Source:《Economia》January 2017

Author: Liu Qin

Computers were invented in the 1940s, but they were not used for company management and accounting in China until the late 1970s. After more than 40 years of continuous development, digital technologies, including the recent wave of AI, big data processing, mobile technology, cloud computing and the Internet of Things, have spread to all aspects of management and organisations in China. In accounting, its application has developed from double entry book-keeping to comprehensive financial accounting and integrated financial reporting. This has led to improved decision-making, and organisational change. There are ten development trends in the Chinese Accounting Information System (AIS):

1.Business and Accounting Function Integration 

Finance, business, and management functions will become fully integrated, supported by the AIS, supporting the unity of business and accounting standards, information pooling and sharing, real-time and synchronised processing.

2.Moving to Automation

China is moving to complete automation of source document, journal entry, accounting records and financial reporting. ERP is already widely used, so the process from accounting records to statements is fully automated. However, automating processes from original voucher to accounting voucher, and from accounting records to financial reporting is still under way.

3.Integration of Internal and External Systems

We are integrating organisations’ AIS with those of its suppliers and customers, the information systems of its external regulators (such as tax authorities and securities regulator), and of other counterparties (such as airline companies and hotels). The main challenge to achieving such integration is the standardisation of information.

4.Mobile Technology and Multiple User Interfaces

AIS operating terminals are now diversified and mobile, from computer rooms to personal computers, laptops, mobile phones, iPads and other mobile devices. The challenges for such mobile terminals include achieving compatibility of software and hardware across networks and data security.

5.Customised Information and Bespoke Services

Organisations will provide financial and accounting information through different channels for different users, such as banks, tax authorities, statistics bureaus, finance offices/ministries, stock exchanges and investors in order to satisfy their specific needs.  Care is needed to ensure that information is delivered accurately and completely without unnecessary security risks.

6.Accounting Standards, Global Application 

Financial shared services centres will progress, and staff will process financial data of different organisations from many countries and regions with different languages, reporting standards, taxation laws, currencies and cultures. Understanding how to translate the differences into practice will need in-depth knowledge and certain flexibility. 

7.Standardised Accounting Information

Standardisation of accounting information can be realised by convergence to international accounting standards and by the use of tools such as XBRL. The standardisation of accounting information can solve the problem of “information silo”, in order to achieve effective comparison and analysis.

8.Shared Service Centres

Through financial shared services centres, accounting functions and information systems could be offered to not one but many organisations. Another way to achieve sharing is to have bookkeeping agencies provide services to SMEs through cloud accounting system.

9.Increased Risk Exposure

AIS has now moved from PC to LAN, intranet, and cloud. This has led to increased exposure to the risk of hackers, viruses, network breakdowns and software or hardware faults. IT governance needs to be strengthened to mitigate these risks.  

10.Clouding Information System Platform(ISP)

AIS will be gradually moved to the cloud, organisations can carry out their management and decision-making activities by their private ISP or public ISP offered by third parties. Nevertheless, due to concerns over security, data privacy and other factors, the process of clouding ISP might take a much slower pace than expected.

In summary, in China, with the development of information technologies, the broad application of AIS will break down the boundaries between business and finance disappear. Professional accounting institutions will be more centralised, finance and accounting functions will merge into a single large data processing function. We expect to see a sharp increase of investment in security for information systems, and demand for entry level bookkeepers and auditors will decline.