Chinese authorities have urged state-owned firms to phase out using the four biggest international accounting firms, signaling continued concerns about data security even after Beijing reached a landmark deal to allow US audit inspections on hundreds of Chinese firms listed in New York.
The Chinese Ministry of Finance is among government entities that gave window guidance to some state-owned enterprises as recently as last month, urging them to let contracts with PricewaterhouseCoopers LLP (PwC), Ernst & Young, KPMG International Ltd and Deloitte & Touche LLP — collectively known as “Big Four” auditing firms — expire, people familiar with the matter said.
While offshore subsidiaries can still use US auditors, the parent firms were urged to hire Chinese or Hong Kong-based accountants when contracts come up, one of the people said.
Photo: Reuters
China is seeking to rein in the influence of the US-linked global audit firms and ensure the nation’s data security, as well as to bolster the local accounting industry, the people said.
Beijing has been giving the same suggestion to state-backed firms for years, but recently re-emphasized that companies should use other auditors than the Big Four, the people added.
No deadline has been set for the changes, and replacements might happen gradually as contracts expire.
Photo: AFP
The US Public Company Accounting Oversight Board in December last year completed its first-ever on-site work paper inspection of some of the largest Chinese companies and said it was able to sufficiently review audit documents during the trip to Hong Kong, which was hosted by PwC and KPMG.
The board is planning further reviews this year.
Getting shut out of Chinese state-owned businesses would be a blow to the accounting firms.
The Big Four earned a combined revenue of 20.6 billion yuan (US$3 billion at the current exchange rate) from all Chinese clients in 2021, the finance ministry said.
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