This new rule is the “Measures for the Administration of Selection and Engagement of Accounting Firms by State-Owned Enterprises and Listed Companies” issued by the Ministry of Finance and other departments in February 2023.
This new rule refers to the “Measures for the Administration of Selection and Engagement of Accounting Firms by State-Owned Enterprises and Listed Companies” (hereinafter the “Measures”, 国有企业、上市公司选聘会计师事务所管理办法) issued by the Ministry of Finance and other departments on 20 Feb. 2023.
It had previously been reported by some media that China urges state firms to drop Big Four auditors. However, there is no sign of that in the Measures.
The highlights of the Measures are as follows.
- In principle, a state-owned enterprise (SOE) shall not engage the same accounting firm continuously for more than eight years.
- A partner of an audit project or a signatory certified public accountant that has actually conducted the audit business of the same SOE or listed company for five years shall not participate in the audit business of the same SOE or listed company for five consecutive years thereafter.
- SOEs and listed companies shall strengthen the examination of accounting firms’ information security management ability. For instance, they shall include a separate clause in the selection and engagement contract to specify the responsibility and requirements for information security protection and strengthen the management and control of confidential and sensitive information when providing documents and materials to accounting firms, so as to effectively prevent the risk of information disclosure. Accounting firms shall comply with the obligations of information security protection and standardize information data processing activities according to Chinese laws.
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Contributors: CJO Staff Contributors Team
