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LEGAL AND REGULATORY MODEL FOR THE AUDIT PROFESSION: THE UK AND CHINESE MODELS COMPARED



Author(s)

Joseph Lee

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DOI:10.17265/1548-6605/2014.01.003

The article discusses whether the UK’s liberal regulatory model for the audit profession could benefit China as it continues its reform towards a western-inspired liberal market economy. China has already carried out substantial reforms: the disaffiliation programme, audit industry consolidation, and the diffusion of international audit norms. However, substantial deficiencies in the Chinese audit profession remain, and corporate audit continues to lack credibility. Adopting a system modelled on that used in the UK could resolve these issues. However, if China chose to adopt the UK’s liberal regulatory model, it would not only require economic reform, but also structural reform to its political system. This would include removing conflicts of interest between the audit profession and companies controlled by public authorities; the development of an independent self-regulatory system accountable to the judiciary; corporate democratisation; the development of private enforcement and the introduction of an independent judicial system.