China has told its state-owned companies to stop working with the Big Four auditors – EY, KPMG, PwC, and Deloitte – and asked them to use local accounting firms instead.
China’s Ministry of Finance (MoF) has called on the country’s state-controlled firms to let their audit contracts with the Big Four expire, Bloomberg reported today.
The MoF has instead asked state-owned entities to begin using local Chinese or Hong Kong-based auditors when contracts next come up for renewal.
State-controlled companies’ overseas subsidiaries will, however, continue to be allowed to use the Big Four audit firms to review their accounts.
All of the Big Four firms have local Chinese subsidiaries with multiple offices throughout the country, with revenues in the country growing rapidly over the past decade.
EY, PwC, and KPMG, declined to comment on the report, while Deloitte didn’t immediately respond.
The new guidance from the Chinese government follows a landmark deal agreed between Beijing and Washington in August last year, which lets the US’s accounting watchdog inspect audits of Chinese companies listed in the US.
US regulators had previously only had access to Chinese and Hong Kong audit papers if they were granted that access by the China’s financial watchdog, the China Securities Regulatory Commission.
China’s financial watchdog had previously expressed concerns that giving US regulators access to audit papers would reveal the country’s state secrets.
However, the deal was agreed after the US threatened to begin delisting Chinese companies in 2024 if the PCAOB continued to be blocked from accessing audit information.