Chinese Taiwan

The Taiwan Securities and Exchange Act (referred to as the Act) and the Taiwan Business Entity Accounting Law (referred to as the Law) sets financial reporting requirements for all companies in Chinese Taiwan.

Accounting Requirements

Under the Act, 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 and credit card companies. 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 following the Republic of China Generally Accepted Auditing Standards (ROC GAAS, reclassified and recoded as TWSA, TWSRE and TWSQC1 since December 15, 2022), which is developed by the ARDF and are converged with the 2021 International Standards on Auditing (ISA). Auditors in Chinese Taiwan 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.

There is a shared approach to the regulation of the accountancy profession in Chinese Taiwan, 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 national 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 only professional accountancy organization (PAO) in Chinese Taiwan. The FCPAACT is a national federation representing four group member associations: the Taiwan Provincial CPA Association, Taipei City CPA Association, Taichung City CPA Association, and Kaohsiung CPA Association. As prescribed under the Act, the FCPAACT is responsible for maintaining a registry of all CPAs and CPA firms in Chinese Taiwan, implementing CPD requirements for CPAs, establishing QA and investigative and disciplinary systems, and setting a Code of Ethics for CPAs.

Established under the Certified Public Accountant Act (the Act), the Financial Supervisory Commission (FSC) is the independent audit oversight agency in Chinese Taiwan. Article 3 of the Act also establishes the FSC as the statutory audit regulator in Chinese Taiwan, 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).

Federation of CPA Associations of Chinese Taiwan (FCPAACT)

The FCPAACT was founded in December 1946 and it is the only professional accountancy organization in Chinese Taiwan. The FCPAACT is a national federation representing four group member associations: the Taiwan Provincial CPA Association, Taipei City CPA Association, Taichung City CPA Association, and Kaohsiung CPA Association. 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 in Chinese Taiwan. 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 national ethical requirements.

In Chinese Taiwan, 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 May 2024, 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 in Chinese Taiwan. 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 management standards are adopted by both the FCPAACT and FSC as TWSQM.

Current Status: Partially Adopted

The Certified Public Accountants Act (the Act) establishes all initial professional development (ID) and continuing professional development (CPD) requirements in Chinese Taiwan. 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 May 2024, the IES are adopted.

Current Status: Adopted

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 in Chinese Taiwan. 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 audited following Republic of China Generally Accepted Auditing Standards (ROC GAAS, reclassified and recoded as TWSA, TWSRE and TWSQC1 since December 15, 2022), which are developed by the ARDF and converged with the 2021 International Standards on Auditing (ISA). The ARDF also refers to the International Standards on Review Engagements (ISRE) and International Standards on Assurance Engagements (ISAE) when developing Standards on Review Engagement (TWSRE), standards on Assurance Engagement (TWSAE).

Current Status: Partially Adopted

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).

In 2022, most of FCPAACT’s Code of Ethics was revised referring to the 2018 IESBA Code and continues to proceed with revisions in 2023. FCPAACT has no specific plans to adopt the 2022 IESBA Code at this time.

Current Status: Partially Adopted

Under the Accounting Act, the Directorate General of Budget, Accounting & Statistics (BAS) of the Executive Yuan 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.

Current Status: Partially Adopted

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 May 2024, 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

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 in Chinese Taiwan.

All public 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 credit cooperatives, and credit card companies. 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

Relevant Organizations

• Accounting Research and Development Foundation, Chinese Taiwan
• Federation of Certified Public Accountant Associations of Chinese Taiwan (FCPAACT)
• Financial Supervisory Commission (FSC)

Relevant Legislation

• Business Entity Accounting Act
• Certified Public Accountants Act, Taiwan
• Securities and Exchange Act, Taiwan
• Taiwan Company Act, Taiwan

Relevant Publications

• FCPAACT, Country Profile, February 2016.
• IFRS Foundation, “IFRS Application Around the World—Jurisdictional Profile: Taiwan,” June, 2016
• International Forum of Independent Audit Regulators (IFIAR), “IFIAR Member Profile—FSC,” 2018.