Chinese Taiwan

Member Organizations

Member Organization Associate

  Federation of CPA Associations of Chinese Taiwan

Legal and Regulatory Environment

• Overview of Statutory Framework for Accounting and Auditing

  Accounting Requirements

  In Chinese Taiwan, all public companies are required to prepare financial statements following the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

  All public companies (listed companies) are required to prepare financial statements in accordance with International Financial Reporting Standards (IFRS) as endorsed by the Financial Supervisory Commission (FSC), or with permission, IFRS as issued by the International Accounting Standards Board (IASB). The same rule applies to all financial institutions and “other financial institutions” such as credit cooperatives, credit card companies, and insurance intermediaries. The Act requires all non-public companies to either follow IFRS endorsed by the FSC, or Enterprise Accounting Standards (EAS). The EAS are developed based on the 2013 IFRS for SMEs.

  IFRS are translated by the Accounting Research and Development Foundation (ARDF) under the authority of the Securities and Futures Bureau (SFB), with endorsement provided by the FSC. The ARDF is responsible for reviewing and translating all accounting standards issued by the IASB, then submitting them to the FSC for endorsement to be applied in the jurisdiction. IFRS endorsed by the FSC are called the Traditional Chinese IFRS (TIFRS). TIFRS differ from IFRS issued by the IASB as some options have been eliminated and effective dates differ.

  Auditing Requirements

  The Company Act requires all companies, except companies with less than NT 30 million in equity of companies, less than net operating revenue by 100 million or less than 100 employees joined labor insurance are exempted since 2019, to have their annual financial statements audited. Auditors adhere to the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants, as prescribed by the FSC and Ministry of Economic Affairs when conducting audits.

• Regulation of Accountancy Profession

  There is a shared approach to the regulation of the accountancy profession in the jurisdiction, with multiple bodies in the jurisdiction holding regulatory responsibilities.

  The Certified Public Accountants Act (the Act) establishes the roles and responsibilities for Certified Public Accountants (CPAs) and CPA firms to follow in the jurisdiction. The Act also establishes the roles and responsibilities of the Financial Supervisory Commission (FSC) and the Federation of CPA Associations of Chinese Taiwan (FCPAACT) in the regulation of CPAs and firms.

  The CPA Act and the Professionals and Technologists Examinations Act establishes the pathways for individuals to become CPAs in Chinese Taiwan. Under both acts, individuals who choose to become CPAs must have a university or college degree, pass the CPA exam (administered by the Ministry of Examination), attain two years of practical experience, and become members of the FCPAACT before applying for a license with the FSC to practice. All CPAs and CPA firms must be members of FCPAACT and licensed with the FSC before being permitted to practice in the jurisdiction.

  Although the FSC, as the statutory audit regulator in the jurisdiction, is empowered to oversee auditors, including conducting quality assurance (QA) inspections, and investigating and disciplining auditors and firms that audit public companies if irregularities arise, it has delegated this responsibility to the Accounting and Auditing Supervision Division of the Securities and Futures Bureau (SFB). Other responsibilities of the FSC, as prescribed in the Act, include establishing initial professional development (IPD) and continuing professional development (CPD) requirements for CPAs, procedures for registering and licensing CPAs and CPA firms, and for public disclosure of registration materials. In addition, the FSC is responsible for approving accounting and auditing standards that are developed by the Accounting Research and Development Foundation (ARDF).

  The CPA Act establishes the role and responsibilities of the FCPAACT. The FCPAACT represents four provincial member associations. As prescribed under the Act, the FCPAACT is responsible for maintaining a registry of all CPAs and CPA firms, implementing CPD requirements for CPAs, establishing QA and investigative and disciplinary systems, and setting a Code of Ethics for CPAs.

• Audit Oversight Arrangements

  Established under the Certified Public Accountant Act (the Act), the Financial Supervisory Commission (FSC) is the independent audit oversight agency. Article 3 of the Act also establishes the FSC as the statutory audit regulator, empowered to conduct quality assurance (QA) and investigative and disciplinary (I&D) mechanisms for CPAs and CPA firms, with the goal of enhancing the oversight of CPAs and firms and improving the quality of financial reporting—all aimed at safeguarding the public interest. Currently, the FSC delegates the responsibility of QA and I&D of CPAs and CPA firms auditing public companies to the Accounting and Auditing Supervision Division (AASD) of the Securities and Futures Bureau (SFB).

  The other responsibilities of the FSC include issuing licenses to all CPAs, establishing initial professional development (IPD) and continuing professional development (CPD) requirements, approving accounting and auditing standards that are developed by the Accounting Research and Development Foundation (ARDF), establishing the process for the QA review and I&D of CPAs and CPA firms who audit public companies, overseeing the approval of sanctions on all CPAs and CPA firms in Chinese Taiwan who are found guilty of misconduct, and overseeing the supervision of financial reporting or securities registration and requirements.

  The FSC is a member of the International Forum of Independent Audit Regulators (IFIAR).

• Professional Accountancy Organizations

  The FCPAACT was founded in December 1946. The FCPAACT represents four provincial member associations. The objectives of the FCPAACT are to enhance the functions of CPAs, improve the operational abilities of CPAs, contribute to economic development, promote international exchanges of research and experience to the accountancy profession, and to develop the career of CPAs. Membership in the FCPAACT is mandatory for all CPAs and CPA firms.

  The FCPAACT’s responsibilities as established under the Certified Public Accountant Act include maintaining a registry of all CPAs and CPA firms, implementing continuing professional development requirements, establishing quality assurance (QA) and investigative and disciplinary (I&D) systems, and prescribing ethical requirements.

• Projects or Other Information

Adoption of International Standards

• Quality Assurance

  Both the Financial Supervisory Commission (FSC) and the Federation of CPA Associations of Chinese Taiwan (FCPAACT) share responsibility for quality assurance (QA) reviews of audits.

  The FCPAACT’s mandatory QA practice review function is outlined under the Certified Public Accountants Act (the Act). The FCPAACT’s Peer Review Committee conducts QA practice reviews on CPAs and CPA firms registered with the FCPAACT and this system is also monitored by the FSC. As of September 2020, the FCPAACT reports that most of the requirements of SMO 1 have been incorporated aside from the frequency of quality control reviews.

  Under the same Act, the FSC is responsible for conducting QA inspections for CPAs and CPA firms that have been approved to audit public interest entities. The FSC has delegated the function of these QA inspections to its Accounting and Auditing Supervision Division of the Securities and Futures Bureau (SFB). This QA system adopts a cycle and risk-based approach and is separate from that of the FCPAACT. In 2011, the FSC signed an arrangement with the Public Company Accounting Oversight Board (PCAOB) of the United States and alongside the SFB, conducts joint inspections. It is remains to be clarified if the FSC’s system is aligned with the best practices of SMO 1.

  Quality control standards, adopted by both the FCPAACT and FSC, are aligned with ISA 220 and ISQC 1, respectively.

  Current Status: Partially Adopted

• International Education Standards

  The Certified Public Accountants Act (the Act) establishes all initial professional development (ID) and continuing professional development (CPD) requirements. As prescribed under the Act, the Financial Supervisory Council (FSC) is responsible for administering all IPD in order for individuals to become Certified Public Accountants (CPAs), while the Federation of CPA Associations of Chinese Taiwan (FCPAACT) is responsible for implementing CPD requirements for CPAs. Local universities are responsible for establishing and administering the accounting degree programs that are required to be completed for individuals to enter the profession. The CPA exam, which is taken following the completion of an applicable university degree is administered by the Ministry of Examination.

  As of September 2020, a majority of the 2015 IES are adopted except practical experience requirements (IES 5) which still fall short. As the practical experience requirement is set out in the Act, the FCPAACT reports that it is exploring how to eliminate the gap and it is also collaborating with stakeholders to review and incorporate the revised IES issued in 2019.

  Current Status: Partially Adopted

• International Standards on Auditing

  Under the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants, the Financial Supervisory Commission (FSC) is responsible for establishing auditing standards to be applied. The FSC has however delegated its responsibility to the Auditing Standards Committee of the Accounting Research and Development Foundation (ARDF).

  The Company Act requires all companies to have their annual financial statements following local audit standards which are developed by the ARDF and are converged with the 2016—2017 International Standards on Auditing (ISA). The only exemption applies to companies who has less than NT 30 million in equity, less than net operating revenue by NT 100 million or less than 100 total employees. As reported by the Federation of CPA Associations of Chinese Taiwan (FCPAACT), the latest revised ISA are being reviewed for eventual adoption.

  The ARDF also refers to the International Standards on Review Engagements (ISRE) and International Standards on Assurance Engagements (ISAE).

  Current Status: Partially Adopted

• Code of Ethics for Professional Accountants

  Under the Certified Public Accountants Act, the Federation of CPA Associations of Chinese Taiwan (FCPAACT) is responsible for establishing ethical requirements for Certified Public Accountants, with approval by the Financial Supervisory Commission (FSC).

  The FCPAACT has developed a Code of Ethics for its members referencing the 2016 IESBA Code of Ethics. As of September 2020, the FCPACCT is reviewing the 2018 International Code of Ethics.

  Current Status: Partially Adopted

• International Public Sector Accounting Standards

  Under the Accounting Act, the Directorate General of Budget, Accounting & Statistics (BAS) has the responsibility to adopt accounting standards for the public sector. The current procedures and standards for public sector accounting were updated in 2019 with the publication of the revised Governmental Accounting Concepts Statements and Governmental Accounting Pronouncement. The FCPAACT indicates that the pronouncement refers to the IPSAS and follows best practices adopted by other jurisdictions. As reported by the FCPAACT, the pronouncement adopts a system of accrual-based accounting except for activities of the treasury which still follows a cash-based system. (IFAC, CIPFA 2018).

  Current Status: Partially Adopted

• Investigation and Discipline

  Under the Certified Public Accountants Act of 2009 (the Act), the Federation of CPA Associations of Chinese Taiwan (FCPAACT) is responsible for establishing an investigative and disciplinary (I&D) system for Certified Public Accountants (CPAs) and CPA firms under the oversight of the Financial Supervisory Commission (FSC).

  Chapters 6 and 7 of the Act sets out the disciplinary process and sanctions to be administered against CPAs who have been found guilty of misconduct.

  The FCPAACT is responsible for investigating all alleged acts of misconduct via its Discipline Committee (DC) and Professional Responsibility Investigation Committee (PRIC), and the committee recommends disciplinary actions to its Board of Directors for approval. Approved sanctions are then forwarded to the CPA Discipline Committee that operates under the FSC for final approval and, if necessary, to hear appeals by those found guilty of misconduct.

  In 2020, the FCPAACT conducted a review of its I&D system against SMO 6 requirements, and identified that the following gaps: timeframe targets for disposal of all cases; ensuring that the public is made aware of results of investigations; a process for an independent review of complaints where there is no follow up; and liaising with external bodies on possible serious violations that have occurred. The FCPAACT reports that depending on the individual circumstances of each case, a timeframe is only set once the case has been scheduled to be heard and for public interest considerations, the FCPAACT liaises with the FSC to determine the type of information that is made public on the FSC website.

  Additionally, the FSC is empowered to sanction auditors of public interest entities if a CPA or CPA firm refuses to participate in the QA review process of the FSC, the result of the QA review is substandard, or CPAs do not meet continuing professional development requirements as reported by the FCPAACT.

  Current Status: Partially Adopted

• International Financial Reporting Standards

  Under the Securities and Exchange Act, the Financial Supervisory Commission (FSC) and the Accounting Research and Development Foundation (ARDF) are responsible for establishing applicable accounting standards.

  The Act requires all public companies to prepare financial statements in accordance with International Financial Reporting Standards (IFRS) as endorsed by the Financial Supervisory Commission (FSC), or with permission, IFRS as issued by the International Accounting Standards Board (IASB). The same rule applies to all financial institutions, and credit cooperatives, credit card companies, and insurance intermediaries. The Act requires all non-public companies, to either follow IFRS endorsed by the FSC, or Enterprise Accounting Standards (EAS). The EAS are developed based on the 2013 IFRS for SMEs.

  IFRS are translated by the Accounting Research and Development Foundation (ARDF) under the authority of the Securities and Futures Bureau (SFB), with endorsement provided by the FSC. The ARDF is responsible for reviewing and translating all accounting standards issued by the IASB, then submitting them to the FSC for endorsement to be applied in the jurisdiction. IFRS endorsed by the FSC are called the Traditional Chinese IFRS (TIFRS). TIFRS differ from IFRS issued by the IASB as some options have been eliminated and effective dates differ.

  Current Status: Partially Adopted

Disclaimer

IFAC bears no responsibility for the information provided in the SMO Action Plans prepared by IFAC member organizations. Please see our full Disclaimer for additional information.