Annual Statutory Audit

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Introduction

What is Annual Statuary Report?

Why is it important?

Our Take

Annual Statutory Audit

The annual statutory audit is a crucial part of ensuring compliance with Chinese financial and accounting standards and maintaining transparency in the financial dealings of a company. Statutory refers to the legal requirement or obligation that the annual audit is conducted in accordance with the laws and regulations in China, including financial accounting standards and tax laws. The annual statutory audit is mandatory for some entities, such as listed companies or subsidiaries, but optional for others.

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What is Annual Statutory Audit?

An annual statutory audit is a comprehensive review of a company’s financial statements performed by a Chinese-registered Certified Public Accountant (CPA). The purpose of this audit is to ensure that the financial statements accurately reflect the financial position, operating results, and cash flow of the company in all material aspects. The audit report, which includes the auditor’s opinion, must conform to the Chinese financial accounting standards, commonly referred to as PRC GAAP. Local CPAs will follow PRC GAAP standards and can also prepare separate reports for the company’s management and also provide advice upon request.

Why is it Important?

An annual statutory audit is mandatory for listed companies, specific industries, and subsidiaries. In some instances, different tax authorities might require an annual audit. However, even if a company is not listed, there may be instances when it needs to present an annual statutory audit report to local authorities, foreign customs departments for visa purposes, potential customers, financial institutions, or overseas headquarters. If a company is applying for a bank loan, it must provide a 3-year audit. The report provides credibility to the financial information presented by the company and proves its financial stability.

In addition, an annual statutory audit is also a valuable tool for management to assess the efficiency and compliance of the company’s operations. A management letter from the auditor, which is included in the audit report, highlights any inefficiencies or non-compliances identified during the audit. This information can be used by management to make informed decisions and implement necessary changes to improve the company’s operations.

Our Take

As a professional consulting company, we strongly recommend that all WFOE’s in China conduct an annual statutory audit, even if it is not mandatory. The annual statutory audit provides a valuable opportunity to assess the financial stability of the company, ensure compliance with Chinese financial accounting standards, and identify areas for improvement in the company’s operations. We have a team of experienced professionals who can assist you in navigating the annual statutory audit process, ensuring that it is completed efficiently and effectively.

Ready to ensure your financial transparency and compliance with Chinese regulations?

Contact Sapience Pro today for expert assistance with your annual statutory audit.

Our experienced team will guide you through the process, providing valuable insights to enhance your operations and solidify your financial stability. Don’t wait – take proactive steps to safeguard your business and maximize its potential.

Reach out to Sapience Pro now and secure your company’s future success!

Thinking of opening a company in China?

Click the button below to download our FREE China WFOE Guide PDF.

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