China banks speed accounting control-Ernst

BEIJING, March 14 (Reuters) China's large state banks are moving quickly to establish independent and effective internal audit units that will meet international standards, accounting firm Ernst&Young said today.

''I think it is possible within five years,'' Alfred Yeung, a global financial services partner at the U.S.-based firm, told reporters.

Yeung based his optimism on the level of commitment seen from banks' top management, as well as on external pressure from regulators, markets and rising competition.

However, Ernst&Young said Chinese banks typically have only one percent of their total staff dedicated to auditing duties, much less than the two to five percent at global peers.

In addition, the accounting firm said the lack of a sound internal auditing system is not enough of a reason for delaying the initial public share sales of banks such as Bank of China and Industrial and Commercial Bank of China, both of whose IPOs are expected later this year.

''The banks' have already established the framework for internal auditing and corporate governance controls,'' said Yeung. ''There is no need to delay the IPOs.'' ICBC is an auditing client of the U.S. company.

China will open its financial doors further to outside competition at the end of 2006, when promises made in order to enter the World Trade Organisation take effect.

REUTERS SR BST1840