It is reported that Chinese authorities have ordered state-owned enterprises to sequentially suspend contracts with the ‘global big four accounting firms’ for data security reasons.
The British Guardian reported on the 22nd (local time) that China’s Ministry of Finance issued such “unofficial guidelines” to some state-owned enterprises last month.
The ‘Global Big 4 Accounting Firms’ are PricewaterhouseCoopers (PwC), Ernst & Young (EY), KPMG, and Deloitte.
“China’s Ministry of Finance has instructed state-owned enterprises not to extend their contracts with these four companies when they expire, but to sign contracts with accounting firms in mainland China or Hong Kong,” sources said.
These guidelines do not apply to offshore branches in other countries, such as the United States, of the relevant state-owned enterprises, but reportedly apply to all parent companies in China.
The deadline for replacing the accounting firm has not been set.
The Chinese government’s move is believed to be in line with its intention to curb the influence of global accounting firms associated with the United States, ensure the safety of its data, and promote the development of its accounting industry.
For the foreign accounting firms involved, the loss of a large client, a Chinese state-owned enterprise, would be a major blow. According to China’s Ministry of Finance, the ‘Global Big 4 Accounting Firm’ earned 20.6 billion yuan (approximately 3.87 trillion won) from Chinese customers in 2021.
As Chinese companies avoid the four major accounting firms that are audited by the US Public Company Accounting Oversight Board (PCAOB), opaque accounting practices are likely to recur, raising the possibility that the US-China conflict will flare up again.
Last year, U.S. regulators applied pressure by delisting or listing Chinese companies listed on the U.S. stock exchange due to accounting audit issues.
Then, after consultations between the U.S. and Chinese authorities, in December of last year, the PCAOB conducted a preliminary audit of Chinese companies in Hong Kong. The PCAOB plans further reviews this year.
Source: Donga