KPMG, one of the world's largest accounting firms, plans to enhance efforts to have countries adopt by 2005 a set of international accounting standards.
The move, which would replace several countries' different standards, is aimed at regaining investors' confidence.
The accounting industry must support the reform to restore trust among investors and the capital markets, Mike Rake, KPMG International's chairman, told Business Weekly.
KPMG believes many of the issues affecting accounting firms are global issues, which should not be dealt with in isolation on a country-by-country basis, Rake said.
Instead, he added, these issues should be dealt with through proper, independent regulations drafted by the accounting industry.
“One set of global consistent accounting standards should provide much of the transparency required by the capital markets,” said Rake.
“There is much work individual accounting firms can do to raise standards, increase transparency and ensure effective risk management systems are in place,” said Rake, who was attending KPMG's international executives committee last week in Shanghai.
The committee, which was reviewing KPMG's strategic direction and initiatives in China, was the company's first senior executive gathering in China since its entered the market decades ago.
KPMG officially opened its first Chinese mainland office in Beijing in 1983. It opened offices in Shanghai in 1986, Shenzhen in 1993 and Guangzhou in 1996.
KPMG Huazhen was established in 1992 to provide statutory audits and other services. KPMG was the first international accounting firm to launch a joint venture accounting firm in China.
KPMG has taken several significant steps to address public concerns over how the industry operates, such as revising its risk-management systems and working closely with governments and regulators in the countries where it operates to discuss sensible changes, Rake said.
KPMG is also working with audit committee members around the world to highlight corporate governance issues, Rake said.
KPMG and many other accounting firms are trying to win back investors' confidence, which eroded with frequent accounting scandals and the collapse of Enron.
KPMG separated its consulting practices earlier this year, and reduced the time for audit partner rotations in the United Kingdom and the United States from five to seven years – a move to weed out possible ill-practices.
KPMG has no plans to list, even though other accounting firms are undertaking initiatives to list their consulting arms. “We do not have such plans, and we will stick to the current partnership structure,” Rake said.
Marvin Cheung, chairman of KPMG's Hong Kong and mainland operations, said the company will target two groups of customers in China – multinational companies and large Chinese firms seeking opportunities outside China.
KPMG will also focus on financial institutions, as it has a lot of expertise in the sector, Cheung said.
KPMG, with expertise in serving international giants, such as Citibank and Deutsche Bank, is eyeing opportunities to help transform China's financial institutions.
KPMG is working with one of China's four largest State-owned commercial banks, and with one of the country's largest insurers to provide auditing, accounting and consulting services.
While KPMG officials declined to name the two firms, analysts have suggested the insurer could be China Life, the country's leading life insurer, which is busy preparing for a massive initial public offering in Hong Kong next year.
Experts believe that the China Construction Bank (CCB) is probably partnering with KPMG.
CCB is undergoing an aggressive restructuring ahead of a much-planned listing within five years.
“The Chinese banking sector promises to be one of the most dynamic and vibrant sectors in China in the next few years,” said Cheung.
“We hope to participate in the development of this sector, utilizing our global networks and expertise to assist our China clients.”
“Our business in China will grow by at least 20 per cent annually during the next 10 years. That will be powered by China's rapid economic growth and expansions of China's enterprises,” Cheung said.
KPMG's global business grew 3.9 per cent in the fiscal year ended in September, despite a continued global economic decline and widespread corporate scandals.