Chinanews.com, August 26. The official website of the China Securities Regulatory Commission released on the 26th that the relevant person in charge of the China Securities Regulatory Commission answered reporters' questions on the signing of the China-US audit and supervision cooperation agreement.
The details are as follows:
1. Q: What is the significance of signing the China-US Audit and Supervision Cooperation Agreement?
A: The signing of the Sino-US audit supervision cooperation agreement is an important step for the two sides to solve the Sino-US audit supervision cooperation issue. It establishes a supervision cooperation mechanism for the two sides to carry out daily inspections and law enforcement cooperation on accounting firms within the scope of mutual supervision. , which lays the foundation for the two sides to carry out equal and efficient cooperation in the next step under the premise of complying with their respective legal regulations and regulatory requirements, and is in line with the international common practice of capital market regulatory cooperation.
The audit supervision cooperation between China and the United States has positive significance for improving the practice quality of accounting firms and protecting the legitimate rights and interests of investors, and also helps to create a good regulatory environment for enterprises to carry out cross-border listing activities in accordance with laws and regulations.
2. Q: What are the main contents of the Sino-US audit supervision cooperation agreement?
A: The China-US audit and supervision cooperation agreement signed this time is based on the Memorandum of Understanding on Law Enforcement Cooperation in 2013 and the Memorandum of Understanding on Pilot Inspection Cooperation in 2016, in accordance with the domestic laws, regulations and regulatory requirements of both parties, and with reference to relevant international practices. The cooperation experience of the two parties was reached after repeated consultations.
The cooperation agreement mainly makes specific arrangements for the two parties to carry out daily inspections and law enforcement investigations on the cooperation of relevant accounting firms, and stipulates important matters such as the purpose of cooperation, the scope of cooperation, the form of cooperation, information use, and specific data protection.
The cooperation agreement includes the following key contents: First, establish the principle of reciprocity.
The terms of the agreement are equally binding on both parties.
Both China and the United States may, in accordance with their statutory duties, conduct inspections and investigations on relevant firms within the jurisdiction of the other party, and the requested party shall try its best to provide adequate assistance to the extent permitted by law.
The second is to clarify the scope of cooperation.
The scope of the cooperation agreement includes assisting the other party to carry out inspections and investigations of relevant firms.
Among them, the scope of assistance provided by the Chinese side also involves some Hong Kong firms that provide audit services for China concept stocks and whose audit manuscripts are stored in the mainland.
The third is to clarify the way of cooperation.
The two sides will communicate and coordinate the inspection and investigation plan in advance. The U.S. side must obtain the audit papers and other documents through the Chinese regulatory authority, and conduct interviews and inquiries with the relevant personnel of the accounting firm with the participation and assistance of the Chinese side.
3. Q: What is the purpose of carrying out cross-border audit supervision cooperation?
A: When companies issue securities and go public in the capital market, they should regularly publish financial reports to provide information for investors to make informed decisions.
The laws and regulations of various countries require accounting firms to audit relevant financial reports, and require regulatory agencies to supervise relevant accounting firms to ensure that they perform their duties as "gatekeepers" in accordance with laws and regulations, improve the quality of capital market information disclosure, and maintain investment. the legitimate rights and interests of the parties.
In the case of cross-border listing of companies, local accounting firms that provide audit services for these companies generally need to be registered in the listing place and be supervised by the regulatory authorities in the listing place.
Since these firms may be located all over the world, in order to supervise them, the regulatory authorities of the listing places must establish a cooperation mechanism with the local regulatory agencies of the relevant firms to carry out cross-border regulatory cooperation, which is a common practice in the global capital market.
If the cross-border audit supervision cooperation cannot be effectively carried out, it will be difficult to be sure whether the audit work of the relevant firm meets the regulatory requirements, and the quality of the financial reports of the relevant listed companies will lack a layer of guarantee, which will cause investors to question, and even according to the laws and regulations of the listing place, the securities of the relevant companies Unable to continue listing and trading there.
With the gradual deepening of the two-way opening of China's capital market, the cross-border listing of enterprises and the cross-border development of accounting firms have become more frequent. At present, more than 200 Chinese companies are listed on the US capital market, and more than 30 domestic accounting firms are registered with PCAOB. , able to provide audit services for Chinese companies listed in the United States.
In order to perform the audit and supervision duties of the above firms, PCAOB needs to establish cooperative relations with Chinese regulatory authorities and implement cross-border regulatory cooperation.
Similarly, if Chinese regulators need to implement audit supervision on US accounting firms within their own supervision, they must also do so through the supervision cooperation mechanism.
This is international practice, and both sides need this mechanism.
Retaining the listing of Chinese concept stocks in the United States is beneficial to investors, beneficial to listed companies, and beneficial to both China and the United States. It is a win-win institutional arrangement.
This is an important basis for the two sides to sit down and negotiate and reach an agreement.
4. Q: What is the role of audit working papers in cross-border audit supervision cooperation?
A: The supervision of accounting firms will inevitably involve audit working papers.
Taking daily inspection as an example, in addition to inspecting the internal control system of accounting firms, regulatory agencies also need to spot-check the audit working papers of some listed companies to test the quality of the firm's work.
The audit working papers are the “work records” made by the firm during the audit process, including the audit plan formulated, the audit procedures implemented, the relevant audit evidence obtained, and the audit conclusions reached.
The main function of audit working papers is to record whether auditors have dutifully verified the accuracy of financial information such as corporate income and expenditure in accordance with auditing standards, and therefore generally do not include sensitive information such as state secrets, personal privacy, or underlying corporate data.
It should be noted that the direct object of audit supervision is the accounting firm, not the listed company it audits.
Judging from the international practice of cross-border audit supervision cooperation, the regulatory agencies in the place of listing generally select some accounting firms for inspection every year, and randomly check audit projects that are representative or have potential audit quality risks among the listed companies audited by the audited firms. Validated to assess the quality of the firm's audit work.
The same is true for China-US audit supervision cooperation, and there is no need to inspect all audit projects of US-listed companies every year.
5. Question: Under the framework of the cooperation agreement, if the audit working papers contain some sensitive information, can they get the necessary protection?
A: In recent years, my country's data security law, personal information protection law and other information security related laws and regulations have been implemented one after another, and the information security responsibilities of relevant market entities have become clearer, and there are more rules to follow in operation.
Enterprises, whether listed or not, are obliged to strictly abide by the laws and regulations of their own countries.
Recently, the China Securities Regulatory Commission and other departments have improved the relevant confidentiality and file management regulations for overseas listings, put forward clear requirements for standardizing the information security management of audit working papers, and further implemented the main responsibility of listed companies for information security. The regulated storage and handling of confidential sensitive information provides more detailed and executable guidelines, which are helpful for the preparation of manuscripts under the premise of meeting the requirements of accounting and auditing, and to protect the security of relevant information in accordance with the law.
The Sino-US audit supervision cooperation agreement will carry out the inspection and investigation activities of the relevant accounting firms by both parties under the cooperation framework. The two parties will fully communicate and coordinate in advance. The audit working papers and other documents that the U.S. side must review will be assisted by the Chinese regulatory agency. supply.
At the same time, the cooperation agreement clearly stipulates the processing and use of sensitive information that may be involved in audit supervision cooperation, and sets up special processing procedures for specific data such as personal information, which provides a feasible way for both parties to perform their statutory supervision duties while protecting the security of relevant information. path.
6. Q: Does the conclusion of the China-US audit and supervision cooperation agreement mean that the risk of delisting Chinese stocks from the US has been lifted?
A: The signing of the China-US audit supervision cooperation agreement marks a key step for the two sides to solve the audit supervision problems of Chinese concept stocks through strengthening cooperation, which is in line with the expectations and expectations of the market.
In the next step, the two parties will carry out daily inspection and investigation activities on the cooperation of relevant accounting firms according to the cooperation agreement, and make an objective evaluation of the cooperation effect.
If the follow-up cooperation can meet their respective regulatory needs, it is expected to solve the audit supervision problem of Chinese concept stocks, thereby avoiding passive delisting from the United States.
We look forward to actively promoting cooperation with the US regulatory authorities in a professional and pragmatic manner and working together to achieve positive results.
(Zhongxin Finance)