Does accountant also hit price war?Regulatory action!State-owned enterprises, listed companies can only hire these accounting firms later

2022-05-17 0 By

The “price war” is affecting the influence and quality of the audit industry.On April 2, the General Office of the Ministry of Finance (MOF) publicly solicited opinions on the draft of the Administrative Measures on the Selection of accounting firms by State-owned enterprises and listed companies, aiming to regulate the selection of accounting firms by state-owned enterprises and listed companies, promote fair competition in the CPA industry, and promote the improvement of audit quality.It is proposed that when state-owned enterprises select accounting firms, the weight of quality management level in the selection mechanism should not be less than 40%, and the weight of quotation should not exceed 15%.In addition, audit fees should be adjusted dynamically. Audit fees can be reasonably adjusted according to consumer price index, social average wage level and business scale changes.CPA industry low – price competition phenomenon is serious, the overall performance of the industry is general.Statistics show that 8,600 accounting firms earned less than 100 billion yuan in 2020.From another point of view, the average audit cost of listed companies has only increased slightly over the years. According to the statistics of Securities broker China Reporter, the average audit cost of A-share listed companies in 2020 was 1.63 million yuan, while the average audit cost five years ago was 1.5 million yuan.Some insiders explain that, on the one hand, accounting is to attract customers to fight a “price war”, on the other hand, it is also related to the strength of Party A, many enterprises in the bidding will be “price” as the first standard of recruitment, and this price-oriented recruitment mechanism further leads to low price competition of accounting firms.With the deepening of the reform of “decentralization, regulation and service”, the problem of low-price competition accumulated for many years in the industry has gradually emerged. Some accounting firms undertake business at the cost of far less than the project cost, resulting in insufficient input of audit resources and difficulty in effectively ensuring audit quality.At the same time, because audit service quality is difficult to quantify or standardize, especially the design of the current bidding mechanism and the orientation of “the lowest price gets”, the average audit fee level shows a downward trend.In the bidding process, some enterprises directly regard audit services as goods procurement, and regard low price as the primary condition for recruitment.For example, the total assets of some enterprises increased by more than 200 billion yuan in the past 10 years, but the audit fees dropped by about 80%.Some enterprises in the audit bidding price factor weight as high as 60%, triggering malicious price competition, the final bid price compared with the last year decreased by up to 56%.From the perspective of supervision, low-price competition in the industry is prominent, which is not only reflected in the disruption of the market by some accounting firms, but also reflected in the neglect of the intellectual contribution and business complexity of CPA audit services by some enterprises, which encourages the low-price-oriented bidding environment and interferes with the normal practice environment and competition order of the industry.The regulator pointed out that low-price competition leads to the mismatch between audit fees and enterprise scale and economic development level, which is not conducive to accounting firms investing sufficient audit resources and stabilizing the industry talent team, reducing audit quality and damaging the social reputation of the industry.We have learned,Introduced the “measures for the management of state-owned enterprises, listed companies hiring of certified public accountants (draft)”, including the legislative basis, the definition, the responsibility of the audit committee, selecting mode, the file open and submit to apply for the hiring period, evaluation standard, bid evaluation, the substantial rotation, make, length of service public, audit fees, float, data saving, supervision and management, explain authority and effective date, etc.In order to combat the phenomenon of low-price competition, the selection method plans to make the following requirements: one is to set up a quality as the core of the selection mechanism.Centering on reducing the weight of price factors, the index weight of selecting accounting firms should be set scientifically, and the weight of quality management level should not be less than 40% and the weight of quotation should not exceed 15% in the selection of state-owned enterprises.We will guide enterprises to form a quality-oriented recruitment mechanism and effectively curb vicious competition at the source.Second, through the calculation formula to reduce the price is too high and too low points.In order to avoid the behavior of maliciously underpricing or abnormally high quotation interfering in the recruitment process of state-owned enterprises, the calculation formula of taking the average quotation as full mark and deducting points for higher or lower quotation is stipulated.The third is to increase the punishment of low – price competition.Strengthen the supervision of the implementation of the relevant regulations on recruitment, and take relevant supervision and management measures to the enterprises that violate the regulations and the accounting firms that compete at low prices.In fact, in 2021, Sichuan Institute of Certified Public Accountants invited 21 accounting firms to participate in the sasAC audit project with reasonable fees, and required the firms to regulate bidding behavior and resist low-price competition.According to Tang Lin, deputy secretary general of Sichuan Provincial Association of Notes, many firms in Sichuan province and Chengdu State-owned Assets Supervision and Administration Commission (SASAC) participated in the bidding for 2020-2022 financial final accounts and settlement auditing projects with low prices.According to the bid-winning result, the lowest discount is only 47% of the limit price. According to the bid-winning price of the firm, the firm may not be able to compensate reasonable resource input, and it is difficult to guarantee the quality of the bid-winning project.Part also said that last year, the Beijing institute of certified public accountants firm existence “audit fees significantly lower than the cost” “issue the business report number clearly beyond service ability” “is not the low quality of the practice of certified public accountants control and practice” “report” situations, such as individual firms and even sell “work with business intermediary batch report”,As a result, a large number of customers pay excessive attention to industry fees rather than service quality, and the operation of law-abiding accounting firms becomes more and more difficult. The consequences of “bad money driving out good money” will inevitably lead to the loss of the overall interests of the whole industry.Another important aspect of the selection method is that audit fees can fluctuate according to socioeconomic conditions and business scale.The regulator pointed out that the tenure of some accounting firms can be up to 10 years after they are hired, but the audit fee agreed in the engagement letter is fixed, which may lead to a substantial increase in audit investment but the audit fee remains unchanged.The selection method proposed dynamic adjustment of audit fees on the basis of full consideration of prices, social average wage level and other factors, audit fees can be adjusted reasonably according to consumer price index, social average wage level, business scale changes, to balance the rights and interests of both parties.Due to the serious phenomenon of “price war”, the growth of CPA industry is not high.In December 2021, the Chinese Institute of Certified Public Accountants released the comprehensive Evaluation and Analysis Report on Accounting Firms in 2020. There were 8,607 accounting firms in China, and the annual business revenue was 95.7 billion yuan.What’s the concept?The income scale of the whole industry is less than that of Yili Group in the same year (96.886 billion yuan).In terms of the audit fees of listed companies, according to the statistics of Securities broker China Reporter, the annual a-share audit fees in 2020 totaled 7.056 billion yuan, and the average audit fees of each listed company was 1.6342 million yuan.Five years ago, it was 1.498,500 won.That is to say, the average audit cost of listed companies has not changed in the past five years.In addition, to put an end to by “people take business”, “no substitutions” and avoiding the independence of regulatory requirements, and some measures of certified public accountants audit project director partner and signatures LunHuanQi and make an audit project director partner, signature CPA to undertake the same state-owned enterprises, listed companies audit business five years later, there should be 5 years to make,And the cooling off period is not affected by job changes (i.e. job-hopping).Source: Securities China review: Sun Shijian