While Beijing wants to reduce the influence of Western auditors, data security worries have led Chinese officials to request that state-owned companies stop employing the four largest global auditing firms, according to Bloomberg News. According to the article, which cited persons who know the situation, Ministry of Finance of China is one of the governmental bodies that recently advised several state-owned firms informally to allow their contracts with PwC, EY, KPMG, and Deloitte to expire.
When contracts go up for renewal, offshore subsidiaries parent companies were advised to engage local Chinese or Hong Kong accountants rather than global auditors, one of the persons told Bloomberg.
China has intensified supervision in several fields
The Ministry of Finance did not immediately answer requests for a response from Reuters. The other top audit companies waited to answer, and PricewaterhouseCoopers (PwC) declined to comment. China has increased its monitoring in several sectors, including data regulation, to ensure that activities do not jeopardise its economic and national interests.
The second-biggest economy in the world, China, is currently decoupling from the largest, the United States, raising geopolitical tensions, which some business leaders are worried about. In September 2021, China put into effect its Data Security Law, which broadly obliges Chinese businesses and municipalities to classify data according to its importance to the economy and national security.
The Big Four, often known as Deloitte, PwC, Ernst & Young (EY), and Klynveld Peat Marwick Goerdeler (KPMG), are the top accounting companies in the world by revenue. According to data from the finance ministry, according to Bloomberg, they received 2.99 billion dollars ($20.6 billion) in income from all Chinese customers in 2021.
The stream has been reluctant to provide foreign authorities access to Chinese company audit documents
China has hesitated to allow offshore authorities to view the audit records of Chinese businesses listed in the United States without its consent, citing worries about national security. To let American securities regulators examine the documents in Hong Kong, the two parties came to an agreement last year. In December, the American accounting watchdog announced that it now has full authority to inspect and look into companies in China.
There will be “no loopholes” for accounting companies in China that are registered with her organisation, according to Erica Williams, chair of the U.S. Public Company Accounting Oversight Board, who made this statement on Wednesday.
She said, “Should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s complete access at any point in any way, the board will act immediately.”
