China aims to strengthen regulations in the certified public accounting sector, this is according to statements made by China’s Deputy Finance Minister Zhu Zhongming. This happens shortly after state firms in China were encouraged to not continue their contracts with the Big 4 Accounting firms and work with medium-sized and local Chinese auditors instead.
According to a statement made by the Chinese Ministry of Finance on 26 March 2023, in a meeting with the Deloitte Global Council Chairman, the Ministry had urged Deloitte to understand their mistakes and improve their audit quality. This stern warning was accompanied by a 3-month suspension on operations in their Beijing office and $30.9 million (RMB 212 million) for apparent lapses in the work conducted in the audit of bad-debt manager China Huarong Asset Management Co. (中国华融资产管理股份有限公司)
The Global Chair of Deloitte, Sharon Thorne, informed the Ministry that Deloitte will put together a plan to correct their mistakes and will improve the quality of their audit work.
Zhu Zhongming also stated that the Ministry of Finance in China will continue to improve the regulatory system and promote the rule of law for a more fair international business environment.
The deputy minister further stated that the Ministry will strengthen supervision of accounting and finance service providers and treat all firms operating in China equally. This comes in light of China encouraging state-owned companies to phase out the “Big-4” accounting firms in favor of other global firms and networks as well as local auditors.
While foreign firms are welcomed into the market, it is important for them to understand that the rules of engagement differ in China compared to Western counterparts, a rule that applies to all firms no matter the size.
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