fbpx

Type to search

China Strengthens Supervision of Accounting Firms in Fight Against Fraud

Following a string of confidence-sapping fraud scandals, regulators extend their reshaping of national economic rules to book keepers


Chinese President Xi Jinping, right, and former president Hu Jintao attend the closing session of the 19th National Congress of the Communist Party in Beijing in Oct 2017. Photo: Jason Lee, Reuters.

 

China’s regulators have turned their gaze on stamping out fraud following a string of scandals that undermined investor confidence in the nation’s financial sector.

Officials said Monday they will tighten scrutiny over accounting firms in a fight against financial forgery, vowing “zero tolerance” toward misconduct.

The guidelines, published by China’s State Council, or cabinet, come as Beijing launches a flurry of regulatory crackdowns against sectors ranging from consumer technology to tutoring.

China will publish detailed rules on the supervision of accounting firms, and will increase the frequency of inspections, while stepping up punishment, the guidelines said.

It will also crack down on misconduct including unlicensed accounting, online hawking of auditing reports, and leakage of confidential information, the State Council said.

Dented Confidence

Meanwhile, Chinese regulators will cooperate on cross-border supervision of accounting and auditing, in a bid to safeguard China’s economic and information security.

China is stepping up efforts to open its stock and bond markets to global investors, while also channelling household deposits into the country’s capital markets to help fund innovation and economic growth.

But investors’ confidence has been dented in recent years by a slew of scandals, including high-profile accounting fraud by Kangde Xin Composite Material Group and Kangmei Pharmaceutical.

China’s State Council said on Monday that accounting firms have not fully played their role as “gate keepers” of capital markets, which have often witnessed cases of financial forgery and inaccurate accounting information.

Securities Watchdog

The guidelines didn’t provide specifics regarding cross-border cooperation, only saying the move would help enhance China’s international credibility and influence.

China’s securities watchdog said on Friday it would create conditions to cooperate with the United States on auditing supervision.

Washington plans to delist Chinese firms listed in the United States that fail to meet its auditing requirements.

 

  • Reuters, Mark McCord

 

Also on AF

Chinese banks say 560 million people have ‘zero’ in accounts

China may let US audit SOEs to resolve accounting dispute

Tags:

Mark McCord

Mark McCord is a financial journalist with more than three decades experience writing and editing at global news wires including Bloomberg and AFP, as well as daily newspapers in Hong Kong, Sydney and Melbourne. He has covered some of the biggest breaking news events in recent years including the Enron scandal, the New York terrorist attacks and the Iraq War. He is based in the UK. You can tweet to Mark at @MarkMcC64371550.