USASBE 2008 Proceedings - Page 0557
globalization leads to changing values and makes life too fast and impersonal, and (5) 72% of Asians feared that globalization could threaten local traditions and culture.
For many companies, international expansion is a way to build on competitive advantages and explore unique opportunities (Capar & Kotabe, 2003). Many entrepreneurs have been attracted to the Chinese business landscape (The Economist, 2004).
In countries around the world, entrepreneurs expanding their business on foreign shores need to be sensitive to the dynamics of the operational business environment. According to Li (1998) government transformations in China have been dramatic and hard to comprehend. In addition, entrepreneurs have to be cognizant of disparity of business practices. Many business practices in China have been shaped by its long history and remain anchored on its culture (Su & Littlefield, 2001). Many business practices also tend to be politicized (Steidlmeier, 1997).
ACCOUNTING PRACTICES IN CHINA
Culture and tradition have a role to play in the divergence of accounting practices. For instance, in China, while many businesses maintain proper accounting records, some of the systems used require thick manuals and incorporate provisions that are confusing (Economist, 2007). In addition, the business landscape has been characterized by documented cases of corruption, poor planning, little regard for shareholder rights, and even market manipulation (Tam 2002, Chandler, 2004). Information accuracy is an issue in China. One accounting challenge that exists in the country relates to the availability of adequate and accurate information to make informed decisions (Chang, 2001). Another challenge exists in the auditing systems where substandard viewpoints from auditors were noted. (Tang et al, 2000).
In the Chinese culture, the emphasis on relationship building or guanxi (Li, J. & Wright, 2000) can lead to business approaches that are divergent from Western practices. Guanxi is often utilized to further one’s position or business (Xin & Pearce, 1996 ; Leung & Wong, 2001). It might lead to the release of private information, expedited work, and even faster debt collection (Barnathan, et al, 1996). A study has indicated that guanxi in China can add anywhere from 3- 5% to business costs (Oriental Daily News, 1993).
Szeto, Wright, & Cheng (2006) depicted the Chinese environment as one where business ethics and guanxi clash, as accountants are driven to operate closer to Western standards by the need for better quality professional appraisal of control systems and reports and more complex technology. In fact, Tsui and Windsor (2004) observed that ethical reasoning scores of Chinese auditors were lower than that of their Australian counterparts.
Aside from culture, the Chinese accounting environment is unique due to differences in accounting treatment and the economic environment (Choi & Levich, 1992). In addition, differences in currencies can be a factor in accounting. While the yuan has been relatively stable in recent years, confusion in conversions can easily arise specially among inexperienced practitioners.