In a decisive move to enhance financial transparency and accountability, China has introduced new regulations to strengthen oversight of foreign accounting firms operating domestically. The rules, effective immediately, place these firms under the direct supervision of the Ministry of Finance and the Public Securities Bureau.
Under the updated framework, foreign accounting organizations are now required to submit detailed annual business plans and operational reports to Chinese authorities. This marks a significant shift from the previous administrative guideline, which only mandated firms to file notices with the Ministry of Finance when engaging in domestic operations.
The crackdown comes in the wake of a record-breaking 441 million yuan ($60 million) fine imposed on PwC in September for its audit of the now-bankrupt property developer, China Evergrande Group. Investigations revealed that Evergrande had inflated its revenue by a staggering $78 billion, prompting heightened scrutiny of accounting practices within the country.
China’s move to tighten controls is part of a broader effort to address accounting failures and fraud in its financial system. Earlier this year, authorities initiated probes into intermediaries linked to Evergrande, further escalating regulatory pressure on the sector.
Additionally, the Ministry of Finance has ramped up inspections of the Big Four accounting firms—Deloitte, EY, PwC, and KPMG—over their work with Chinese companies. Sources reported significant regulatory investigations and a wave of client losses for PwC throughout 2024, underscoring the intensifying regulatory environment.
The latest rules reflect Beijing’s resolve to foster greater accountability and deter financial mismanagement, signaling stricter compliance expectations for international accounting firms operating in China.
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