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With the scope and penalties of China’s social credit system being further clarified in 2021, legal and regulatory compliance has become more important than ever. More attention should be given to the annual compliance procedures as mandated by various governmental departments.

The start of a new year is a hectic time for foreign companies in China. To meet the various compliance deadlines scattered throughout the year, they need to begin the long and complicated process of financial reporting, months in advance. Failure to comply will risk them being hit with deteriorating credit, additional fines and penalties, and such companies might not be able to remit their profits overseas.

Beyond facilitating compliance requirements, the annual audit also presents an opportunity for the entity to conduct a deep dive into their finances and internal operations. A comprehensive audit might reveal unexpected irregularities or suboptimal business practices, or discover eligibility for tax incentives that had not previously been captured.

In this issue of China Briefing magazine, we walk foreign businesses through the annual audit and compliance process from start to finish. We begin by exploring the significance of annual audit on FIEs and how to prepare for an effective audit. Then, we offer a comprehensive step-by-step guide to completing the annual compliance process. Finally, we provide a comparison of the Chinese Accounting Standards (CAS) and International Financial Reporting Standards (IFRS), which lays the basis for GAAP conversion.

In this issue:

• Annual Audit in China: What is it and Why is it Important?
• How to Prepare for an Effective Annual Audit?
• Annual Compliance Requirements in China: What Do Companies Need to Know
• What are the Differences Between CAS and IFRS and How to Bridge Them?