Date
18 October 2017
Ivan Au does not expect a large impact on Hong Kong audit companies because most of them already have mainland partners. Photo: HKEJ
Ivan Au does not expect a large impact on Hong Kong audit companies because most of them already have mainland partners. Photo: HKEJ

Auditors want specifics on China’s new audit rules

Industry players are seeking more details after China tightened regulations on foreign auditors.

The new rules, which went into effect on July 1, require foreign auditors, including those from Hong Kong, to cooperate with Chinese counterparts when working on listing or securities issuance projects for Chinese companies.

Companies owned more than 50 percent by Hong Kong, Macau or Taiwan entities that are seeking a public listing or planning to issue securities are exempt from the new policy. 

Previously, such restrictions were unclear

Ivan Au, division deputy president for Greater China of CPA Australia, told the Hong Kong Economic Journal that the new regulations are reasonable.

He does not expect a large impact on Hong Kong audit companies because most of them already have mainland partners.

Au said the new policy is intended to secure confidential and sensitive information such as state secrets.

It is the first comprehensive regulation after reports of irregularities by foreign players.

The finance ministry has received numerous complaints of such malpractice, according to reports which cited a source from its accounting department. 

This includes non-compliance with approval procedures and illegally taking out audit documents across the border.

The new policy requires such documents to be kept in the mainland and filings to be made to provincial financial authorities before foreign auditors can be allowed to do any audit work in the country.

Au said the guidelines are clear about the new policy but more details are necessary to ensure a successful implementation.

For instance, a company that operates in different mainland provinces should be able to tell which local authority it falls under.

He said a mechanism should be established to handle potential differences in the regulatory interpretation of the policy in different regions and in certain special cases.

A refined regulatory regime will benefit the domestic audit industry and support efforts to open up the sector, he said.

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MY/JP/RA

EJ Insight reporter

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