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Interview With Zhu Jiandi, Chief Partner And Chairman Of Lixin Accounting Firm

2020/11/24 11:31:00 51

A Series Of Interviews With 30 People In China'S Capital Market In The Past 30 Years

Under the reform of registration system, IPO is becoming more market-oriented, which is a great opportunity for accounting firms. But at the same time, it also puts forward greater challenges, and the compaction intermediary responsibility has been raised to a more important position.

In the capital market, intermediaries including accounting firms are regarded as "gatekeepers" and are expected by many investors.

However, from Lantian shares in the early years to Kelon Electric appliances, to Furen pharmaceutical and kangdexin in recent years, a number of scandals involving financial fraud of listed companies have been exposed one after another, and accounting firms of all sizes have been pushed to the forefront of the storm.

For accountants, on the one hand, they are employed by the listed companies, on the other hand, they play the role of "finding fault" for the listed companies, which is a delicate positioning.

But it is worth affirming that at present, there are more than 40 accounting firms engaged in the audit of listed companies. Most of them can stand on the front line of the capital market conscientiously and contribute to the healthy operation of listed companies.

Under the reform of registration system, IPO is becoming more market-oriented, which is a great opportunity for accounting firms. But at the same time, it also puts forward greater challenges, and the compaction intermediary responsibility has been raised to a more important position.

How to further improve the professional ability of accountants? How to define the accountant's responsibility? How to improve the quality of listed companies from the perspective of intermediaries? In response to the above problems, recently, the 21st century economic reporter conducted an exclusive interview with Zhu Jiandi, the chief partner and chairman of bifin accounting firm.

In the current domestic market, Lixin Accounting firm is firmly in the leading position. Since 2001, it has been ranked first in the number of audit reports issued by accounting firms in China. Zhu Jiandi has been engaged in the CPA industry for 33 years, and served as the executive director of the Chinese Institute of certified public accountants, the president of the Shanghai Institute of certified public accountants, member of the internal control committee of the Ministry of finance, and member of the Accounting Information Committee of the Ministry of finance. At the same time, he was also a deputy to the 13th National People's Congress, offering advice and suggestions for the audit industry.

First, the secret of controllable quality: risk

21st century: with more than 90 years of history, how did Lixin develop step by step? What kind of opportunity did you enter Lixin?

Zhu Jiandi: in 1927, Mr. Pan Xulun founded an accounting firm, which was named "Lixin Accounting firm" by borrowing the meaning of "people do not trust, but do not establish" in the Analects of Confucius. Since 1928, Lixin Accounting School was founded. Therefore, the development of Lixin is to have first and then to have schools.

The development of China's audit market is still relatively short. Due to various influences, the accounting firms were suspended for a period of time. Until the 1980s, when foreign-funded enterprises were constantly pouring in, the "three-capital enterprises" gradually developed in China. After China's reform and opening-up, China needed the witness of Accountants in accordance with international practices. At this time, Mr. Pan felt that economic development needed this area He proposed to restore Lixin, which is also an important part of reform and opening up in line with international standards. At this time, accounting firms have sprung up. At that time, the state-owned system was still in the process of reform and opening-up, but we had to go further to strengthen the system. In 1998, there was a turning point in the fate of this industry. All the enterprises within the system must be completely decoupled and reformed.

As for me, I stayed in school after Lixin graduated in the 1980s, and then assigned to the office. Just at this juncture, let me choose whether to stay in school or to work in the office. At that time, it was quite contradictory, and with a lot of energy, I wanted to carry down the banner of Mr. Pan. In the face of further reform and opening up, and the development and construction of the entire capital market, I wanted to catch up with this era.

Originally, there was no idea at the beginning, and there was no pressure under the school system. Once the reform and opening up, I want to do something. The development of capital market has attracted me to further explore and improve from all aspects. In this respect, it is more and more extensive, just in time for the times. Later, we met with the capital market, from the listing of stocks, restructuring, issuance and establishment, there are many new things, because many people do not understand, the whole process is full of expectations and challenges.

Originally, we mainly served foreign-funded enterprises, and later served the entire listed company. Then, through everyone's efforts, from a relatively small-scale firm to a firm with 10000 people, it has gradually developed by taking advantage of the east wind of reform and opening up, relying on the platform of Lixin and the creation of predecessors. Now the brand has been handed over to me, and I know my responsibility well.

21st century: what role have accounting firms played in the growth of China's capital market?

Zhu Jiandi: the accounting firm is an important link in the forefront of China's reform and opening up, the most direct and direct face to the capital market. Accountants are the gatekeepers of the capital market, and we have witnessed the development of the whole market. At present, the business scope of Lixin in China's capital market is relatively wide. From the perspective of market development, Lixin always adheres to integrity and does not make false accounts. In the service process of Lixin, we feel the whole social environment, especially the expectations and requirements of medium and small shareholders for intermediaries and accountants. As a gatekeeper of the capital market, the more important thing is to "be honest and ethical".

Recently, China Securities Regulatory Commission (CSRC) proposed to promote the high-quality development of capital market by improving the quality of listed companies, which played a key role in guiding. At present, the registration system is implemented in an all-round way. From the promotion of the science and technology innovation board to the growth enterprise market, the future market will be very large. The market should be able to develop with the registration system as the core. The core of the registration system is information disclosure. Information disclosure is to fully disclose information, to be true, accurate and complete, to have a responsible and fair information disclosure to the public, so accountants will further strengthen this aspect.

21st century: Lixin will soon usher in the important moment of Centennial establishment. From the perspective of domestic leading companies, what do you think is the secret of a century old foundation?

Zhu Jiandi: it is not an easy thing to greet the centenary. We should rely on the joint efforts of all the believers. Under the changeable market framework of the capital market, as a Li Xin person, we always keep in mind that "risk is controllable, quality is the first", so we often put risk control in the first place. In order to achieve this goal, Lixin has strengthened the review procedures. It needs to pass the audit of multiple departments and further control through the risk control system, including the whole quality and technical standard system. Only by grasping the quality and grasping the main line, can we have a long-term foundation.

Under the reform of registration system, IPO is becoming more market-oriented, which is a great opportunity for accounting firms. -Gan Jun system

Industry competition: can't reduce quality, can't fight price war

21st century: human resource is a very important link for intermediary organizations including accounting firms. In terms of talent echelon construction and personnel daily management, how to ensure that there is no "pyramid rise" phenomenon?

Zhu Jiandi: as an intermediary or other enterprises, talent is the first priority. Especially in today's era, if an enterprise does not have an excellent talent training mechanism, it is difficult for the enterprise to carry on the inheritance. As for Lixin, on the one hand, it advocates the quality of risk control, on the other hand, it vigorously cultivates excellent talents. To this end, we have adopted various methods to recruit outstanding talents from the whole industry, including external recruitment and strengthening training. In recent years, the training strength of the whole firm is relatively strong. In the case of fierce market competition, we have the characteristics of Lixin, and retain talents through various ways such as career retention, treatment retention and emotional retention. We are pleased to see that outstanding talents including the top four are constantly pouring into Lixin, which will be a backbone force of Lixin in the next century.

21st century: judging from the ranking of the association in recent years, Lixin has fully possessed the strength of the four international PK. What do you think of this competition?

Zhu Jiandi: through the development in recent years, especially under the policy framework of the Ministry of finance, China Securities Regulatory Commission and China Association for injection of securities, through its efforts in recent years, we have basically been close to the four major income scales, and even exceeded one or two of the four major income scales in recent years.

But I don't think scale is important. Whoever can develop in this industry for a long time is the final winner. Therefore, we are indifferent. We are not pursuing scale. In the past two years, we have reorganized the projects. From the perspective of risk management and control, about 40 or 50 listed companies have been withdrawn from the market in 2019, and dozens more have been withdrawn this year. Through a natural structural adjustment, outstanding listed companies have been retained in Lixin, and some companies with poor quality or risk objection have been adjusted as far as possible 。 At present, we must be "stable". Only on the basis of "stability" can we go far. Therefore, at present, we are striving to gradually standardize the development and maintain it for a long time. For the current ranking, although we have reached this level, but we are also very indifferent, do not necessarily require the first, second.

Competition exists in fact. Without competition, social development will not move forward. Therefore, we believe that under a certain framework, moderate competition is normal. The key is to have a bottom line, grasp the risks and control the competition under this premise. At present, we should encourage competition, but we can't lower the price or reduce the quality to compete without cost conditions, which is very unfavorable to the development of the industry.

21st century: the whole company is a partnership, and some projects need to be adjusted. How to face the internal resistance from partners?

Zhu Jiandi: This is also a pair of contradictions, because from a partner's point of view, business development is a problem that he must consider; but from the overall situation, considering whether the firm can develop steadily, we have a set of strict screening and control system.

First of all, the partner does not meet the requirements of this partnership system in terms of ethics and competence. At present, we are very strict with the entrance of the project, and we have an internal accountability for the problems found in the process of project inspection and audit. This forces the partners to obtain excellent projects, or they must put the adherence to risk control in the first place, insist on the reasonable expression of audit opinions, and grasp the risk through our audit opinions. In terms of assessment, I think it has been highly responded by all partners. At present, the situation is relatively smooth.

21st century: how do you feel about the pressure of the company's business development after eliminating so many projects at once every year?

Zhu Jiandi: there is indeed pressure. Recently, a certain number of listed companies have been adjusted. This is a structural adjustment, and at the same time, it has also undertaken some high-quality companies. In addition, we have also absorbed a large number of high-quality listed companies through IPO, so the total amount has not decreased much, and will increase this year. On the whole, through internal structural adjustment and digestion, we are on the right path.

How to treat financial fraud: the key lies in the professional ability of Accountants

From the perspective of financial professionals in the early 21st century, can you see this kind of fraud?

Zhu Jiandi: some financial fraud events have had a great impact on the whole society, have also had a very bad impact on the whole capital market, and have a certain impact on our industry. As accountants, we feel very indignant.

From an accountant's point of view, to the present state, accountants help enterprises to cooperate in counterfeiting. I think this possibility is relatively small. Of course, there are some cases in which problems can be found through audit, such as income, cash flow, gross profit rate, high double loan, or equity pledge, capital occupation, etc., which are the phenomena of fraud in enterprises. As an accountant, you must keep your eyes open and be able to find problems. This is also a technical problem. You can see whether your professional ability is competent or not, as well as the bottom line of your accountant's professional ethics.

Audit has inherent risk, not omnipotent, do not take the accountant as a universal tool to adopt, this is also an abnormal phenomenon. Therefore, within a reasonable scope, we should express reasonable opinions through the implementation procedures of accountants themselves. I think this is what we should do. At present, there is a lot of pressure on the external audit agencies, but it is very difficult for the intermediary agencies to cooperate.

Last year, during the NPC and CPPCC sessions, I also called for severe punishment for those who have cooperated with counterfeiters. Now some financial institutions and even individual banks will cooperate with listed companies to make fraud. This puts forward higher requirements for accountants. The key lies in the professional ability of accountants. Listing now is really a huge interest challenge. At present, the society has developed to a certain stage. I think credit is the most important part. In the future, our country should establish a strong social integrity system. If we leave this system, it will be terrible to talk about and do a lot of things. Our industry is also the same, we should establish such a credit system. For Lixin, the first lesson for all of our new recruits is honesty. Be a man in advance and leave the basic rules. No matter how big you are, I don't want it.

21st century: Accountants sometimes play a more delicate role in the process of service. On the one hand, they should be open and fair. On the other hand, listed companies are employers. They may put forward some excessive requirements. How do you deal with the conflict between the two?

Zhu Jiandi: there are contradictions. On the one hand, we accountants are employed by enterprises. To put it simply, it pays. Part of the value of Accountants is also reflected through it. However, under this framework, I think that on the one hand, accountants should check according to the requirements of standards and risk orientation. On the other hand, we should adhere to the bottom line and independence in the process of facing interests. If we leave independence, it is very difficult to carry out the work. Independence is also our talisman. We insist that all relevant stakeholders must have an independent statement of commitment, otherwise in the process of judgment, your interests will be challenged and it will be difficult for individuals to make a reasonable judgment. Lixin requires all employees to have a commitment. Once they lose their independence, they should be punished internally.

21st century: do you think there are some common reasons for some big problems in the past few years?

Zhu Jiandi: the kangdexin incident last year sounded the alarm bell for the development of our industry. It's very sad to see this happen. The Ministry of finance has encouraged us to become bigger and stronger. Up to now, it has achieved fruitful results and cultivated a large number of accounting firms in China. The key is to implement the relevant requirements of the Ministry of finance, China Securities Regulatory Commission and China Securities injection Association, and do a good job in the internal control of the firm in the whole development process.

All the projects of Lixin are reported through the project management and control system. If the report is not issued or not, the president of risk control and technology will ultimately be responsible for the implementation and management. Without his nod, our report will not come out, which is also a check. Every big Institute has its own means to control risks, otherwise it will not be able to develop to today. Generally speaking, through the development in recent years, I think the development momentum of this industry is still good.

"21st century": a few years ago, a large number of Listed Companies in traditional industries hoped to be able to transform and upgrade to a better track, and carried out a large number of cross-border mergers and acquisitions, which led to the "thunder of goodwill" and brought a lot of trouble to accounting and auditing. What's your opinion on this?

Zhu Jiandi: it's not easy for listed companies to develop. I remember that in 2014 and 2015, many listed companies were cross-border M & A, and a wave of M & A emerged. Now looking back, there are some problems in the process of M & A of listed companies, especially the problem of goodwill, which has not been digested so far. In recent years, the key is how to use time for space to resolve goodwill.

For the listed companies, we should be cautious. Professionals should not cross-border or excessively cross-border as far as possible, and do not engage in unfamiliar business as far as possible. We have learned a lot in this respect. Transformation is necessary, but we must do what we are familiar with in the process of transformation. We have also dealt with several relatively large M & A cases. In the end, both sides were hurt. They really paid a great price, and the listed companies and small and medium shareholders lost a lot in the end. In the future, better treatment results may be obtained after 2-3 years of resolution.

21st century: a few years ago, Lixin encountered some negative events. What do you think of this?

Zhu Jiandi: objective evaluation, this is inevitable in the process of work, sometimes it is impossible to achieve 100% omission, the important thing is how to learn lessons. Then, in view of the problems found, we think about how to rectify them. Of course, there are some situations that need coordination and communication, especially under the framework of the existing standards, which requires all parties to work together. This also puts forward a higher requirement for supervision, and we should really understand the meaning of the guidelines. In the process, I don't think we can follow the result orientation blindly. I think that the view of "if the company has an accident, we should take the accountant" should be improved. We must have a reasonable sentencing. Therefore, we have always proposed accounting responsibility and audit responsibility, because the responsibilities of enterprises and accountants should be clear, otherwise there will be misunderstanding in supervision.

In the process of accountability, can we learn from foreign countries? Now we use a simple joint and several liability in our country. Once the joint and several liability is involved, the small and medium-sized shareholders often find a firm when they have no money and drag the firm into it. Foreign use is to supplement the proportion of joint and several liability, the execution of the parties first, not enough, and then punish the intermediary office. Penalty firms also have a prescribed proportion, which is not a simple joint and several full liability. In foreign firms, the upper limit of liability ratio is 20%.

We also hope to learn from foreign countries in this respect, otherwise it is difficult to cultivate large firms in this market. Especially after the registration system, once we meet one, the office can't bear it. Moreover, our domestic security system can't keep up with it. There is still a lot of room for development in this business. Overseas, this aspect is relatively mature, which is to resolve future risks through an insurance mechanism. But this aspect is immature in the domestic market, and insurance companies are not willing to intervene in this field. Because the market development is not very good, the executive liability insurance is not very good.

How to improve the quality of listed companies under the registration system: clubs should strengthen their own risk control system

"21st century": the new securities law has increased the intensity of punishment, and you also proposed to increase the intensity of punishment during the two sessions. From this point of view, has the new securities law met your psychological expectations?

Zhu Jiandi: as an accountant and a representative of the industry, I have always been concerned about our duties and have been following the development of the capital market. This revision of the securities law should be said to be more timely. We all pay close attention to the capital market punishment. Compared with the old and new securities laws, this time the intensity is much greater than that of the old one. But objectively speaking, as for the threshold, I think we can appropriately increase the punishment in the face of the capital market interest driven. Of course, there must be a process. I believe that the intensity of punishment has been enhanced through various administrative measures, including civil and criminal measures.

21st century: after the full implementation of the registration system, the whole IPO volume will be large. From the perspective of auditors, how to ensure the quality of listed companies?

Zhu Jiandi: the registration system is good for the market, but we should be cautious. I think it's very difficult, especially for the science and technology innovation board. In the face of the increasing market volume in the future, Lixin is at the head of the market. However, after the rapid development of the market, due to the limited production capacity, it is difficult to accept such a large market at once. If it is not eliminated, there will be problems in the future.

At present, we feel the rapid development of the whole market. In terms of IPO, it is also a great challenge for us to be able to do the work of the original three years in one year. On the one hand, from the internal constraints, strengthen their own risk control system, put forward higher requirements for our entire service system. On the other hand, we should strengthen the staff training and improve their professional competence. We should be able to find the problems existing in the listed companies and deal with them properly as far as possible. At the same time, through the implementation of the securities law in recent years, a number of listed companies or investors have been educated to recognize the situation. Those who fail to meet the standards should not be listed with diseases. Through the education of investors, a number of them can be stopped.

Of course, we should act according to our ability and not exceed our own strength. Therefore, we have restrictions on the management and control of partners. We do not encourage partners to do business beyond their resources and capabilities. To a certain extent, we will dissuade or stop his business undertaking to a certain extent, mainly dissuade some projects with low quality or beyond his ability to control, which is also the biggest difference between small and large firms. It is an objective rule that there will be a round of institutional reshuffle for the firms in the future. Large firms must do a better job in controlling their reputation.

21st century: what are your views and suggestions on improving the quality of listed companies?

Zhu Jiandi: China Securities Regulatory Commission has strong executive power in improving the quality of listed companies. How to improve the quality? The "six in one" and "six in one" need to be studied and dealt with. In particular, it involves some listed companies occupying funds and illegal guarantees. I remember that since 2006, the CSRC has been trying to find ways to deal with relevant matters, which has been regarded as a red line and has been rectified. However, due to external and internal factors, the illegal occupation guarantee of listed companies has rebounded in recent years.

In my opinion, the financial sector should still give time, policies, outlets and plans, including self-examination, self correction, and proper buffer period. Those who persist in counterfeiting must be severely punished. We need to prompt the listed companies, not to test the bottom line. With the further transition of market operation, the overall quality of listed companies is still rising, or it will develop better. After the regulation, the market will be cleaner.

21st century: the interests of investors are often damaged by some inferior companies. From the perspective of professional accountants, how should ordinary investors protect their personal rights and interests?

Zhu Jiandi: originally, Chinese shareholders, on the one hand, are concerned about the market, on the other hand, they are also concerned about information. However, due to the limitation of the source of information or the lack of understanding, especially the lack of understanding of the application and development concept of new technology, I think they should abandon an inherent thinking, analyze the new market according to new terms, and small and medium shareholders should also improve their own Ability to judge, constantly learn new framework, new policy. According to the traditional thinking, it can't keep up with it.

As an accountant, we should try our best to reflect the information disclosure of listed companies objectively and in real time to make the information more complete. Especially after the new securities law came out, on the one hand, it is to compact the intermediary responsibility, on the other hand, it also puts forward new requirements for investors.

Through the study of the new securities law, the future development of the capital market must be a healthy and sunny market.

What are the experiences of protecting overseas investors in the 21st century?

Zhu Jiandi: compared with the domestic market, the overseas market is relatively mature, because their top-level design framework is relatively mature, and the whole construction system is relatively perfect, and investors are more rational in all aspects. According to their own regulations, they are relatively standardized in the field of audit. We also do overseas listing, foreign countries pay more attention to the integrity of the system. There is also an investment perspective. They treat it more rationally, so there are still some differences in the regulatory concept, investor service and the requirements of some standards.

 

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