[China Accounting and Tax Column 003] Is an audit by an accounting firm necessary?

The purpose of an accounting audit is for an independent third-party accounting firm to evaluate the reliability of financial statements and other accounting reports and report the results. Depending on the accounting firm, it is common in China for the firm to prepare an audit report that includes the financial statements and notes based on the final financial results determined after the audit.
Companies established within the territory of China are required by the "Company Law of China" to prepare accounting reports after the end of each fiscal year and undergo an audit by an accounting firm as mandated by law.
In practice, the audit report is referenced for the preparation of corporate income tax returns, and when distributing profits, it may be required to submit it as supporting documentation for the allowable dividend amount to tax authorities, foreign exchange control authorities, or banks conducting remittance procedures, making it necessary for various processes.
Considering the corporate income tax return (due by the end of May of the following year), it is advisable to conduct the audit by around March of the following year and receive the audit report in April. However, since the fiscal year in China is set from January 1 to December 31, accounting firms are busy during that period, so it is recommended to request the accounting audit early.

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