Chapter 2 enrironmental influence on accounting development

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Field and Pendrill (1998), hypothesized that the reason why China’s accounting system needs to be reformed is because of the reform of China's economic system, which had moved from a centrally planned economic system to socialist market economic system. They illustrated some examples of economic changes such as foreign investment and joint ventures, state enterprises being given autonomy in their operational and financing activities, the setting up of the company with share capital and so on. Such changes in the economy necessitated changes in the accounting system.

Chan (1999), after briefly reviewing China’s accounting history, explicitly stated that “economic reform mandates changes and development in accounting rules, accounting practices, and accounting education”, “China’s accounting developments have already followed economic reform”. He illustrated that the re-prosper of China’s accounting profession, accounting professional organization, accounting education and so forth are all the result of response to the economic reforms.

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