system not only have a good dynamic reconstruction, integration and openness but also a good reliability and safety.
Key Words: virtual enterprises; EAI; web services

Main Contents of “the Chinese Appraisal Journal” (No.4, April 2007)

accountingview — Wed, 06 Jun 2007 05:53:00 GMT

Two instructions from Vice Finance Minster, Zhu Zhigang

In February, Vice Finance Minster and President of CAS, Mr. Zhu Zhigang gave instructions after reading Working Reporting of CAS Directors. He encouraged all the delegates to make the appraisal profession be respected by the society, to enjoy the reputation of professional integrity, and not to be ashamed to market economy.

In April, Mr. Zhu Zhigang instructed that: the key point of the profession is personnel. Only if are there high-quality personnel, excellent valuation reports could be produced. Thus, we should strengthen professional training and continuing professional education, making outstanding personnel scientifically, regularly and effectively.

Assets Valuation will exert a Profound Influence on the Reform of Forestry Property Right System

Interim Provisions for the Management of Forest Resources Assets Valuation was successfully issued by Ministry of Finance and State Forestry Administration. In order to help audience understand and master these interim provisions, Appraisal Journal of China invited experts to explain several issues with respect to the range of forest resources valuation, qualification of valuation subject and related requirements.

Main Contents of “the Chinese Appraisal Journal” (No.3, March 2007)

accountingview — Tue, 05 Jun 2007 03:11:00 GMT

Current development and its implication of fair value valuation in Germany and UK.(by CAS fair value studying delegation to Germany and UK.)

Theory and its application about coefficient βin the income method of valuation

Valuation and financial consulting in acquisition of ports

Business valuation on “large companies in possession of several small companies” of fire power electricity companies
After implementing the “large companies in possession of several small companies” technical transform project, the new small companies need to be performed valuation in order to solve out the problem of “multi-system in one factory”. During the valuation process, the value types should be identified. Moreover, it should be fully considered the influence of leases, maintenance and management of the delegation of operation, and other aspects which may influence business value. This article analyzed the life cycle of large size fire power electricity generating unites. Further, it proposed a “three-phase model” to calculate the income of fire power electricity companies.
The analysis of market environment in business valuation

Some ideas about expanding the valuation business
This article analyzed the deficiencies of ideas, theory and recognition in current valuation profession, as well as the results of low-level performance of valuation practice. It states the necessity of understanding the functions and needs of valuation. Moreover, it emphasizes that valuation services should include valuation, valuation consulting and valuation review types. Valuation profession on one hand should restore the bad practice environment resulting from department segmentation through legislation, on the other hand, should change the old concept, build the platforms of human resource, information and technical service, and finally realize the goal of raising valuation practice level.

Discussions on valuation methods for forest resources in Yichun

Discussions on the profit present value method and group valuation model on forest resources
Yichun first carried out the reform of forestry property right system. Forest resource valuation is critically important to make sure the reform successful. However, the application of the obtaining of present value method is a difficult phase during the valuation. How to identify the net income and the comprehensive adjustment multiple of the forest quality differences, and how to increase valuation efficiency on the basis of ensuring valuation quality are key in the obtaining of present value method. With his practical experience, the author proposed his ideas on the above-mentioned questions.

Discussions on some issues in the application of regression equations
Econometrics has been more frequently applied in valuation practice. However, after analyzing the valuation cases using regression equations, the author finds out that some regression equations themselves have problems and thus may lead to errors in valuation results. Taking two cases using regression in the book Business Valuation Case Study as examples, this paper pointed out some problems of applying regression in valuation as well as several attentions and procedures which should be considered during the valuation process.

The adjustment of factors in the transaction case comparison method on non-performing financial assets valuation

Discussion on valuation of compensation amounts of non-performing financial creditor’s rights

Discussion on the valuation of corporation qualification

Taxation and accounting measurement on the valuation result of enterprise restructuring

The application of gray system theory in valuation forecasting

On behalf of IVSC the representatives of CAS attended roundtable meeting on fair value measurements held by IASB and FASB

Main Contents of “the Chinese CPA” (No.4, April 2007)

accountingview — Fri, 25 May 2007 02:29:00 GMT

Special Report
CICPA Secretary-General Chen Yugui Attended a Media Interview on CSRC’s Decision to Withdraw Supplementary Audit
Working Meeting on Nationwide CPA Training Convened by CICPA
CICPA Issued CPA Training Programmes in 2007

Laws and Policies
An Introduction of the Administrator System in the Bankruptcy Law
Professional Training
Thoughts on the Development of CPA-oriented Accounting Major in Chinese University Education
Risks Associated with Public Misperceptions on CPA’s Professional Opinions
Act against Bribery within Accounting Profession

Auditing & Assurance
Implementation of the New Accounting and Auditing Standards: A Positive Approach from the Perspective of CPAs
Characteristics and Application of Auditing Standards on Analytical Procedures
Suggestion on Implementation Risk-based Auditing

Accounting
Bill-related Issues Involved in the Compilation of Cash Flow Statements

Case Study
Two Lawsuits Arising from a Verification Report on Capital Contribution
Unhealthy Partnership Structure Leading to Failure of CPA Firms

Theoretical Research
The Logic of Auditing Procedures
Discussion of Continuous Auditing
Distorted Disclosure of Financial Information by Listed Entities

Overseas Experience
CPA Competence Requirements in the EU, Italy and France

Main Contents of “the Chinese CPA” (No.3, March 2007)

accountingview — Thu, 24 May 2007 05:50:00 GMT

Auditing & Assurance
Establishing Professional Standards of Audit Sampling to Control Detection Risk in Practice
Commercial Bank Auditing from a Perspective of Modern Risk-oriented Auditing
Pay Attention to Assets Misappropriation in the Business Restructuring Audit
Auditing Inventory Accounts with a Red Balance
Auditing Methodology Differences Between China and Overseas

Taxation
Issues on Value-added Tax in Physical Assets Valuation and Verification
Comparison of Tax Planning on Tax Merger and Tax-free Merger

Consultation
Comparison among Three Typical Internal Control Valuation Approaches by CPAs
Some Thoughts on CPA Firms Developing Non-audit Services

Information Technology
Introduction of Telereference based on Internet and Its Application in CPA Firms
Influence of Information Technology Development on Modern Auditing

Case Study
Cases and Thoughts on Bank Confirmation Letter
On a Special Type of Fraudulent Verification of Capital Contribution
Thoughts on Related Party Transaction of Purchasing Trademark Rights from Holding Shareholders

Internal Governance of Accounting Firms
High Quality and Good Service could Make Small-sized CPA Firms More Competitive
Firm Culture is the Root of CPA Firms being Stronger and Bigger

Theoretical Research
Sociological Implication of Accounting Professionalization
System Environment and Auditor Independence
Analysis of the Evolution of Auditing Standard on Auditor Reporting in China
On the Justice of Auditing

Overseas Experience
Analysis of Top 25 of International Accounting Firms
Brief Introduction to CPA Competence Framework of CGA